The financial crisis, minus the boredom

October 8, 2010

Whoops! Why Everyone Owes Everyone & No One Can Pay
By John Lanchester
224 pages
Penguin, Allen Lane

Review by Mat Ward

If you don't know the difference between a credit default swap (CDS), a collateralised debt obligation (CDO) and a cheese sandwich, this highly readable book could help you in a painless, entertaining way.

Its author, John Lanchester, grew up in 1960s Hong Kong. He says the contrasts of obscene wealth and crushing poverty were “like a lab test in free-market capitalism”.

Little did he realise that such a freakish experiment would be set free to wreak havoc on the world when the Berlin Wall came down in 1989. The beauty parade between communism and capitalism ended, and capitalism stopped pretending to be anything it was not.

The ultimate result was the Global Financial Crisis, which Lanchester deconstructs in a light, lucid fashion. He manages to explain the CDSs and CDOs, as well as derivatives, equity, liquidity, options, futures, Gaussian copula formulas and much else besides, all while alluding to incongruously illuminating references like The Simpsons.

He’s also refreshingly frank. He says humans are, for the most part, innumerate and “rubbish at thinking about risk”, banks and their legislators don’t really know what they’re doing and the huge bailouts mean capitalism has failed.

Lanchester sharpens his gentle humour with righteous anger and his conclusion that people should revolt against the banks will resonate with many.

If your eyes glaze over at the mere mention of money and you’d rather stick pins in your privates than read about profits, this could be the financial crisis book you’ve been waiting for.

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