December 16, 2017

Greece is the Word in Michael Lewis’s New Book on Europe

The Parthenon, a symbol of Greece, and recently, its debt woes Greece is the word in Michael Lewis’s new book on Europe and its debt crisis. Michiko Kakutani of the The New York Times gives an excellent summary of Lewis’s new book, “Boomerang: Travels in the New Third World”. Kakutani says Lewis “makes topics like European sovereign debt, the International Monetary Fund and the European Central Bank not only comprehensible but also fascinating”.

Mr. Lewis explains why the world is so worried that Greece could default: “If Greece walks away from $400 billion in debt, then the European banks that lent the money will go down, and other countries now flirting with bankruptcy” might easily follow, destabilizing regional and world economies further. He also explains why taxpayers in Germany — the euro zone’s largest economy, with resources critical to a rescue plan — are reluctant to keep bailing out other countries they regard as profligate, indolent and irresponsible.

In “The Big Short” Mr. Lewis focused around a handful of investors who were aghast at how the dangers of the subprime mortgage market were being ignored by bank executives and government regulators, and who used their prescience to make a fortune betting against the stability of the system. One of them — left “on the cutting-room floor” of that earlier book — was a hedge-fund manager named Kyle Bass, who by the end of 2008 had already moved on to a “new all-consuming interest, governments.”

Mr. Bass reasoned that the financial crisis wasn’t over, that, in Mr. Lewis’s words, “the bad loans made by highly paid financiers working in the private sector were being eaten by national treasuries and central banks everywhere,” which meant that entire countries could collapse. Months later, when entire countries did indeed start to go bust, Mr. Lewis asked himself, “How did a hedge fund manager in Dallas even think to imagine this strange world?”

Lewis has a track record of delivering well-written, engaging books that deal with topics that are poorly understood or not much is known. Liar’s Poker brought the behind-the-scenes of Wall Street’s elite to the public. A few years working at Salomon Brothers bond trading desk enabled Lewis to be able to write for a living.

As the news (and the play) point out, Greece is the word in Michael Lewis’s new book on Europe, its causes and how people are profiting from the mess. Investors should read his books to see ideas that others don’t – the ones that make money in the midst of chaos.

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