In 'Boomerang,' Cheap Credit Exposes Nations' Flaws No two countries are experiencing the global financial crisis in the same way. And author Michael Lewis says you can tell a lot about each country by looking at its problems. To research for his new book, Boomerang, Lewis visited some of the most financially challenged countries in the world.
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In 'Boomerang,' Cheap Credit Exposes Nations' Flaws

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In 'Boomerang,' Cheap Credit Exposes Nations' Flaws

In 'Boomerang,' Cheap Credit Exposes Nations' Flaws

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  • <iframe src="" width="100%" height="290" frameborder="0" scrolling="no" title="NPR embedded audio player">
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Just as unhappy families - at least according to Tolstoy - are unhappy in their own way, so, too, are economically endangered countries endangered in their own way. That's certainly the impression you are left with after reading Michael Lewis' new book "Boomerang."

I: Iceland, Ireland, Greece, even the United States. And in each case, he found a fatal flaw deeply engrained in the culture that at least partly explains how they lost their economic way. Michael Lewis joins us now. Good to have you with us, Michael.

MICHAEL LEWIS: Thanks for having me.

NEARY: So the world in the first decade of this century is, as you explain it, was awash in cheap credit. Each country was kind of like it was left in the dark with a big pile of money, and what they did with that money was very revealing about that country. Can you explain that a little more, what you mean by that?

LEWIS: Yes. You can think about the credit bubble as one giant temptation that was laid before the developed world, that anybody who wanted to borrow basically could, in virtually unlimited sums. And given that temptation, different countries wanted to do different things with the money.

NEARY: So you set off on what you call a sort of financial disaster tour, and the first country you hit is Iceland. And there you say you have a nation of fishermen who thought that overnight, they could become a nation of bankers. Now, first of all, what made them think they could do that?

LEWIS: And when all of a sudden their banks were offered unlimited credit by the rest of the world, every young Icelander was offered the opportunity to essentially become an investment banker. And you ask what made them think they could do this. It's interesting. They developed, very quickly, a narrative. And the narrative was Icelanders have a history of taking a risk. Icelanders are kind of genetically suited to be investment bankers.

NEARY: And it turns out that was not necessarily the case.

LEWIS: It was definitely not the case. The losses were just breathtaking, you know, hundreds and hundreds of thousands of dollars in banking losses for every man, woman and child in Iceland. But they basically walked away from most of their debts. So they've kind of gone on their way.

NEARY: Yeah. And meanwhile, let's go to Ireland now, because the Irish, you say, the famously pessimistic Irish were discovering optimism. They had an incredible real estate bubble. But as you describe it, this real estate boom had, quote "the flavor of a family lie." What do you mean by that?

LEWIS: Well, in both cases, the bank sunk the country. But the Icelanders' banks did this by essentially handing money to Icelandic tycoons to buy things overseas. It was a conquering impulse. The Irish, left alone in a dark room with a pile of money, wanted to buy Irish land. And they drove the prices up absurdly. But nobody said it. They all sort of kept mum. Swept...

NEARY: Swept it under the table. Swept it under the table, so to speak.

LEWIS: Swept it under the table. That's right.

NEARY: Mm-hmm.

LEWIS: If you think about the Irish history, it's kind of an atavistic response. The Irish have always been in less control of their land than most peoples in history. They have had, until recently in history, long experience with nothing but poverty and economic failure.

NEARY: And as you point out, unlike Iceland, Ireland is going to pay off its debts and it's going to be...

LEWIS: Maybe.

NEARY: Well, they're going to try to, or they feel obliged to. Let's put it that way.

LEWIS: That's the point...

NEARY: And it's going to be tough.

LEWIS: There was a moment right after Lehman Brothers failed when Ireland really could have walked away from its obligations - justifiably. It wasn't the Irish government that borrowed all this money. It was private Irish banks. And the Irish government made a decision to basically nationalize this obligation. And the amazing thing is that the Irish people did not protest. The Irish people just said, yeah, we have to pay it back.

NEARY: Whereas in Greece, of course, protests have been quite common.

LEWIS: And yet, when they're told it's time to pay, they're furious. Their response is: We don't want to change. We don't want to pay back the money.

NEARY: Michael Lewis - his new book is "Boomerang: Travels in the New Third World." Good talking to you, Michael. Thanks so much for joining us.

LEWIS: Thank you.

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