As recommended by various people, I read “Whoops!: Why Everyone Owes Everyone And No One Can Pay” by John Lanchester this month. As I borrowed it from the library, that’s another step closer to my library book-reading goal!
I’d say it was probably the most fascinating non-fiction book I’ve read in a long, long time!
It basically describes and explains how the global economy was brought to the edge of destruction in 2008. Ooh, those naughty banks!
Where was I in 2008?
Well, this was the year I sold the house that I owned with my ex and I finally paid off my credit card debts so I was in a good place financially – finally! The proceeds of the sale were left sitting in a high interest bank account (yes, they existed back then!) and I had virtually no investments whatsoever (I say virtually as I discovered years later that I had a small holding in an investment trust!).
Whilst I do remember the global economy collapsing and the hysteria in the news, I didn’t really understand why or how it happened, except that the banks were largely to blame. How so? Something or other to do with ‘sub-prime’ mortgages but to tell you the truth, I wasn’t really that interested at the time.
I also naively didn’t think the financial crash would affect me since I had no investments (that I knew of) that were affected by the plummet in the stock market…until my job became ‘at risk’ and Old Co axed around 120 people in one go and had to be bailed out by Warren Buffet. Those days at work weren’t great…
Years later, I would still feel the aftereffects of the crash, with regulatory overkill forming a huge part of my working life and environment – audits upon audits!
So what’s in the Book?
The book is easy to read as it assumes you know nothing so explains lots of things in a clear, uncomplicated way; things which my eyes probably glossed over when I saw them in newspapers back in 2008.
I also found it pretty scary – scary at how the banks were so powerful that they pretty much made up their own rules and when even those rules didn’t suit them, they just bent them and nobody stopped them. Regulators were just regulators in name only – they were next to useless against the almighty banks.
People think pay day loans are bad but they’re nothing compared to the mortgages that were handed out almost like candy to people known to have patchy credit history. It wasn’t just the value of the mortgages, it was the sheer number of mortgages that were handed as it was so easy for anyone to get a loan.
‘Stated income’ loans were where the borrower just stated what their income was and the lender took their word for it…yes, really!
‘Ninja loans’ – where people who had ‘No Income, No Jobs or Assets’ were able to borrow a pile of money…
It really sounds made up and unbelievable but the scary truth is that this all happened, though not in some corrupt third world country – it happened in the rich western countries and nearly destroyed the global economy.
So, who or what was to blame?
Greed, stupidity, Governments or Banks?
Probably all of the above.
Have lessons been learnt?
Well the book was written six years ago and there’s still the ticking time bomb of Deutsche Bank (still the most dangerous bank in the world?) to name but one.
Only time will tell before the next financial crisis happens due to some new loophole that will get exploited, though of course, actual Brexit and the result of the US elections could cause some disruption.
Anyway, a highly recommended read.