Studies of Life

Learning by doing.

Review of I.O.U.: Why Everyone Owes Everyone by Lanchester

23 July 2013 by Jim

Since the financial crisis exploded we’ve been bombarded with information about it, but I had yet to find a complete, thorough account of what actually happened. I have found precisely that with IOU by John Lanchester.

To quote the author and illustrate the essence of the book: “The credit crunch was based on a climate (the post-Cold War victory party of free-market capitalism), a problem (the subprime mortgages), a mistake (the mathematical models of risk), and a failure (that of the regulators). […] So: a huge unregulated boom in which almost all the upside went directly into private hands, followed by a gigantic bust in which the losses were socialized. That is literally nobody’s idea of how the world is supposed to work.”

It is a wonderfully short, easy to read and fun way of understanding the workings of the financial crisis.

The book is a bit unstructured: it reads like a long, linear story. It doesn’t hierarchise or order its elements, except chronologically, and therefore it’s a very easy read but not good for reference. It is however, deeply enlightening and explains most of the questions I had about subprime mortgage loans and other financial crisis terms very easily, without any boring fact lists. It’s light and very instructive, so definitely recommended!

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