Michael Lewis learned something when he wrote his previous book, “The Big Short”. In that book he chronicled the story of a few people who were able to make millions by shorting the housing market just before it crashed. As he puts it, he suspected they were on to something so he went and asked, “What should my next book be about?” The suggestion was to cover all the crumbling countries in Europe. That’s just what Lewis has done masterfully in this book.
He travels through Iceland, Ireland and Greece discussing with heads of state and finance ministers what exactly lead to their problems and what is being done to fix it. The former question usually involves reckless spending when money was cheap in the early part of the 2000s. As Lewis describes it, “we got to see what each country would do with an unlimited supply of money and the lights turned off.” The Irish for example, decided to buy and sell Ireland from themselves until property values and development far outstripped demand.
While the trip through those three countries is interesting, I was really interested by what Lewis did next. In the last couple chapters of the book Lewis covers two other interesting countries. First he visits Germany, the country everyone assumes (or maybe hopes) will bail the rest of Europe out of this financial mess. Then he turns his gaze to the USA. Not so much the Federal government, but the state and local governments. After an entertaining interview with Arnold Schwarzenegger, he looks at one of the newly bankrupt cities in the US, Vallejo California. The spiral he describes is an interesting one where cities begin to need more money because of liabilities to city workers so they raise taxes so the wealthy people (the ones who can afford to leave the city) leave town so the tax receipts decline so they raise taxes so… It’s a very interesting problem, one that it’s not unreasonable to fear in Pittsburgh.