TRAVELS IN THE NEW THIRD WORLD
BY MICHAEL LEWIS
“Boomerang is about what he has come to see as the larger phenomenon behind the credit crunch: the increase in total worldwide debt from $84 trillion in 2002 to $195 trillion now (Lanchester 1).” There was no one direct link to the financial crisis all over the world. Each culture seemed to do something different that led to the downfall of their respected counties. From 2002 through 2008, many countries were becoming extremely wealthy until the collapse. Icelanders gave up fishing to take up investments, Greeks let its citizens get away with tax fraud, Ireland was giving money away for real estate and Germany was funding these soon to be broke countries. People were becoming too greedy and trying to make as much money as they can; but in the end they lost it all.
In 2008, Iceland went bankrupt because they essentially had no financial experience. Iceland’s assets increased so dramatically it almost made no sense (2). Their three banks collapsed, so did their citizens. Citizens were considering emigration; all do to inexperience in their financial markets. The problem with the global financial crisis is that, “people who saw it coming had more to gain from it by taking their positions than they did trying to publicize the problem (20).” Iceland was mostly fishers and farmers, who were also the bankers who speculated the financial markets. This was a problem. The problem was that the bankers who worked in Iceland couldn’t be trusted. Iceland’s banks were privatized and run by fisherman, which lead the country into debt 850% of gross domestic product (3).
Greece had $400 billion outstanding government debt and another $800 million in pension debt (44). George Papaconstantinou was in charge of figuring out this gigantic financial crisis. His job started off frantically and it only got harder from there. He thought the budget deficit was 2.7% but really it was closer to 14% (47). Each day he found out a new debt that Greece must take on. Greece had no congressional budget office, so the numbers were always flawed. Michael Lewis later found out that tax fraud was so common in Greece that pretty much everyone cheated. There essentially wasn’t a penalty for tax fraud and this is why the people of Greece destroyed the banks. Greece was spending and borrowing at will. “ The Greek state was not just corrupt but was also corrupting (54).” Everyone thought everyone was bribing, cheating, lying, and stealing and this would corrupt the Greeks into doing the same. To sum up the idea of the Greek economy: “the Greek economy is collectivists, but the country, in spirit, is the opposite of a collective. Its real structure is every man for himself (55).”
Ireland’s Anglo Irish Bank lost $3.4 trillion dollars, and that’s only one bank. The two other major banks: Bank of Ireland and Allied Irish were both a bust. These banks lost because of the vast amount of money they lent to homebuyers and property developers. Ireland is the third most likely country to default in the world, which could group them in the third world category (85). Throughout Irelands history they have always been a poor country and they became abnormally rich in the 2000’s. There are many other theories on why Ireland went bankrupt. Some theorist believes when Ireland allowed birth control, this allowed to get them out of poverty. These theories were never proved, and the reason for the downfall of their sudden wealth was the lending. Irish lent large amount of sums to their citizens and when the citizens, some polish, couldn’t pay their loans, they got up and left Ireland. The government guaranteed the banks and bonds but Ireland banks made the mistake of allowing the housing industry run their banks. The housing industry failed in Ireland and the banks went right down with them.
The European nations were...