Money, money, money: novels and nonfiction about high finance
The British author John Lanchester is one of my great reading pleasures. I was introduced to his work through his 2012 novel, “Capital,” which I still recommend to anyone who can get their hands on it.
“Capital” is a big, rich novel that is set around the time of the financial implosion of 2008. It follows a group of Londoners as their ambitions collide with the ongoing financial train wreck. They include a banker and his wife, a performance artist and his grandmother, a Pakistani family, a Zimbabwean refugee…and others. One of the most interesting and ultimately poignant of Lanchester’s characters is Roger the banker, who is making piles and piles of money. The problem is, the transactions his firm is engaged in have gotten so complicated that Roger really has no idea how anything works anymore (a feeling that in our technology-saturated world, many readers will relate to). As you can imagine, this leads to complications.
This book is not just about money, though – it’s about the xenophobia brought on by terrorism, and about how people connect (or not) in a 21st century multicultural society. In addition to being an astute observer of human foibles, Lanchester is also an astonishingly funny fellow. That, combined with his big heart, makes “Capital” a classic. Several reviewers described his work in “Capital” as a 21st century version of Dickens. I think Dickens would definitely have approved of “Capital,” but his fellow literary giant Anthony Trollope, who knew a thing or two about money and human nature, would have appreciated it, too.
Lanchester also wrote a post-crash book with the hilariously dry title, “I.O.U.: Why Everyone Owes Everyone and No One Can Pay.” This book was one of many that dissected the financial crash; Lanchester, who developed a layman’s interest in hedge funds, is fascinated with the fact that so few people understand a financial system that so many people and institutions depend on. Here’s one quote from the book. “Warren Buffett was doubly right to compare the new financial products to ‘weapons of mass destruction’ — first, because they are lethal, and, second, because no one knows how to track them down,” Lanchester writes. He has a special antipathy for bankers who loaned money to poor people who were extremely bad credit risks, then turned around and sold the loans (and the risk) to someone else. Making money off of people’s gullibility and misery, then running for the exits.
Did I mention Anthony Trollope and his novel of financial scandal, “The Way We Live Now”? Trollope wrote about the same phenomenon in 19th century London, though Trollope’s scoundrels mostly just ripped off the rich.There have always been people who understand money better than the masses, and I want to mention a couple of book that go back in history to examine that phenomenon.
The first is “Lords of Finance: The Bankers that Broke the World” by Liaquat Ahamed. This 2009 book is a group biography of sorts about four men who Ahamed says basically helped the push the financial systems of the world off a cliff and into the Great Depression. He writes about a Englishman, a Frenchman, a German and an American (ample blame all around). After World War I these men were engaged in an effort to reconstruct the world of international finance. They were wildly different personalities, but they were united by a common fear – that the greatest threat to capitalism was inflation. So they decided to try to turn back the clock and get the world economy to return to the gold standard. And it worked – until it didn’t. As the world economy began to weaken, their adherence to the belief that the gold standard would provide stability kept those who ran the financial system from instituting measures that would have halted the slide into worldwide depression.
Does this sound like a brainy book? It is, but Ahamed, a professional investment manager, has a gift for characterization and explaining things. This book won the 2010 Pulitzer Prize for history and was recommended by Bill Gates, who probably had a very interesting chat with his buddy Warren Buffet about this book.
Another book that looks back at an institution that probably affects everyone is “House of Morgan: An American Banking Dynasty and the Rise of Modern Finance” by Ron Chernow. Winner of the 1990 National Book Award, this book follows four generations of the family at the center of the J.P. Morgan financial empire. It ends with the crash of 1987, well before the 2008 implosion, but it shows just how deeply the institutions created by the Morgan empire have affected financial policy in this country, and it vividly portrays the ongoing tension between financial institutions and the governments that are supposed to be regulating it.
Finally, I’ve been waiting for a chance to mention “Capital in the Twenty-First Century,” written by the French economist Thomas Piketty. This book, an unlikely best-seller, looks at the entire system of capitalism – not just from the perspective of who the winners and losers are, but by asking the question: is capitalism accelerating the division of the world’s population into the haves and the have nots? (the haves would be those folks who are running the hedge funds, among others). Piketty makes a compelling argument that it is. Of course, he has all sorts of detractors. But his book has generated a lot of needed discussion.