I.O.U.: Why Everyone Owes Everyone and No One Can Pay
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For most people, the reasons for the sudden collapse of our economy still remain obscure. I.O.U. is the story of how we came to experience such a complete financial disaster, starting with the magical proliferation of credit that led to an explosion of lending on the global and local landscapes of banking and finance. Viewing the crisis through the lens of politics, culture, and contemporary history—from the invention and widespread misuse of financial instruments to the culpability of subprime mortgages—Lanchester deftly draws conclusions on the limitations of financial and governmental regulation, capitalism’s deepest flaw, and most important, on the plain and simple facts of human nature where cash is concerned.
With newly updated, superbly written reportage, Lanchester delivers a shrewd perspective and a digestible, comprehensive analysis that connects the dots for expert and casual reader alike. Part economic primer, part fiscal and historical analysis, I.O.U. is an eye-opener of a book.
corporate results in history. Finally enough, already already? Not necessarily. According to the U.S. Treasury statement accompanying the fourth bailout, “Given the systemic risk AIG continues to pose and the fragility of markets today, the potential cost to the economy and the taxpayer of government inaction would be extremely high.” To stabilize AIG would “take time and possibly further government support.” That’s what “too big to fail” means. You could put it like this: AIG + CDS + CDO + TBTF=
difficulty. So that’s the first thing that’s different about British mortgages: there are more of them. Second, they are bigger: the size of the loan is proportionately bigger in relation to the value of the house. German banks, for instance, will lend only a maximum of 60 percent of a property’s value. In France, the rules are even more strict. For a start, our model of the mortgage, in which the loan is keyed to the value of the house being bought, doesn’t apply. In France, it’s the other way
dose of humor. A great book; interesting, accessible and witty.” —John O’Farrell, former columnist for The Independent and The Guardian, and author of An Utterly Exasperated History of Modern Britain Thank you for downloading this Simon & Schuster eBook. Join our mailing list and get updates on new releases, deals, bonus content and other great books from Simon & Schuster. CLICK HERE TO SIGN UP or visit us online to sign up at eBookNews.SimonandSchuster.com CONTENTS INTRODUCTION ONE THE
45–48, 147 mathematics and, 47–48, 52–54, 115–17, 166 offshore companies and, 70, 72 options and, 46–47, 50–52, 151, 174, 184 over-the-counter trading of, 184–85, 201, 205–6 prices and, 38, 46–52, 54, 56, 75, 158–59, 166 regulation and, 68, 70, 73, 153, 183–86, 200–201 risk and, 46–47, 49–52, 54–55, 57–58, 66–75, 78–80, 114–15, 117–22, 151, 153, 158–60, 163, 166–67, 184–85, 205, 212 size of market in, 48, 56, 80, 117, 201 see also collateralized debt obligations; credit default swaps
developed world. Of the four financial statements, the balance sheet is the one which provides a glimpse into a moment of time. The others show processes, flows of money; the balance sheet is a snapshot. A balance sheet is divided into Assets on the left and Liabilities on the right. Assets are things which belong to you, liabilities are things which belong to other people. Here’s what an individual’s balance sheet might look like: ASSETS House $200,000 Deposits in bank $10,000 Car