Join John Lanchester to talk about Whoops! - our book of the month - Tues 2 Nov, 8pm

[GeraldineMumsnet]

Hi everyone, Tilly is in outer circles of internet hell so am posting on her behalf.

We've chosen Whoops! by John Lanchester as our October book of the month.

It's highly topical given child benefit cuts and the impending comprehensive spending review (ie even more cuts) because it succinctly and wittily explains why the credit crunch happened and what led to the current dire financial mess.

We're really pleased that John can join us for our next book club discussion on Tues 2 Nov at 8pm.

Whoops! is out now in paperback (a manageable 200 pages). Read more about it and John's other books, plus glittering reviews of Whoops! by many book club authors we've already discussed.

Hope you can join us, should be a great discussion. :)

Asterixnottintin, do you really prefer Asterix to Tintin? (Maybe that?s a different conversation.)

A French economist chum of mine thinks that what we should do is create a legal responsibility attached to any lending, which follows the loan wherever it goes?in other words, if money is leant in a reckless or predatory way, the loaner is liable and so is anyone who buys or trades that loan. An interesting idea, but I?m not sure how workable it is, because the whole mass of interlocking loans is so complicated and so international that I?m not sure it would be doable. The international nature of banking is a big part of the problem here. So the short answer is, I don?t think it can be done.

You?re right, though. The people ?to blame??that?s a shorthand idea but I think we both know what we mean?have got away for the most part unscathed. I think people are going to get more and more annoyed about that as the economic hard times really start to bite.

@AsterixNotTintin

Hi John
Thank you for writing this book. My mind still boggles at the financial world, but I'm a whole lot closer to understanding it than before.

I can't quite remember if this quote came from the book or not, but there was an American senator who said the bankers should apologise or commit hari-kiri - or preferably both. What do you think the bankers could do to atone?

Could there be any way that an independent body assess the culpability of each person in charge of deals, from CEO downwards, in every British bank and demand an amount to be paid back by that person to the taxpayer over a number of years?

I can't help but feel there has to be some personal attachment of blame - if you are intent on making yourself a packet, then you should be prepared to lose yourself a packet too. None of them have lost anything.

Atillathehen, there are lots of different ways of telling the story of how we got here. Your focus on debt is one way of doing it. The debt bubble has been passed around the world for the last several decades?the thing that?s different this time is that it?s we in the developed West who are sitting on the debt bomb, whereas the last several debt crises have been in far off countries of which we know little (Russia, South-East Asia, Latin America?and that?s just in the last 15 years or so). A big part of what happened is that politicans wouldn?t tackle inequality directly, so people who wanted a higher standard of living were encouraged simply to borrow the money to buy a richer lifestyle. Cheap credit?debt?was used as a salve for rising inequality. Not a very effective salve, to put it mildly.

@AttilatheHen

John,

I don't think you're being quite honest, or clear, or perhaps you don't know, about the banking crisis. You've pin-pointed a lot of greed and nasty doings, but that doesn't explain why they were allowed to happen in the first place, and it doesn't explain what will happen now.

:o Allow me to challenge you: all of our money (98%) is created by banks from nothing, literally the tapping of a keyboard, and issued as loans (debt).

This means that no matter how much money we have in the economy, there is always money leaking out in terms of debt repayments, and the value of that money is eroded by inflation. So, more money has to be brought into the economy so that there's money to pay the debts, keep things going and deal with the inflation.i.e there has to be more borrowing; people have to be given every opportunity to borrow.

We get ourselves into a cycle. However, finding people/companies to keep on getting into debt so this upward spiral can continue is difficult. The fact that banks were lending to the very poor is a sign not only of greed and stupidity, but that nearly everyone else had had enough debt as they were prepared to take on. And the system needs more and more people to take on debt. So the banks looked for a group that would take on debt - the poor.

When the subprime market started to collapse it was a sign that the money supply was going to start shrinking. This means that we'd be poorer and we'd still have debt round our necks, so banks started to hoarde and wait for the bad news - who had made so many bad loans they'd go bust. (Truth is, when the money supply starts to shrink good loans turn to bad loans, so the banks, by freezing credit just accelerated the process of crisis and recession.)

As you know, as the money supply falls, people, lose jobs, debts can't be paid and we go into a Depression. The only thing that has prevented that so far is unprecedented government action. In the UK almost 1/3 of tax receipts have disappeared! So, we're borrowing (180 billion a year) just to standstill.

We will pay higher taxes, have less services and have poorer jobs to pay for debts created by the banking system; we have to borrow to have money in the economy (That's the way it works, even if you personally haven't borrowed yourself). We'll be debt slaves ultimately, and as things stand, the vast majority of us will be in that category, and our children. All for the banking system and who it benefits.

Your book doesn't tackle this. Are you worried you'll be called a Marxist?

I agree with the idea that we have to 'rebalance' the economy?everybody seems to agree with that. It's a bit like being in favour of oxygen. We need more manufacturing and more emphasis on our strengths in areas such as higher education, the arts, clean energy, and so on. It would have been nice if the media and the government had made more of a fuss about the fact that in the same week, a British-based scientist won the Nobel prize for medicine on Monday (for inventing IVF), then another two won the Nobel in Physics on Wednesday (for inventing a form of carbon called graphene). Shouldn't that have been the occasion for, I don't know, a national holiday maybe? To make the point that research is a great national strength that needs to be encouraged?

Sorry, I haven't read Will Hutton's book, but I know I should.

@TillyBookClub

Evening all

I'm thrilled to introduce our Author of the Month, John Lanchester.

John, thank you very much indeed for joining us tonight. I thought we might kick off with the advance questions above, and then the floor is open...

And a quick reminder to everyone, including those who haven't read WHOOPS!: all questions (about the financial crisis, previous books, writing life, etc) are welcome, don't hold back.

And finally my question:

I was intrigued by your analysis of the breakdown of communism leading to the trigger-happy Anglo-Saxon financial culture that we believed to be the only true path. Now that our model has failed too, what do you think is the right path to create a fair society (or making everyone have 'enough' as you put it in the last chapter)? If our economy isn't based on financial services, what do you think it could be based on?

And have you read the Will Hutton book (I think called The Fair Society)?

(sorry, make that three questions)

John,

I don't think you're quite responding to my point. The system IS a debt bomb. We're always in debt. Whether it's the managed debt accumulation of post-WW2, or the laissez-faire accumulation since Thatcher-Reagan. The system is based on debt. At some point, the debt becomes too much and overwhelms the system: 1929 and now.

I don't wish to discuss other countries debts. I'd like you to answer this:

Can we have economic growth without more people/companies taking on more debt?

If the answer is 'yes' please explain.

Well, we can prepare to make a huge fuss next year, when the government's commission on banking comes up with its suggestions. These I suspect will include ideas about breaking up the banks about which the banks will immediately launch a huge fuss. We need to let the politicians know, and have in the front of their minds, the fact that we the electorate have not forgotten what happened and we are determined to have safer, better banks.

@LeninGuido

So, what do we do? How do we protest?

YOu said "more positive feedback than I was expecting from people in the world of business and finance. The interesting thing is how many of them are completely furious with the banks, based on many years of negative experience. I?ve been really surprised by that."

Is any of this feedback from those in finance from people close enough to feel guilt as well as anger?

Are there any gamekeepers turned poachers who might tell more?

I think that reading your book has crystalised my opinion that there many layers of fault in this whole thing.

Like you I was around for the UK house price crash at the end of the 80s/early 90s. DH and I had just moved to London and had been dithering about buying because we felt prices were too high so were renting instead. That bubble was widely analysed at the time and perhaps that affected our attitude to debt, but I have remained quite sceptical about 'good times' ever since. There is a whole generation, starting from just slightly younger than me, who were conditioned to be accepting of debt and so colluded with the bubble. While there would still have been a huge crash, and there is no doubt that there were many failures by all sorts of institutions, on an individual level many people would now be more comfortable if they had used any excess money to reduce their mortgages instead of buying treats, or if they had simply reduced their spending when they could no longer pay off their credit card.

When considering change do you think there is room for a bottom up approach as well as changes in legislation? For instance do you think personal finance taught in schools would have an effect on individuals ability to cushion themselves from economic swings?

Do you really think it is responsible to suggest popular action about a subject as complicated as banking regulation?

What would safer, better banks look like?

On debt you make the point very well in the book: the banks lent the money, but lots of people were there, eager to borrow. Can we really believe that at the time (not now, with the benefit of hindsight) they would have rather not have been lent the money?

I'd like to respond to your point about inequality too.

A man in China will work 15 cents an hour; in Britain, £5.25 est. The nature of global markets mean that jobs go to the cheapest labour markets. A politician would have to take on global capitalism to reverse that!

Yes, we could produce more here, but for less profit, and uncompetitively. I don't see how the current 10 million economically inactive, but of working age, population can find jobs when they are competing with those wages.

Unless, you're suggesting that government engineers equality. That's dangerously Left-Wing :)!

I haven't heard a word from anyone who in any way feels responsible, or admits to feeling responsible for what happened. I have heard stories about people working in high street banks who quit their jobs because they felt the lending they were being encouraged to jam down the throat of consumers was morally indefensible?but I don't know any of those people directly and I don't know anyone who has managed to get them to talk on the record.

I know this is infuriating and hard to believe, but the fact is that many of the people involved in the best-rewarded parts of investment banking feel no guilt whatsoever about the recession. Many of them were very annoyed when bonuses were briefly suspended and regard their resumption at mind-boggling levels as no more than their just reward. A popular phrase during 2008-9 was 'I'm working for free this year'?meaning, multi-hundred thousand pound salary only, with no bonus on top.

@poppyknot

YOu said "more positive feedback than I was expecting from people in the world of business and finance. The interesting thing is how many of them are completely furious with the banks, based on many years of negative experience. I?ve been really surprised by that."

Is any of this feedback from those in finance from people close enough to feel guilt as well as anger?

Are there any gamekeepers turned poachers who might tell more?

Axterix beats Tintin, in every way.

Asterix: historically informative, witty, believable (in that magic potion accounts for everything), heroes you'd want to have a drink with

Tintin: dodgy made-up places, grindingly unfunny (sole jokes: Snowy gets lashed on whiskey, Calculus can't hear and Thomson twins fall over), highly improbable plots, a prissy hero that makes you want to stick a fork in your head.

But my husband and two sons would disagree. I'm trapped in a household of no taste.

Anyway, back to finance...

I am one of the Annoyed. I didn't buy a house, or borrow money, or spend very much at all, over the last 10 years. Mainly because I didn't earn enough to buy a house or borrow that much money. Towards the end of the book you say we are all to blame, but I passionately feel we aren't. Yes, if you borrowed way too much then you should now not complain if asked to pay it back. But there must be thousands of us who haven't?

What do your fellow writers feel (I'm imagining most of them aren't in the Notting Hill mansion bracket, although maybe they are?)

Well, we do, in RBS and HBOS, thanks to the bailouts. A state stake in the other banks might well be something the famous commission suggests.

@LeninGuido

Should we have a national stake in major banks? That's another way to regulate and redistribute.

@bran

I think that reading your book has crystalised my opinion that there many layers of fault in this whole thing.

Like you I was around for the UK house price crash at the end of the 80s/early 90s. DH and I had just moved to London and had been dithering about buying because we felt prices were too high so were renting instead. That bubble was widely analysed at the time and perhaps that affected our attitude to debt, but I have remained quite sceptical about 'good times' ever since. There is a whole generation, starting from just slightly younger than me, who were conditioned to be accepting of debt and so colluded with the bubble. While there would still have been a huge crash, and there is no doubt that there were many failures by all sorts of institutions, on an individual level many people would now be more comfortable if they had used any excess money to reduce their mortgages instead of buying treats, or if they had simply reduced their spending when they could no longer pay off their credit card.

When considering change do you think there is room for a bottom up approach as well as changes in legislation? For instance do you think personal finance taught in schools would have an effect on individuals ability to cushion themselves from economic swings?

That is so dispiriting but not surprising.

Sorry, I cannot see the point of a national stake in some banks, unless those banks are to be the utility banks Lord Turner speaks of, i.e. banks that take deposits and lend (conservatively) to individuals and businesses.

But how would having a few nationalised banks avoided the crisis? The German Landesbanks (state-owned at least partly) were not exactly insulated from what went on in the States...

Looks like the banks can't win to me!

Be cautious and everyone slates them, after all you all bailed them out???

Don't be cautious, get involved in risky lending and again they are for the high jump!

Who is on the commission? How nuch common sense is there?

Yes, I completely agree about teaching personal finance.

The whole thing about attitudes to debt is deeply mysterious to me. I grew up being taught that debt was a bad thing, in and of itself?something to be avoided. That used to be a very widespread attitude in this country and it's strange that it seemed to vanish so completely in the last, what, three decades. Part of what happened is that the financial services industry rebranded 'debt' (a bad thing) as 'credit'?which sounds like a good thing, sounds like something we could all do with more of. So yes, people did make mistakes and indulge themselves, but they were strongly encouraged to do so, and the entire society's direction of travel was arguably askew.

@bran

I think that reading your book has crystalised my opinion that there many layers of fault in this whole thing.

Like you I was around for the UK house price crash at the end of the 80s/early 90s. DH and I had just moved to London and had been dithering about buying because we felt prices were too high so were renting instead. That bubble was widely analysed at the time and perhaps that affected our attitude to debt, but I have remained quite sceptical about 'good times' ever since. There is a whole generation, starting from just slightly younger than me, who were conditioned to be accepting of debt and so colluded with the bubble. While there would still have been a huge crash, and there is no doubt that there were many failures by all sorts of institutions, on an individual level many people would now be more comfortable if they had used any excess money to reduce their mortgages instead of buying treats, or if they had simply reduced their spending when they could no longer pay off their credit card.

When considering change do you think there is room for a bottom up approach as well as changes in legislation? For instance do you think personal finance taught in schools would have an effect on individuals ability to cushion themselves from economic swings?

'We need more manufacturing and more emphasis on our strengths in areas such as higher education, the arts, clean energy, research'

I had this conversation with my husband, where I insisted that we could keep manufacturing alive in UK if we focused solely on high quality luxury goods. He thought even those now had to be made in China otherwise the figures would never add up.

What do you think we can manufacture?

And how do we make money from research? Does it get sold as a commodity?

A simple example is forcing the banks to have much higher levels of capital reserves, along the lines of the Canadian banks which didn't go bust and didn't require a bailout.

Better banks would think more about the customer. Paul Volcker is hardly a dangerous anti-capitalist?he was President Reagan's Treasury Secretary. Just the other day he said that in the last several decades, during a frenzy of 'innovation' in banking and financial instruments, he could only think of one innovation which had benefited the customer: the cashpoint machine. Better banking would have more things like that?cheques which clear into your account the same day they leave the account of the person paying you, for instance.

@SuiGeneris

Do you really think it is responsible to suggest popular action about a subject as complicated as banking regulation?

What would safer, better banks look like?

On debt you make the point very well in the book: the banks lent the money, but lots of people were there, eager to borrow. Can we really believe that at the time (not now, with the benefit of hindsight) they would have rather not have been lent the money?

John,

I'll have to be Paxmanesque:

Can we have economic growth without people/companies taking on more debt?

(Even in your younger years the system was still built on debt?)