Reviewed by Paul Meloan

In what seems now like several economic lifetimes ago, author Michael Lewis wandered into Salomon Brothers on Wall Street, the epicenter of American finance at the end of the 1980s. Shortly after his arrival, Lewis relinquished any chance to make a great fortune in finance in exchange for the opportunity to tell how the prospect of such wealth affected those under its spell.

As it turned out, by the beginning of the 21st century the lure of great riches had gone global. Since 1989’s story of Wall Street and Salomon Brothers  (Liar’s Poker), Lewis has chronicled the creation of opulence and its evaporation right before our eyes, sometimes as quickly and mysteriously as it appeared in the first place. If some of this ground seems familiar, it should: this book is an adaptation of Lewis’s earlier work and has been published in part in Vanity Fair magazine since 2009.

In Boomerang, Lewis explores the world of global capitalism as practiced abroad and compares it with the American experience of the post-boom hangover. His travelogue is divided into four parts, one for each of the countries he visited to learn about their experiences in the great boom and bust of the last decade.

The tour commences atop a small mass of volcanic rock in the North Atlantic, home to scarcely 300,000 people: the Republic of Iceland. Lewis takes great pains to spell out how ill prepared the Icelandic people were to deal with modern finance, at least the type practiced by Goldman Sachs. For the past several hundred years, Iceland’s economy has relied principally on fishing, with the relatively recent addition of mineral extraction. Lewis’ disdain for what he perceives as the nation’s lack of sophistication is heightened by his gratuitous observation that Iceland’s small population and physical isolation from the rest of Europe make it a frequent subject for scientists studying the effects of inbreeding.

Ireland would never be confused with Iceland, the similarity of their names notwithstanding. An independent country since 1922, Ireland was hailed as an economic miracle at the turn of this century, in stark contrast to its previous levels of poverty when compared with other European nations.

The engine that drove the economy was the influx of capital to Irish banks, which in turn lent it out to developers seeking to raise the values of their assets by buying them from each other. What made the Irish case curious, however, was the political response to the predicament faced by its banks: When default loomed on Irish bank debt, the government guaranteed the debts to the bondholders, thus converting the problems of the banks into the problem of the nation.

Greece, the birthplace of much of what we define as Western culture (chapter title: “They Invented Math”), dominates global financial headlines today as its national debt spins out of control. Lewis takes the reader on a brief tour of modern Greek society:  a taxation system that is unenforced, an economy that is unproductive, a labor force that is unmotivated to change, and a political system that is largely unapologetic for sticking the rest of Europe with the costs.

The existence of modern Greece seems attributable to the creation of the European Union and its collective responsibility for the debts of all of its members. Imagine a large group dinner, with each of the countries of the European Union represented by one of the guests at the table. All of the diners know they will be getting separate checks at the end of the meal, but one of the guests gorges himself on food and wine, while the other guests look on, somewhat embarrassed but reluctant to cut him off. Now, at the end of the meal, the bloated diner is short on funds and can’t pay his tab.

Historically, such a diner would have a problem with the restaurant, or even the local police. In the modern EU, it’s as if all the diners at the table have a problem: the restaurant will not let anyone leave until the entire tab is paid. If you are German, the restaurateur already knows you have the most money of all the diners, and is counting on your profound sense of propriety and embarrassment to motivate you to cough up the funds.

As a German, you ordered one of the cheapest entrees on the menu, and even skipped the soup course. You enjoyed the wine, but did not get another glass when offered. You finished the meal nourished, but not completely satisfied. You were proud of your self-discipline and restraint, and silently complimented yourself on your trim waist and firm muscles.

The Germans become the center of the story: When the music suddenly ends in Europe and the dancers try to sit down, it becomes clear that the Germans own all the chairs.  While the other countries used their new access to capital to escape prior circumstances, the Germans opted to double down on theirs. To paraphrase Lewis, when given the chance to be anyone they wanted to be, the Germans chose to be more German.

The Germans wanted to be thrifty and industrious, preferring to reinvest their profits rather than consume them. Unfortunately, they failed to recognize that most other countries did not share this view. Some of them, notably the United States, once did, but now that has changed. This blind spot resulted in the Germans’ being the suckers of last resort when American mortgages went from AAA-rated investments to the financial equivalent of toxic waste. Long after the ratings from American agencies were proven meaningless, the Germans either would not or could not bring themselves to believe they had been duped.

Thus the Germans find themselves in 2011 in a dysfunctional family, one forced to live together in a common economic home of its own construction. Kicking out a brother (Greece) will create further tension, and may only make the other siblings (Spain, Portugal, Italy, France) worried they could be next.

Finally, Lewis visits America’s glimpse into its potential future: California. With an economy that, were it a separate country, would make it among the ten largest in the world, California should give pause to Americans feeling a tad smug over economic dysfunction abroad. Lewis offers a sympathetic ear to former governors and small-town fire chiefs alike, noting that all are learning to get more from less, and trying to locate solutions for the collective when every member seems consumed by self-interest.

It is this central tension that makes the story: If Thomas Friedman correctly observed that the world is flat and our problems are shared, then does it not stand to reason that the solutions will be shared as well? If there is good reason to journey around the world (or at least to Venice Beach, California) to explore how we created the mess we are in today, it is to see whether the world will rise to the occasion — or sink.

Paul Meloan is a partner at Aegis Wealth Management (www.aegiswealth.com) in Bethesda, Md., and blogs about personal finance at paulmeloan.posterous.com.