John Lanchester, How to Speak Money, review: Author shows how language is used by financial institutions to trick the public

Lanchester acknowledges that language is used to hide the truth; and provides masses of examples of how this was so when the financial crash imploded

A pedestrian stops to look at a screen showing the latest FTSE 100 index in London, at the height of the credit crunch in 2008 (CHRIS RATCLIFFE/BLOOMBERG NEWS)

John Lanchester says one of his aims in writing How to Speak Money is to encourage his readers to learn more about money and economics.

He also says, if pushed, that his big ambition is to encourage everyone to go and read more about economics, a subject that he claims is not a “dismal science” at all, but the essence of human behaviour in all its forms.

Well, Lanchester has pulled off both ambitions. And he has done so because he’s a novelist (his best-selling novel, Capital, was set during the financial crash) who has investigated finance because he’s fascinated by the subject, rather than as an economist who approaches it from a more studied, academic angle.

The book works because Lanchester follows the famous rule of showing rather than telling, and injects narrative as well as context into the subject matter, one that most people find complex and, let’s say it out loud, boring. Yet studying human behaviour isn’t boring at all. The problem is that the language used by all the different tribes in finance – whether they are doves, hawks, macroeconomists, private equity pirates, swappers, hedgies, quants, brokers, and many more niche players – comes across as mysterious gobbledegook for most people.

So the lingo needs translating and that’s what Lanchester has done so brilliantly: credit is not credit at all but debt, austerity cuts can’t be austere but are just cuts, and when “peripheral euro-zone government bonds are gently unwound by letting them run off” what is really meant is that the bank owns too much debt – probably from Greece or Italy, and rather than sell it all off (because the prices would crash) the bank waits for the loan period of the debt to come to an end and doesn’t buy any more of it. Thus, the debt owned by the bank gets smaller over time, instead of collapsing if the bonds were sold.

He has great fun with what he calls “reversification” – whereby the words used by financiers are the complete opposite of what they appear to say. For example, a bailout is not about throwing water out of a ship but about putting money into something, while hedge funds have nothing to do at all with the original meaning – of hedging a bet – but rather they are a mechanism by which a lot of money is put together by investors which is then used to take highly-leveraged risks. Most often they fail – often needing a bail-out.

Now we know. But most of the time, most people don’t know. And the problem is that the financiers, bankers, and politicians don’t necessarily want the man and woman on the street to understand either; otherwise they wouldn’t stay on the street but would be pulling down the buildings. Which is why Lanchester is so adamant that everyone should know how the bankers speak and why.

Yet Lanchester doesn’t set out to duff up the financial world. In fact, you get the sense that he rather likes the lingo with it’s own alphabets, codes, and other linguistic intricacies as well as the challenge of decoding them. His father was a banker – what we call today an old-fashioned one, who worked for HSBC in colonial Hong Kong – and his enjoyment of the business, and its peculiarities, rubs off.

But he acknowledges too that language is used to hide the truth; and provides masses of examples of how this was so when the financial crash imploded and threw out corkers such as the improbable sounding “mezzanine RMBS synthetic CDO.” A con or complex? In most cases, Lanchester says that these terms sound complicated because they are complicated and that the lack of transparency is not necessarily sinister and has parallels in other so-called specialist subjects, such as food. He uses the French word baveuse, which means “drooling”, but also describes the texture of a perfect omelette, to show how words can change and take on new meanings.

Whether baveuse means the omelette is drooling or perfectly runny inside doesn’t matter – but the danger is incomprehension, not knowing which is meant. As Lanchester warns, not understanding is a form of consent, and means we accept what’s happening to us. Ideally, of course, if we all understood more of what is happening more people would be in a position to cry foul and, who knows, stop the next crash ahead of time, because the professionals won’t. And even the Queen might not have had to ask, as she did during a visit to the LSE in November 2008 during the crash: “It’s awful: Why did nobody see it coming?”

The truth is that many people did see it, but they were not taken seriously, or were ignored, or both. Hopefully, Lanchester has sent Her Majesty a copy so that she – and the rest of us – will see the next one coming. Because it will.

How to Speak Money, By John Lanchester, Faber & Faber £17.99