A Decoder for Financial Illiterates

Do you know the difference between “fiscal” and “monetary”?

Don’t feel bad. Neither did the British writer John Lanchester when he began work a decade or so ago on “Capital,” his sweeping novel about contemporary London. To his annoyance, he realized that he lacked even the rudimentary vocabulary to write about one of the great forces driving life in that city: the financial system.

“I got a first-class degree from Oxford,” Mr. Lanchester said the other day. “I worked for The London Review of Books for a decade; and I had heard the terms ‘fiscal’ and ‘monetary’ maybe 10,000 times each, and I didn’t know what they meant. I kind of vaguely sort-of maybe half-knew, and that was embarrassing. I didn’t know what they meant until I was in my late 40s.”

Mr. Lanchester, now 52, was speaking over lunch at Delmonico’s, an old-school restaurant of dark wood paneling, hushed conversation and big slabs of meat in the heart of the New York financial district. Outside, the stock market was having what appeared to be some kind of seizure. If you were just an innocent bystander, so to speak, it was hard to understand what was happening, other than that it was not good at all.


John Lanchester said, “You’ll never find a memo where they say, ‘Hee hee hee, let’s use all these complicated words.’ ” Credit Andrew Testa for The New York Times

“There is a gigantic gap between them and us — people who understand these forces and this language, and the rest of us,” Mr. Lanchester said. So, back around the time of the 2008 crisis, he embarked on a self-taught immersion course in the language and mechanics of money.

“The first obstacle, and the main obstacle, was the words themselves,” he said. “It’s embarrassing to admit if you literally don’t know what a word means.” So he began to ask and ask, and ask again.

He shares his findings in “How to Speak Money: What the Money People Say — And What It Really Means,” out this week from W. W. Norton & Company. In it, he explains some of the barriers to understanding, lays out the case for financial literacy and then provides an essential glossary of terms for those who would like to achieve this happy state. Here we find easy-ish concepts (amortization) harder ones (credit default swap, high-frequency trading) and ones we know are super-important in some complicated but confusing way (Libor: the London Interbank Offered Rate).

And yes, also included are those pesky terms fiscal and monetary. For the record: “ ‘Fiscal’ means to do with tax and spending, and it is controlled by the government; ‘monetary’ means to do with interest rates, and it is controlled by the central bank,” he writes. […]

(From The New York Times, Sarah Lyall, 22.10.2014)

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