Deep Politics Forum

Full Version: the Big Short
You're currently viewing a stripped down version of our content. View the full version with proper formatting.
A dramatization of the world financial collapse of 2007/8 - otherwsie known as massive fraud.

Well worth watching.

And apologies for banging my own drum here, but I saw this coming 15 years before it happened. It didn't take any sort of brains, just an observation of the massive leveraging that was taking place in the financial markets in the early mid 1990's - plus later watching how the collapse of Long Term Capital Managment in 2000 from massive overleveraging played out. That was a sign of what was to come.

The collapse of 2007/8 totalled $5 trillion that was put on the shoulders of the US taxpayer (not to mention the additional losses from numeous others nations worldwide). The $5 trillion is still being paid by the US taxpayer in interest (not to mention capital reapyments - impossible to cover fort ever after) to those who buy US Treasuries.

Treasuries are sold, for a commission, by the banks that racked up the huge losses and were rescued. They are called "primary dealers".

In other words; the banks made a killing from fraudulent trading that led to a loss of $5 trillion - but hey, they knew would be rescued by the Fed and the US government. They then used money from the $5 trillion bailout to pay themselves huge bonuses and refloat their profit franchise, so they could start the whole circus all over again. And they handsomely profit from making a market in the securities that were - and still are - used to pay off their original gambling debts.

It's going to happen again.

Oh joy.
I was amazed at how the film taught impossibly dense concepts. Can you imagine a Hollywood film throwing around terms like mortgage backed securities, credit default swaps, collateral debt obligations, the NINJA's (no job, no assets), and even the impossible synthetic CDO.

Here is a complaint on the movie by Michael Grunwald, who helped The Big Asshole, Timothy Geitner write his memoir. His whole article is worth reading if not for a good lesson on how to write a limited hangout. Everything is fine now that we have new regulations and look a the jobs that were created, etc. What Grunwald does not address is the wisdom and even morality of creating huge amounts of capital to be wagered on providing a basic need of housing. This question would lead directly to the issue of the vast wealth gap that now exists in the world.

Quote:The Big Short is designed to make people angry. Maybe it wouldn't have succeeded as a work of art if it had ended with responsible government crisis managers making horribly unpopular decisions that stabilized the financial system and prevented a second Great Depression. But that's what happened, and people ought to know that. Taxpayers didn't get shafted; the bailouts ended up turning a profit for the government. The financial system is not perfectly safe, and never will be, but it is dramatically safer. Many of the big banks are still big, but bigness was not what caused the crisis, and the Sanders proposal to take a hatchet to big banks, while emotionally satisfying, would be bad public policy.

Read more:

Here is a much better and stronger criticism of The Big Short (the book) from Naked Capitalism. Yves Smith doesn't like the book and therefore the movie much at all. Her article is really good.