The Big Short

Posted by coaldigger 7 years, 7 months ago to Economics
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I watched the movie and liked it but felt they left out a very important part---Big Brother. Michel is very clever in the way he gets the reader to follow his logic under the guise of a movie review. He carefully pries open your brain and inserts some wisdom instead of trying to beat you over the head with it and hammer it into your skull. I think a lot of people have important ideas and more people would listen if the person clever enough to craft the idea would spend more time on packaging it to be accepted by others. Unfortunately people expect others to recognize the truth as-is while people that are selling lies know how to sugar coat them,
SOURCE URL: http://www.forbes.com/sites/norbertmichel/2016/08/10/the-big-short-a-great-movie-not-a-policy-prescription/#4ca28004bfe3


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  • Posted by $ CBJ 7 years, 7 months ago
    At the end, the movie did get in one dig at the government when it mentioned all the bankers who went to jail, followed by the comment: "Just kidding."
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    • Posted by blackswan 7 years, 7 months ago
      When was the last time, IN HISTORY, that you've seen or read about bankers lending money to people they KNEW couldn't pay them back? That's what you call an anomaly, which calls for further study; that study will show that it's the government that was behind the anomaly, not the bankers. They were only following orders.
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      • Posted by $ WilliamShipley 7 years, 7 months ago
        Well, the key thing there is that they knew they could immediately package and resell the debt at a profit. So they made money on the loan and they made money on the sale of the debt and they didn't give a damned if anyone ever paid it back.
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  • Posted by $ WilliamShipley 7 years, 7 months ago
    Inspired by the comments here, I watched the movie on Netflix. They did an astounding job of making a very complex process understandable and entertaining.

    The thing the didn't mention, and few people do, was the part the Federal Reserve had in this. After the dot com bust and 9/11, the Federal Reserve began lowering the reserve rate. At the beginning of 2001 it was at 5.98, by the end of 2003 it had been regularly lowered and stood at 1.

    In determining your house payments, interest rates are more important than the price of the house. This lowering of interest rates allowed much higher prices at the same monthly payment and the market started to heat up. At this point almost any stupid deal paid off. You could pay 10% more than the house was worth and sell it at a profit in a year. And many were doing that, or pulling the 'equity' out to buy stuff. This 'equity' was money that was only based on the price of the house which was based on the interest rates making loans affordable.

    In mid 2004, the Fed started raising rates once again and by mid 2006 hit 5 1/4 %. This, of course, meant that the same monthly payment would no longer support as large of a loan. This priced many people out of the market or forced them into lower price homes. The market softened and people trying to unload houses they had bought that they couldn't afford to keep at a profit, something they could have done the previous year, could no longer sell. And the bubble began to burst.

    The Fed started correcting this in August of 2007 but at this point it was too late. The crash was beginning. Lowering the rate didn't change the market psychology because too many people were under water.
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  • Posted by dwlievert 7 years, 7 months ago
    I agree, Coaldigger. The movie was informative and interesting, though it neglected to focus on the source of the financial "shennanigans."

    Those of us who presume to understand the myriad of ways that someone, desirous of the unearned, can do so when the universal measure of the earned is corrupted, will always be disappointed when ignorance of such things "explain" events in non-essentials.
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  • Posted by Herb7734 7 years, 7 months ago
    I thought that if it had one idea to put forth it was that when it comes to money, what appears on the surface is nowhere near reality. That means also, nowhere near the truth.
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  • Posted by $ Olduglycarl 7 years, 7 months ago
    That's the only way to sell a lie...with a spoon full of sugar...makes that poison medicine go down.
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    • Posted by 7 years, 7 months ago
      In many cases, the truth seems harsh and bitter at first glance. In order to be effective those speaking the truth need to package it favorably. The effectiveness of Ayn Rand is that she developed interesting characters that told the story of truth instead of lecturing us. People that have not read Fountainhead and Atlas can be put off by her YouTube interviews and wonder why others are nodding their heads at such "heartless" proclamations.

      Yaron Brook's talks are filled with humor and real world examples. In Q&A he can back up his statements with data that would put his audience to sleep if it were the basis of his speech. I have heard people ask him why there aren't more people like him spreading Objectivism and to me the answer is that he is a teacher. A good teacher has to guide a student to learning, not just provide him the truth and have them accept it. Most really smart people don't have the patience to lead us less endowed to learning and we don't listen or adapt ideas that are false but easier to swallow.
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