The Big Short
05/02/16 Filed in: Cinema
This week's cinema film (as distinct from Amazon Prime) was The Big Short. It started a bit strangely, with a narrative approach, and at first I wasn't too sure about it. But as things unfolded it became clear that the film needed to explain some fairly complicated financial practices while at the same time making itself entertaining. In this respect I feel it achieved its aim, allowing us to laugh at times during what is a very sombre revelation.
I doubt anybody isn't aware that there was a financial meltdown in 2007/8, and those of us who don't believe the Tory mantra that it was all Labour's fault, recognise that it was a result of a total meltdown in the American property market.
Basically, the banks and associated financial whizz kids sold mortgages to people who could hardly afford them, and who would in due course be hit with increased repayments that they almost certainly wouldn't be able to afford. (A fact lost to many in the current long run of low interest rates.) By mixing these 'sub-prime' mortgages with better quality products the risk that they posed were hidden, but unfortunately as the number of better quality products decreased the contents of these mortgage packages became more and more toxic. The film describes these shenanigans by way of some nice little cameos that use analogies to make the point.
I doubt anybody isn't aware that there was a financial meltdown in 2007/8, and those of us who don't believe the Tory mantra that it was all Labour's fault, recognise that it was a result of a total meltdown in the American property market.
Basically, the banks and associated financial whizz kids sold mortgages to people who could hardly afford them, and who would in due course be hit with increased repayments that they almost certainly wouldn't be able to afford. (A fact lost to many in the current long run of low interest rates.) By mixing these 'sub-prime' mortgages with better quality products the risk that they posed were hidden, but unfortunately as the number of better quality products decreased the contents of these mortgage packages became more and more toxic. The film describes these shenanigans by way of some nice little cameos that use analogies to make the point.
A few people became aware of this risk, most notably Michael Burry, a hippy type of character who wasn't taken seriously by the big banks. He, and a few others, independently decided to 'short' these mortgage products, which in simple terms means that they bet that the products would fail. The banks were more than happy to take their money, happy in the totally unjustified belief that the housing market could never fail (think Britain at this point!).
At first things carried on as usual, putting the 'shorters' under a lot of pressure from their investors, but as we know the bubble finally burst, at which point the banks et al tried their damnedest to deny that there was a problem, allegedly assisted by the rating agencies who continued to rate the crap mortgage packages as Triple A, fearing the wrath of the banks if they didn't. Criminal or what?
Of course, once the cat was out of the bag the momentum was unstoppable. Banks failed, thousands lost their homes and the world economy was thrown into chaos, from which it is still to recover.
To my mind this is a must-see film. It shows the real reasons behind the crash, while at the same time reminding us that not a lot has changed. Wall Street still controls the American government and the banks still know that if they get it wrong they will be bailed out. Meanwhile ordinary people continue to shoulder the losses through austerity while the rich continue to get richer.
Plus ça change, plus c’est la même chose.
At first things carried on as usual, putting the 'shorters' under a lot of pressure from their investors, but as we know the bubble finally burst, at which point the banks et al tried their damnedest to deny that there was a problem, allegedly assisted by the rating agencies who continued to rate the crap mortgage packages as Triple A, fearing the wrath of the banks if they didn't. Criminal or what?
Of course, once the cat was out of the bag the momentum was unstoppable. Banks failed, thousands lost their homes and the world economy was thrown into chaos, from which it is still to recover.
To my mind this is a must-see film. It shows the real reasons behind the crash, while at the same time reminding us that not a lot has changed. Wall Street still controls the American government and the banks still know that if they get it wrong they will be bailed out. Meanwhile ordinary people continue to shoulder the losses through austerity while the rich continue to get richer.
Plus ça change, plus c’est la même chose.