Tuesday Cinema Club: The Big Short

I have to start by saying ARRGGGHHHHH.  You might think that is a strange opening to a movie review but I’ve been annoyed by this movie all day and I had to let it out.

Not many people are fully aware of the absolute stupidity that brought about the collapse of the housing markets in 2007/ 2008 and the resulting impacts on the world’s economy. If you watch this movie you will see that the banks were the last to realise exactly what a catastrophe they had created.

One man foresaw the future and backed against the banks, who laughed in his face over the amount of money they would make from the deals. That is until he was right and the banks ran out of money.

I think this movie should be shown in every school to educate people on the stupidity of the people we elect to be in charge of our world. The governments were as much to blame as the banks and as they are all so closely intermingled there has never really been anyone held to account over the whole fiasco.

8 million Americans lost their jobs and 6 million Americans lost their homes when the crisis hit. One banker went to jail out of all the banks, ratings agencies, government departments and controlling bodies that the crisis affected. He must feel very hard done by as he wasn’t the only guy doing it. Or so the movie told us.

The fact that ordinary tax payers money was given to the banks to bail them out, without a solid gold clause that none of the money was to be used to line the pockets of bankers in the form of bonuses is bordering on criminal behaviour.

The government gave the banks the taxpayers hard-earned money and they used it for their own individual financial gain.

I have heard many leading people talking about the banking crisis and explaining the need to pay bankers bonuses in order to keep the best of the best in the top positions. But I don’t agree.

None of the banks realised what they were doing and the effect it was going to have on the world economies and once they began to realise they tried to cover it up and continue making money.

Put that into context of any other business. I am working on a contract to build a new school but I have brought all the wrong tools and fittings and used up all my budget. In order to buy the right tools and fittings I need to charge my client a monthly fee on top of my quote for the works. I eventually finish the school at twice the cost I originally said I would and then ask my client for a bonus of £30m because I am the best at what I do.

Would you pay me a bonus or sue me for overcharging my contract? Would you hold me accountable for the mess I made of my contract?

The problem is that no one was checking who was being given mortgages or their ability to pay the money back. By and large if you want to spend money the bank will let you spend whatever you like, regardless of whether you can pay or not because they make money on charging you interest. The less you pay the more they earn. At no point as far as I can see will they stop letting you spend money. But it’s easy to lose track when you aren’t dealing with notes and coins.

Money only exists in notes and coins in a small minority of its existence. For the most part it is numbers on a piece of paper. I can go shopping all day with my plastic card and 4 digit number and spend up to a limit on my card without touching a tangible piece of money. As I pay my bills each month my bank keeps offering to raise my limit and I keep refusing, I don’t want to spend more money.

If I walked into the bank today and asked to cash all my money I doubt they would be able to hand it all over. I would have to order it and wait. Because banks don’t hold everyone’s money as it mostly exists on a paper trail. Look at Greece when they ran out of money as people wanted to clear out their bank accounts.

The more paper money that is in existence the less it is worth. So printing more money to help people spend devalues the money you are printing. Or so my years of studying Economics at school would have me believe.

The people we put in charge of our financial services and government agencies don’t have to have any relevant qualifications to hold the role. By and large you need to have attended the right school and know the right people. If they don’t understand the mess they created then how will they avoid making that mess again?

The truth is they haven’t learned a damn thing. The banks have re-branded the CDC’s that crashed the markets into a new title and have begun selling them again. The individuals don’t make as much money as they once did but I still don’t think you’ll find that poor a banker out there.

We let them get away with it and they are doing it all over again. It will crash all over again, but this time I doubt it will take as long.

Oh and what about the man who first saw what would happen? Well he is investing small amounts of money in water nowadays. Makes you wonder what he’s seen this time, doesn’t it?

Go and see this movie and learn what you can about the financial industry and how it affects you. Read the paperwork carefully before signing up and ask the difficult questions.  Because bad debt affects all of us in the end and no one ever thinks the bad stuff will happen to them, so make sure you protect yourself when it does.

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One response

  1. I agree that it was an interesting movie. Would appreciate it if you could check out my review at http://scribblesofstageandscreen.com/2016/01/28/the-big-short-review-engaging-and-energetic/

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