Wednesday, January 13, 2016

Reviewing the Big Short

I viewed the movie the Big Short, with Brad Pitt and Steve Carrell, etc last night.  It covers people making money off the financial disaster of 2008, by shorting the mortgage bonds.  It is pretty good, and surprisingly the movie takes a didactic approach, explaining all that is going on to the audience with some funny cameo appearances (Selena Gomez explaining survivorship bias).  To keep the creative tension the narrative insists no one at the time understood what was going on at all, except for these two or three groups of people.   In this fiction, the movie contradicts itself majorly twice, when it mentions Grant Interest Rate Observer (with millions of readers) detailing all this (and that was just one critic at the time), plus the entire Austrian School of Economics followers nailed it (including me); and at the denouement, an actor regrets his realization "the bankers knew all along" (which of course they did) and went ahead knowing they would be bailed out.  The banks were bailed out.  And they knew this because at ever escalating crises since Nixon went off the gold standard (lite) in 1971, the bankers issued ever worse crap to ever more people until THEIR system broke, and then the taxpayers paid off.

And always remember, the bailout saved their system, a system, not "the" system.  Free markets are another system, but you cannot have capitalism or communism and free markets.

The protagonist in this morality play is the CDO, the credit default swap.  Note that: "credit."  Bankers know what they are doing, but they say money when they mean credit so you will not understand.  In the movie, when they say money, think credit, and you'll understand.

There is a scene in the movie, when their short positions are inexplicably NOT paying off when they should. Then the actors,  when searching for alternative strategies, one actor say "short the banks?"  That is exactly where I was in 2008, ready for the obvious and inevitable crash.  Just when my bet was about to pay off, the government, in the form of SEC chairman Christopher Cox, outlawed shorting the financials.  They changed the rules as soon as they were about to lose.

But I knew this was possible back then as I was betting.  Hegemons cheat, and their minions make it happen.  The only surprise is where and when they will cheat.  I accumulated a lot of credit, and like everyone today, "where to put it so I don't lose it?"  I obviously made the best bet at the time, but it does not matter for two reasons:

1. With the hegemon, the house will always cheat if it looks like it will lose.

2.  It was credit, not money.  I lost nothing.

I left that era with everything that mattered (OK, a couple of things I miss.)

Anyway, I always was an anarchist, a vietnam era conscientious objector (Class 1 - O), because God Almighty Himself wants us to have no kings or hegemons (anarchy = no + king).  They'll take your time and treasure and waste it every time.  But, sadly, we insist on being ruled.  Sigh.

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Luke Avedon said...

Great review. I think it's progress that for the first time in pop culture short sellers weren't demonized. Although I hear there is no mention of central banking in the film. sigh.

John Wiley Spiers said...

Ha.. I missed that... exactly... and the summary noting the brilliant doctor moved onto water futures... guess who just made another killing in california?