The Big Short
Last night I watched The Big Short and I have to say, it made me feel profoundly sad in a way that I can’t remember another film making me feel. It has a star studded cast and recounts the story of Michael Burry, Steve Eisman, Grepp Lipman, Ben Hockett, Charles Ledley and Jamie Mai as they bet against the notoriously robust US housing market, “shorting” it in the form of credit default swaps against tranches of mortgage bonds and collateralised debt obligations. I watched the film and then looked up half the terms and still only understand half of that sentence, but the point is that it depicts the entirely true story of a coalition of banks, mortgage brokers, ratings agencies, the SEC and the US government to defraud millions of average American people out of their pensions, savings, homes and in many cases, lives. It didn’t just affect Americans though, as the world economy collapsed with ramifications for almost everyone I know (or at least their parents), and I’m sure other nations' institutions and governments were just as culpable as their star-spangled counterparts.
And the worst part? Nothing changed. In less than five years the Dow Jones surpassed its 2007 peak and has continued to soar, with the global pandemic - which has killed millions and caused millions more to again lose homes and savings - not even setting the industrial average back a year as it continues to moon. CDOs simply got renamed “Bespoke Tranche Opportunities” or even just “Bespoke CDOs” and are still sold. I’m obviously not an expert, but as far as I can tell, little has changed in the way of regulation. Some people are predicting that we’re on the brink of an even bigger bubble than 2008 right now, and when you take into account the soaring price of every security ever, the mind-boggling price of crypto (which isn’t really anything other than a bunch of hashes) and, for example, the fact that internet communities like Reddit can massively manipulate and inflate a stock’s price in part for profit, in part to fight a broken system, but largely just for fun, makes it seem like a compelling argument - especially given that one of the people predicting the bubble is Dr Michael Burry, the guy who figured out the housing market was going to crash in 2005 and persuaded the banks to create a new bespoke financial instrument through which he could short it.
Weirdly the idea of it doesn’t even scare me that much - if it happens, if I lose my job, maybe I’ll move back in with my parents and have to do anything I can to make money, even if that means waiting tables rather than programming, but if I weather the storm for a year or two and don’t panic sell any of my assets, it seems like the market will bounce right back. Which is where a moral component of this comes in - the system just makes the rich get richer and accelerates income inequality. Not only do I have a job that is part of the capitalist machine and so contributes to this inequality, but I’ve got money invested too, and frankly in the current financial climate it’s impossible not to have a huge ROI. And maybe I should even question whether that is ethical - am I exploiting people by doing this? For me, and every other idiot fortunate enough to have some spare cash, to be making so much money, surely someone must be losing it?
I don’t know, maybe this is all too tinfoil hat-y, and maybe I don’t understand it well enough. But it has renewed my desire to give it all up and go be a farmer.