And the big short movie perfectly conveyed his central idea. The problems of Wall Street and the financial system are the most fundamental problems of this century's crisis.
The discussion system has to go back to the source and first clarify two issues, capitalism and financial investment. In Harari's A Brief History of Mankind, he briefly summarized the essential difference between the modern economy and the premodern economy. The premodern economy is a one-way relationship from production to profit. In the modern economy, production and profit have a cyclical growth relationship. When the production creates profits, the profits are reinvested in expanding production, so as to circulate. In the process of putting profits into production, there is an important connection point, credit. Credit refers to Party A's trust in Party B's actions and products. When profits are reinvested in social production, investors believe that production will create greater value and profits. The profit invested in production is capital. The earliest capital investment was for business development and overseas expansion. Belgium established its first stock trading company in 1531. In the 17th century, Germany, Britain, and France followed suit. The first financial crisis occurred in the French Mississippi crisis in 1720s. At the time, John Law, the head of the Mississippi Company, was also the governor of the French Central Bank and the French Minister of Finance. The Mississippi Company launched a project to build New Orleans, using taxes and issuing stocks. With the support of the French government, its stock price has also soared. However, certain investment predators discovered the false high of Mississippi's stock and decisively withdrew their capital at the highest point. Other investors also sold their stocks when they saw the bad news. The Mississippi Company and the French government behind him were instantly in debt. In order to solve the debt crisis, Law, the clever finance minister and central bank governor, started printing a lot of money, which led to the complete collapse of the French economy. The Central Bank of France still has several large boxes of banknotes that are already worthless.
The stock market in 2003 was like the Mississippi Company at the time. Under the economic stimulus that the Federal Reserve lowered bank interest rates to 1%, major banks saw the trend and pushed the rudder to fuel the flames, and the housing market triumphed. The essence of capital is to drive out benefits, and credit is the key to capital investment in the production cycle system. However, greedy banks and financial institutions skipped the credit threshold and reduced loan conditions to almost zero. In an interview about the 2008 financial crisis, Professor William Black from the University of Missouri referred to these loans without any mechanism as Liar's Loan. He described the subprime mortgage at that time, the work background of the lender, income, and creditworthiness without any confirmation and verification to buy a house much higher than his ability to pay. The financial geniuses who graduated from Harvard, Yale, and Massachusetts Institute of Technology used a complex brain-burning financial model to package 80 billion US dollars of junk loans into financial derivatives with considerable returns and sell them to major investment institutions. Including the major federal agencies that manage pensions and social insurance. The main financial product is the CDO (collateralized debt obligation) mentioned in the movie.
These rubbish loans are how He De and how can they become a popular financial product. In addition to the clever hands of these financiers with bigger brains than ordinary people, they also benefit from credit rating agencies. In the big short movie, Mark and his partners went to the appraisal agency to ask why rubbish loans can be rated as 3A, zero-risk capital. The appraisal agency said that if we did not rate 3A, they would go to other institutions on the street to rate 3A. . The income of the appraisal agency comes from the company being appraised.
Then someone has to ask again, why did the regulatory authorities not make a timely move? Professor Hei said that the FBI had intervened as early as 2004, but only issued a warning. Gaithnar, the head of the US Securities Regulatory Commission, later defended that the fraud situation was too serious to be supervised. The reason is that the original regulatory bill for such illegal operations that was enacted earlier has been abolished under the various activities of certain vested interests.
If the Mississippi financial crisis of 1720 originated from the same person as the investment company, the central bank, and the finance minister of the government, then the crisis of 2008 was caused by banks, financial institutions, appraisal agencies, and regulatory agencies that were driven by common interests. The same group of people together. In the film written, directed and acted by Michael More, capitalism is a love story (capitalism is a love story) nakedly pointed out that members of Congress and the heads of regulatory agencies are the beneficiaries of the subprime mortgage crisis and the Ponzi scheme.
The big short movie shows Wall Street and the dark side of Wall Street and the absurdity and greed behind Wall Street through the purchase of vacant mortgage derivatives by several Wall Street investors who have insights into the housing bubble and junk subprime mortgages. The author and director used funny and easy-to-understand life metaphors to explain complicated and profound financial terms and financial phenomena in a simple and simple way, which can also be described as painstaking. The cast is strong, and the acting skills and performance effects are not shown. Group dramas can be filmed closely to the theme, and it is also considered a good work. Have to praise.
However, to give this movie five stars, the most important thing is the thinking it brings to people. About human nature, about the system, about capitalism. US Chief Economist Brian. S. Wesbury said in a TED speech that the truth of the 2008 financial crisis was the repeated intervention of the Federal Reserve. If the government does not intervene, the free market can fully allocate resources to avoid this financial crisis. Wesbury must have won the true story of Adam Smith, who believes that capital and the market are omnipotent, while ignoring the innate greed and unscrupulous human beings who manipulate capital and markets. The most frightening thing is that when the human nature that is hard to fill has created a system that is hard to fill, when human worship and belief in capital have created Wall Street into a system that breeds greater desire and greed, replacing bad people with good people is no longer a way to solve the problem.
The government saved several major banks with the victims’ taxpayers’ money. The elites of Wall Street put on their robes and smiled proudly again.
Lews said he didn't see a really happy person on Wall Street. He also rarely saw anyone voluntarily leave Wall Street.
So the story continues.
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