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Wednesday, July 13, 2016

"The Big Short" & Who Specifically Caused It



The other night, I watched 'The Big Short' on Netflix starring Christian Bale and Steve Carell about how a select few individuals were able to accurately predict the existence of a housing bubble and its ultimate 'pop' in 2008

For explaining such complicated concepts in easily understandable and digestible portions is probably the biggest success of the film

Domestically, the film only made $70mil which is very nice profit-wise considering its $22m budget but considering how important people understand what happened back then and how we're all still affected, the audience draw should have been larger
But we know a thinking film about something meaningful and real that affected billions of people will never be as good a financial draw as comic book superhero films and the animated cutesy goodness of Disney

What was interesting was each individual who ultimately discovered or tripped upon the reality that mortgages were severely overvalued never possessed anything close to a moral conscience

For all of them, these were strictly monetary moves and perhaps for some at the end, there was a little bit of guilt at the realization point that the economy had to completely collapse so their deal could be successful..

And at no time does the film find fault or assess blame at who exactly was the cause
We attribute it to two people..

Democrat Congressman Barney Frank and Republican President George W Bush who worked together to create legislation back in 2002 called the Affordable Housing Act

In layperson terms, what did this was force mortgage companies and banks to lower their scrutiny and level of criteria necessary to get approved for a mortgage

This put excessive risk upon the shoulders of the lenders and so they in response created all those mechanizations where they could package and bundle junk and sell it off to others who bundled that up and sold elsewhere like a game of hot potato
And ultimately it didn't matter if the applicant had a job or even used his/her real name as the primary;  You may have been paying your loan to Bank America or Countrywide but ultimately the title was held elsewhere.

And the common people paid no attention to the adjustable teaser rates.. the brokers all lied to them that they could simply re-apply for new rates..

Oopsie..

The same shit still occurs today but instead of risky housing, it is auto loans that are packaged and bundled into credit swaps.  Most auto loans are only 4-7 years so they don't pose much risk for individual or collective defaults

Nothing really changes..
We read today the Fed is prepared to dump massive amounts of liquidity into the system if the markets show continued signs of stalling..

How nice.. Just order the Treasury to create a bunch of zeroes next to a '1', put it out of thin air (or their asses) then lend to the Fed as more newly created debt so Investors, traders and other Wall Street scum do not go home broke.

That's why we're always hoping and praying for the Big Collapse; one that does not come on a Friday and is magically fixed by Monday

A collapse the Governments can not manipulate and quick fix; one where the elites are far more financially exposed and take greater hits than ever before and aftershocks which force these global politicians and parasites to change their ways or get stomped upon by the angry mob.

All it takes is one wave ripple or gust in the financial winds..