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The Big Short and The Upcoming(?) Economic Meltdown

October 30, 2020

I admit I didn’t understand everything in The Big Short. This includes both the book by Michael Lewis and the movie. A lot of people pretend to understand, but I’m pretty sure they don’t.

Even though Michael Lewis is a good enough writer to make names and numbers interesting, I can’t always follow all the names and numbers when there are a lot of them. The movie had an advantage because the producers hired a bunch of attractive actors/actresses, wrote them some witty lines, and added music and graphics.

The audience reaction to a book/movie like The Big Short is often something like “How could they NOT see what was coming?”

According to the article linked below, something similar might (or might not) be happening again, and if it does happen again, most people won’t see it until it’s too late. But it will probably make for another cool book and another cool movie, and the audiences can again wonder how (statistically) nobody saw this coming.

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After months of living with the coronavirus pandemic, American citizens are well aware of the toll it has taken on the economy: broken supply chains, record unemployment, failing small businesses. All of these factors are serious and could mire the United States in a deep, prolonged recession. But there’s another threat to the economy, too. It lurks on the balance sheets of the big banks, and it could be cataclysmic. Imagine if, in addition to all the uncertainty surrounding the pandemic, you woke up one morning to find that the financial sector had collapsed.

You may think that such a crisis is unlikely, with memories of the 2008 crash still so fresh. But banks learned few lessons from that calamity, and new laws intended to keep them from taking on too much risk have failed to do so. As a result, we could be on the precipice of another crash, one different from 2008 less in kind than in degree. This one could be worse.

Read more here at Will the Banks Collapse?

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What do you think? Can you follow all the numbers in stuff like The Big Short or the linked article from The Atlantic? If so, does an article like the one linked above pose legitimate concerns, or does it simply promote baseless fear? When does expressing legitimate concern turn into fear mongering?

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