Eight years after the financial crisis of 2008 broke, there's finally a movie about it that's worth watching. For anyone who has the slightest interest in the subject matter, 'The Big Short' must not be missed. The movie is (very) loosely based on Michael Lewis's book of the same name and tells the story of four investment managers who foresaw the bubble years in advance--and did quite well out of their clairvoyance.
The Big Short is the by far the easiest way to understand where the crisis came from, how it ballooned and most importantly, how everything that caused the crisis is still happening. Back in the day, most of us had a hard time understanding the terminology of the crisis--terms like subprime, CDSs, CDOs and so on. Amazingly, the movie does a better job of explaining it all everything than anyone else has done. How it manages to do so is fascinating.
For example, Collateralised Debt Obligations (CDOs) and Synthetic CDOs are explained by the 'Father of Behavioural Economics' Dr Richard H Thaler and Pop Star Selena Gomez, at a Blackjack table in a Las Vegas casino. Gomez' plays a hand that's the CDO and other gamblers are constructing synthetic CDOs on it while Thaler sits with them, explaining the maths and the psychology of it all.
For Indian viewers, some of the most interesting parts will be one fund's research team's on ground survey of whether there was a housing bubble. The movie makes it clear that at the heart of the crisis was the deep belief that rising housing prices were a fact of life and that real estate was a safe investment, no matter what. There was an unbroken chain of delusion from the individuals who were buying houses with loans they couldn't repay, all the way up to Wall Street's Masters of the Universe who were sure that any security constructed with real estate as the base would eventually work out. The movie does a great job of driving home the fact that the biggest financial crisis of all happened because people believed that real estate prices couldn't go down.
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