The Academy Award-winning and Oscar-winning film “The Big Short”
received praise from audiences and critics alike, and for good reason
– it did a commendable job explaining the 2008 mortgage crisis in
a digestible and entertaining format. While the film was able to demystify
many complex financial concepts and provide a general overview of exactly
what happened, it still fell short in explaining some of the more nuanced
reasons behind the crisis and why so many people, both on and off Wall
Street, didn’t see it coming.
First, the film actually overstated the complexity of the crisis. The 2008
financial crisis was just the latest in a long list of financial crises
that have happened throughout history. Ultimately, the complexity of the
products people invested in this time around didn’t matter –
the basic problem was a mania financed by risky leverage. Yes, there were
many complex factors that led to the crisis that the film attempts to
explain, but the bottom line is that its nothing new.
Second, the crisis was largely caused by cluelessness, not malice. Throughout
much of the film, they seem to get this right, but by the end, the film
delivers the message that the system is ultimately rigged and that nothing
about that will change. While this type of message surely resonates with
the millions of Americans still reeling from the crisis, it is too simplistic
– it misses many of the less malicious but more compelling reasons
why the crisis occurred.
There’s only so much that can be explained in a two-hour movie, however.
Read Greg Ip’s analysis of the subject online via the
Wall Street Journal.
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