Too Big to Fail or Too Big Function?

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Let’s talk about the economy for a minute, shall we? In a lot of folks, mainly those with little buying power or knowledge of how it actually works, it brings out the most creative uses of profanity mankind has ever seen. In others, those who have made it a priority to understand it and profit from knowledge of it, it brings out hitherto unknown melodies that allow them to sing the praises of a strong economy, even if that’s not true.

Take for instance the story of The Big Short, which describes several of the key players in the creation of the credit default swap market that sought to bet against the collateralized debt obligation (CDO) bubble and thus ended up profiting from the financial crisis of 2007–08. The movie also highlights the eccentric nature of the type of person who bets against the market or goes against the grain, in case you find that interesting. Which, I did. So, I suggest going out and seeing it. Or staying in. I won’t judge.

Now, what I want to talk about is not betting against an arrogant banking industry, but more about the financial crisis of 2007–2008 itself, which was triggered by the build-up of the housing market and the economic bubble. I apologize for all the links, but having only recently discovered that the hyper-linked terms existed, thanks to the movie (what can’t movies do?) and understanding very little about about hardcore economics in general, I figured it would give a bit more clarification to the reader.

During and after watching The Big Short, and other movies like it, whether they be dramas or documentaries, the average person, and I’ll be the average person in this particular case, has little recourse but to get worked up enough to the point of anger or to research what took place and what led up to its taking place. As if there wasn’t enough going on in our lives, right? Right. Good!

What can we do to protect ourselves from the Ayn Rands of the world?

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Even if we understand very little how the economy works, or doesn’t, the fact remains that it affects basically everyone who is above ground. Though, some beneath the ground are sometimes affected (See #2). So, it behooves us to study the economy, even if we don’t stand to profit from it like those who work on Wall Street and the like. There is much that has been written about the 2007-2008 financial crisis, so you could start just about anywhere, so this is just as good a place as any. It offers reasons to be optimistic and pessimistic about the future of the economy.

Now, there are some who think that The Big Short was not telling the entire truth, and for myself, not being an economics expert, it’s hard to tell if it was completely factual, since Hollywood is generally more interested in entertaining than educating. But, even if the economy takes another dive into the dumpster, if we gain a better understanding of it, we can either be somewhat prepared for it or tell ourselves we told us so. That qualifies as a win-win situation for the optimist who is also a pessimist.

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