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World View: Reader Comments on ‘The Big Short’ and the Financial Crisis

This morning’s key headlines from GenerationalDynamics.com

  • ‘The Big Short’ today versus ‘The Three-Penny Opera’ in pre-Hitler Germany
  • Reader comments on ‘The Big Short’ and the financial crisis
  • Readers’ personal experiences with the financial crisis
  • A parent of Generation-Xers describes his experiences
  • Alan Greenspan recognized the bubble in 2005, but won’t admit it

‘The Big Short’ today versus ‘The Three-Penny Opera’ in pre-Hitler Germany

Poster for 1931 London production of Three-Penny Opera
Poster for 1931 London production of Three-Penny Opera

In yesterday’s article, “ “‘The Big Short’ – an infuriating movie about the financial crisis”,” I reviewed the movie “The Big Short,” based on Michael Lewis’s bestselling book “The Big Short: Inside the Doomsday Machine,” describing the financial crisis of the past decade.

As I wrote, the movie did not sugar-coat anything. It unequivocally painted investment and mortgage bankers, financial managers and real estate brokers as crooks and bastards, but they were only financially rewarded by the Justice Department. It ended by making clear that the same people are doing the same things today, and that the financial crisis is far from over.

It seems pretty clear that the director David McKay had the objective of making a political point: That people should be a lot more outraged about what happened, with millions of people losing their jobs and homes and going bankrupt, and that they should demand that some of these crooks should be prosecuted rather than rewarded.

There is a historical analogy to this objective. Bertolt Brecht’s 1928 play “The Three-Penny Opera” (music by Kurt Weill) had a similar objective – to portray the corruption and criminality of the day in order to provoke outrage and bring about change. (If you haven’t heard of the play, you may be familiar with its most popular song, “Mack the Knife”.)

In her book The Origins of Totalitarianism, Hannah Arendt describes how that objective completely backfired:

Particularly significant in this respect was the reception given Brecht’s Dreigroschenoper [[Bertolt Brecht’s The Three-Penny Opera]] in pre-Hitler Germany. The play presented gangsters as respectable businessmen and respectable businessmen as gangsters. The irony was somewhat lost when respectable businessmen in the audience considered this a deep insight into the ways of the world and when the mob welcomed it as an artistic sanction of gangsterism. The theme song in the play, “Erst kommt das Fressen, dann kommt die Moral,” [[“First comes gluttony, then comes morality.”]] was greeted with frantic applause by exactly everybody, though for different reasons. The mob applauded because it took the statement literally; the bourgeoisie applauded because it had been fooled by its own hypocrisy for so long that it had grown tired of the tension and found deep wisdom in the expression of the banality by which it lived; the élite applauded because the unveiling of hypocrisy was such superior and wonderful fun. The effect of the work was exactly the opposite of what Brecht had sought by it. The bourgeoisie could no longer be shocked; it welcomed the exposure of its hidden philosophy, whose popularity proved they had been right all along, so that the only political result of Brecht’s “revolution” was to encourage everyone to discard the uncomfortable mask of hypocrisy and to accept only the standards of the mob.

Arendt’s description, “The play presented gangsters as respectable businessmen and respectable businessmen as gangsters” is what closely ties the two dramas together. Corruption was massive in 1928 Berlin and today’s Washington. Both plays equated gangsters and businessmen — and also equated gangsters and politicians. But the Three-Penny Opera simply amused and delighted those involved in the corruption, and seemed to endorse it.

“The Big Short” portrays the delight that the bankers took in making millions of dollars while making millions of people homeless. Some of the characters even bragged about it. If the politicians and bankers and journalists who watch the movie have the same sense of fun that Arendt describes, then McKay’s message will indeed have backfired. Hannah Arendt, The Origins of Totalitarism and The Three-Penny Opera

Reader comments on ‘The Big Short’ and the financial crisis

After reading “ yesterday’s article, many reader comments expressed outrage in political terms:

“It’s disgraceful that the people responsible for the crash were never prosecuted. It is beyond belief.”

“Makes me ashamed in every way.”

“They will never be prosecuted….why????? Obama and his cronies are all in on it and crooks…”

“All financial authority should be on notice that the public institutions who rely on their “veracity” can and should demand clarity and proof on a daily basis. Selling your ratings, is not the same as giving your ratings.”

“This is exactly why Trump and his adjustable rate mortgages on over-priced New York real estate will be broke by the Presidential Election and Trump will be on food stamps and New York Medicaid, poor fool. Trumps so-called wealth is all on paper and Bloomberg reports that New York real estate bubble is bursting and has dropped every month since February 2015 with no end in sight.”

“There is another aspect to the “big theft” that is usually left out. The influx of Mexicans et al to build the houses in the first place. We did not have the workers to build those houses to bet against.”

“Bush back in 2006 tried to get congress to do something and the usual suspects in the Democrat party dismissed the fears! Thanks community organizing leftists!”

Readers’ personal experiences with the financial crisis

One person, a mortgage underwriter, described his own experiences:

Mr. Xenakis, a Belated Merry Christmas to you. Did my own research back when I first came across your site, years ago, and still sing your praises.

The problem with our entire society is the head in the sand/kill the messenger mentality that is a cancer on reason and logic. I don’t like delivering bad news but in my profession I must on occasion and am floored by some of the responses I get. Had one that actually paid money for an attorney that she could have used for ultimately getting approval- I am a mortgage underwriter- and close. I told the parasite to get phuqed and call his congressman- that’s who it would have taken to get the lending laws changed like he wanted them- and hung up.

There is an reactive, unconscious vindictiveness in people that I had never encountered before. Just boggles the mind how fundamentally unequipped people have become. I tried to call her afterwards, just to try and explain how she had just blew up everything and most likely lost even her earnest money, and still all she could do is scream and threaten me. This was, for me anyway, the most extreme and early example of the ‘sense of false entitlement’.

Keep your head up, keep in mind what my dear departed father used to say; ‘phuq ’em if they can’t take a joke’. Works on about anything, other than jokes. And don’t get too worried about the future, the Chinese are going to bow US into the stone ages. Might I suggest some of the urban survival courses? Online, YouTube. If nothing else you start seeing your neighborhood in a whole new way.

A stockbroker of 30 years wrote to say that the warnings put forth in “The Big Short” are frighteningly accurate:

John, may I first say that Generational Dynamics is frightenly accurate. I have been a daily reader for approximately 10 years. I can say with certainty that you are correct in your assessments. The future Gen Dyn predicts scares the hell out of me. I too watched The Big Short on Christmas Day. I too see that our financial system has not learned anything from the past. In fact it is by far worse. I have been a stockbroker for the past 30 years. You may hate me and lump me in with the others but I have always been honest in my career and honest with my clients. My upper management of the firms I have been associated with over the years are complete idiots. All they care about is shareholder value and their bonus not the client’s best interest. Over the years I have seen these same upper management morons continue to make millions and do nothing about the situation of product layering. I agree that government has turned away from prosecution of the fraud. I do think it is not a red vs blue political issue. It is much bigger than that. It is the ultra wealthy vs the rest of us. Two of my clients, one on the red team and one on the blue team gifted money to their families again this year from profits of their investments. Each are multi billionaires. They give children, grandchildren, great grandchilren and various LLC’s and trust they control millions each year. Each contribute millions to their red PAC and blue PAC which is now easier with the Supreme Court ruling. My conclusions are based on what I experience daily. Management in all brokerage firms are idiots. Racism exists and is strong in the south. Most importantly, the Ultra rich control government. God bless you and anyone else who can see the truth. Prepare yourself for the future Gen Dyn predicts.

Another person, a college professor, has also been reading my web site since 2007 and says the reason that her students — and many of their professors — didn’t see what was coming at that time was that they don’t know how to think:

It’s not that people can’t see what’s coming. It’s that they don’t have critical thinking skills.

Some people are corrupt and taking advantage of other people, and when people walk away with all the money, it’s not accidental.

But I teach with some of the academics and I can tell you that even people that I know that are straight couldn’t see what I could saw in 2007, and one of them was a finance professor.

Talking to the generation that’s now in their 30s, they’re clueless. They have no sense of threat, they have no understanding of what’s coming at them.

A couple of people wanted to give me investment advice:

John, wish you a Merry Christmas and Happy New Year. Although I don’t agree with all of your predictions, I find them insightful nonetheless. I hope that you invest based on your analysis. For a little unsolicited advice, I was told once to invest small sums for risky bets. I treat my political donations the same way!!”

“Some of us are listening. Based on your advice, I liquidated half of my Roth IRA last year. And sometime in January or February of 2016, I’m going to sell the other half of my shares. I’m doing this because I am heeding your warning of the coming stock market crash. Thank you for raising the alarm.”

“I read your tirade today, wanted to give you some reassurance. I’m just an average guy, but I’ve read your blog every morning for years. I don’t take it as gospel, but I am more inclined to believe it than pretty much any other internet source. I can’t be the only one. Keep it up.”

“John, thanks to you & Harry Dent I’ve been in cash equivalent investments for years. And I plan to stay that way for a while. In spite of our spats in the past, I still love your work John.

A parent of Generation-Xers describes his experiences

One person (writing to a third person) tells what happened with his own Generation-X children, something that other older parents may enjoy reading:

As you know I’ve been reading John X., your friend’s newsletter now for years. He drew my interest originally when I read him because his thinking was so close to mine; we largely mirrored each other. I called my thinking generational churn. In which in changing generations the newer generation in part forgot or deliberately ignored what the previous generations tried to pass on.

It happened between me and my children. They are Gen X and I saw on a personal level what happened tho as it was happening I didn’t truly appreciate the process at the time.

They were called the “can do” generation. The generation that would clean up the messes of previous generations. They were the first truly electronic & digital generation. Influenced in a way no prior generation had been. Weaned on gizmos and gadgets unavailable to previous generations. They didn’t have a generational war previous generations had had so they were more homogeneous than prior generations had been. United by all those factors.

You can’t tell them a damn thing because they have all the answers. Imbibed at the common cafeteria they all grew up on. A centralized common source connected by the electronic and digital grid of an increasingly centralized educational, entertainment, news, corporate, political, and governmental complex.

They knew they were right because the people influencing them told them they were right. They are in their later 30’s to very early 50’s & they still play with toys. Their president is known for dealing with crisis by playing golf.

As a parent of that generation I thought I was a good parent. I didn’t fully appreciate how all these forces were and would overwhelm the lessons I tried to pass on.

Finally, here’s a quote from someone from a person on the Millennial/Generation-X cusp who blames it all on Boomers:

Tyrannical boomers shove money-grubbing ideology down our throats saying that the purpose of life is to accumulate wealth. Boomers saw the potential of Xers and millies decades ago, and decided to tyrannically suppress them so that the country would continue in the direction of a wealth based and feelings based society. Even though doing so violated first Xers and the Millies rights. Xers and Millies can clearly see the patheticness of the current generations of leaders and see the competent governance in their national rivals, Russia and China, now the boomer elite wants to end any possibility of reform by shoving Bush and Hillary down our throats. What’s with the boomer love affair with weaklings? Trump is advocating a completely different form of government than what has traditionally existed in this country.

This is why we refer to “the nihilism, destructiveness and self-destructiveness of Generation-X.”

Alan Greenspan recognized the bubble in 2005, but won’t admit it

I forgot to add this to yesterday’s article. Alan Greenspan went through an amazing flip-flop in 2004-5, when he was Fed Chairman, as I wrote about in several articles at the times:

  • (October 2004). Greenspan says there’s a housing bubble, but it’s OK because it means that people have more money to spend.
  • (November 2004). Greenspan said that he and the Fed decided in the late 1990s that they couldn’t stop the tech bubble, but they could handle the aftermath, which they were doing now.
  • (February 2005). Beginning a spectacular reversal of opinion, Greenspan said: “The dramatic advances over the past decade in virtually all measures of globalisation have resulted in an international economic environment with little relevant historical precedent.”
  • (August 2005). Greenspan expresses alarm at the real state and stock market bubbles: “Thus, this vast increase in the market value of asset claims is in part the indirect result of investors accepting lower compensation for risk. … Any onset of increased investor caution elevates risk premiums and, as a consequence, lowers asset values and promotes the liquidation of the debt that supported higher asset prices. This is the reason that history has not dealt kindly with the aftermath of protracted periods of low risk premiums.”

I traced this reversal of opinion by reading and reporting on Greenspan’s speeches. Those speeches are still on the Federal Reserve web site, for anyone who wishes to confirm this. But, strangely enough, Greenspan has never admitted, to my knowledge, that he recognized the asset bubbles in 2005, and no one else, to my knowledge, has ever reported on his reversal of opinion. Alan Greenspan speech (26-August-2005)

KEYS: Generational Dynamics, The Big Short, Bertolt Brecht, Kurt Weill, The Three-Penny Opera, Michael Lewis, Dave McKay, Mack the Knife, Hannah Arendt, The Origins of Totalitarianism, Alan Greenspan
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