1) What are your own views and beliefs about the facts presented in The Big Short? Make a list of the basic principles of “right and wrong” that you believe to be true about markets. What might lead you to change your views?
I think that The Big Short’s attempt at simplifying complex phenomenon and developments in the U. S. economy should be lauded. The movie captured an integral part of the cause of the financial crisis which is greed and apathy. I believe Wall Street gambled with the future of not just Americans and the world, and, it was good to portray it in such light. The movie captures what is wrong with the current economic system. There is an exchange between Mark, Danny and Porter in the movie were they seem befuddled by individuals confessing to wrongdoing. The problem is that the said individuals are not confessing but bragging as Porter observed. Instead of warning the government or the American people that a disaster was looming, the individuals at Wall Street decided to keep information to themselves and worse off, they did bet on the American economy to collapse.
The cuts to celebrities like Anthony Bourdain explaining CDOs helps in illuminating the fact that the economy was in the hands of people who cared little about what they were doing to the American economy. They wanted to make profit by any means necessary.
Basic principles of right and wrong about markets are;
Markets are not perfect
Unfettered markets are subject to greed and abuse
Because of imperfect information there is a big market for lemons
Unfettered markets are not capable of addressing wealth and class imbalances
Without government oversight markets can produce bad outcomes from individuals and society.
It has been shown that left to their own device, markets can alter society in drastic ways hence the need to government regulation. I would change my mind if a success economy emerges that does not need government at all. That said economy should have low poverty levels and equal distribution of wealth.
2) What are your views about the role of government in the markets? How have those views changed over time? What might lead them to change in the future? Does the U.S. President have an obligation to interfere in the markets for the well being of the nation? If the president does get in involved in the markets does that go against U.S. capitalism?
I believe that government should take an active role in the markets albeit a limited one. Because political systems are important to the freedom of the markets, governments can protect the market as well as enhance their performance. The idea of unlimited markets is far too theoretical to work in the real business world.
I grew up reading works by individuals like Ayn Rand and used to believe that the government was an enemy to freedom but that has changed. The way relaxed regulations and loopholes were used by traders and banks during the global financial crisis of 2007-08 means that government is important to the function of the market. The government also had to prop up banks that were close to collapsing.
My views about the role of government in the markets might changes in the event that I become a successful business person and government taxes and regulations are hindering my ability for expansion. I however would welcome government interference if the goal is to save the environment or if my business causes some major societal upsets.
The U. S. President alone should not interfere with the market. He can however do it with the blessing of Congress and the Judiciary. To avoid what happened with the subprime mortgage crisis, the President together with Congress have the prerogative to protect Americans from Wall Street speculation.
The involved of the President in the markets does not necessarily go against U. S. capitalism. The President through infrastructure projects can help the operations of the markets. Seeking purity in capitalism often leads to economic catastrophes.
