The Big Short

>economics
Monetary History of the United States by Milton Friedman

Capitalism and Freedom by Milton Friedman

General Theory of Employment, Interest, and Money by John Maynard Keynes

Road to Serfdom by F.A. Hayek

Capital in the 21st century by Thomas Piketty

Piketty is a socialist, Keynes is all around pretty much (right wing Keynesians like Greg mankiw and left wing Keynesians like Paul krugman exist), Friedman is a free marketeer (but he supports the existence of the Fed), and F.A. Hayek is a free marketeer (against the existence of the Fed).

That selection should give you a pretty good overview of different kinds of economic thinking. If i had to drop one, I'd drop Hayek because even though I myself am a free marketeer, the Road to Serfdom is a lot of philosophy and his economic thought, Austrian Economics, rejects empirical modeling in favor of praxeology (a set of assumptions about human behavior).

I concur; this was my biggest problem with the movie. The banks weren't innocent, but it just seemed to me like it fulfilled what every average guy wants to here that the banks are these cartoon villains. No mention of the GSEs is outright disingenuous if you ask me.

Especially towards the end when he talks about how they blamed "immigrants, poor people, and teachers."

econlog.econlib.org/archives/2015/02/the_housing_bub.html

Scott Sumner has a lot of good writing about this, but there's a lot of competing ideas.

Politically speaking, most left wingers think the problem was unregulated banks and most right wingers think the problem was low interest rates. I'm a right winger and i don't think either was the culprit. The link pretty much explains my view on how the whole crisis formed.

au contraire, it's you who lack smarties, mr. no-fun-allowed-collectivist. maybe think about how good intentions, tecnocrats and totalitarian regimes relate to the nightmares suffered throughout europe in the 20th century.

you can debate free will a lot, and it is an interesting topic, but in the end we have to see that the only way we can respect one another is when we accept that we all are capable of taking responsibility for our actions. otherwise we'd all be little more than children. (and honestly in that situation I'd be even more afraid of how governments would treat us when everyone would agree that all of us are unable to make decisions for our own.)

"I just spent the last 20 minutes googling economic and philosophical schools of thought to try and seem like I'm not a complete fucking idiot after I embarrassed myself in my first post in this thread" -the post

That one line nearly ruined the entire movie for me. It's like they forgot the entities that empowered the corruption.

yeah, because road to serfdom is such an obscure work. how could anyone ever have heard of it? you're a fucking idiot.

>Falling for for Cold War propaganda
If theres a government involved its not Communism. You're thinking of socdems or something

So what are the chances this same shit happens again but with student loans?

Nobody said your little book was obscure work, stop crying because you've made yourself look like an idiot. Keep your academic economics to yourself mate, nobody cares if you can explain on Wednesday why what you predicted on Monday didn't happen on Tuesday. Some of us are busy applying the bit of economics that really matters and making money from it. Piss off.

>If theres a government involved its not Communism.

let's centralize all political and economic power. that will magically make the state wither away voluntarily.

if you say you actually believe this crap you are either dangerously naive and I might have retract my statements on people being able to take personal responsibility or you are maliciously lying.

"...unlike mortgages, student loans are not collateralized, meaning investors get nothing in the case of default. So in the case of a student defaulting, lenders are out even more than they would be in the mortgage-backed securities market."

source:
>.investopedia.com/articles/investing/081815/student-loan-assetbacked-securities-safe-or-subprime.asp

But also check these out:
>moodys.com/research/Moodys-announces-rating-actions-on-student-loan-ABS-backed-by--PR_350543
>bloomberg.com/news/articles/2015-07-15/america-s-student-loan-crisis-risks-turning-aaa-debt-into-junk

you started it you dense idiot. if you're unable to identify sarcasm it's not my problem.

>Keep your academic economics to yourself mate

you really dare calling anyone else stupid? c'mon, say sorry and go play with your play dough.

I'm a pretty staunch conservative and even I can say that most people don't know the Road to Serfdom.

Marxist-Leninism is a variant of communism, just like how crony capitalism is a variant of capitalism.

This

>I'm a pretty staunch conservative and even I can say that most people don't know the Road to Serfdom.

On June 9, 2010, the book became the #1 book sold at Amazon.com, achieving best seller status.

kill yourself.

The book is ranked #198 in Amazon's "Economic Policy & Development" category. How many times can one NEET be wrong in one thread?

>the subprime shitstorm was caused by regulators not doing their jobs
Not sure how you can justify this statement. The regulations is existence were premised on the fact that lending decisions don't need to be second-guessed. For decades (if not centuries) the profit incentive guided banks into making intelligent lending decisions. Good loans get made because the bank is likely to profit from them, while bad loans get denied.

But thanks to mortgage securitization and derivatives, it suddenly became more profitable to make a bad loan than to make no loan at all. Hardly a situation that regulators could predict, or that Congress could prevent with legislation.

I'm not saying the regulators were entirely blameless. In an ideal world they could have acted more nimbly to the new financing vehicles. But to say that they "caused" the crisis is simply indefensible.

dates, ever heard of them? how do you not forget breathing?

Why do retards argue pointless shit. This thread is a classic example.

Nobody honestly gives a flying fuck either way let's just further the discussion for the movie and how it is relevant in this day and age.

Thanks.

So you're saying the early 2000 boom in subprime lending would have still happened if legislation was passed and regulation was tightened during this period to prevent intermingling of employees between investment banks and ratings agencies?

I think its easy to look back with 20/20 hindsight and say that the conflicts of interest (true) caused regulators to be lax or slow in adapting to the changing landscape. I don't disagree that it's a problematic situation, but I can't support the leap of logic that suggests the problem would have been headed off if things had been different.

The fact is that the degree of collateralization and derivatives was unprecedented and hugely profitable. There's every reason to believe that even if the regulators had been 100% on top of the situation, they still might have missed the problem or been foiled by the principal actors.

I don't disagree that reforms in the regulating agencies is a necessary part of preventing this from happening again. But that's not the same thing as suggesting that the regulators "caused" the crisis. I just can't see the logic for that statement.

We can agree to disagree and instead blame the 2008 crisis on irrational exuberance in the credit derivatives market. Fair enough?

>irrational exuberance in the credit derivatives market
Yes, this 100%.

I'm pretty naive to everything shown in the movie. When they're at the blackjack table and it shows two people betting on whether the CDO bites the dust or not. But it's referred to as a Synthetic CDO. I thought this initial bet was the CDS bet.

> most right wingers think the problem was low interest rates

The people in the Austrian school believe this, and most mainstream Economists don't take the Austrians seriously.

So basically we're fucked and it's just a matter of when it happens

the initial purchase of credit default swaps refers to the BBB tranches, or the mortgage bonds (presumably subprime). you're talking about when the guy that christain bale plays goes to goldman sachs and they create a cds for it right?

the synthetic cdo is made up of credit default swaps. the synthetic cdo essentially goes over the top of the original cdo (betting on the outcome of a bet, which is the cds)

jew/10

blamed everyone except the jews to make sure you're not asking too many questions.

>commie........
>fascist......
>same sentence describing a person.

are you God user? because you just created an impossibility

aren't most student loans facilitated through the government instead of private loans so they aren't defaultable like normal ones? unless they work the same way where a bank buys the loans. enlighten me senpai

How do I short market tranche opportunities? Please respond

For kids and boxers it's both. But investment is much different. Investors have a legal and moral obligation towards their shareholders.

It's a meme movie.

nakedcapitalism.com/2015/12/debunking-the-big-short-how-michael-lewis-turned-the-real-villains-of-the-crisis-into-heros.html

TLDR: The heros in the movie were actively encouraging the creation of more CDOs (bundles of bad debt) for them to short (bet against).

it's pretty accurate but it doesn't tell the whole story.

watch inside job if you haven't yet

Subprime loans were not backed by the government. That would mean the government would pay for the subprimes if they defaulted. You're thinking of credit default swaps issued by AIG.

They were rated so highly because of horrible fuck ups by the credit agencies. Freddie Mae and Mac role was that the implicit government backed perception let them borrow at lower rates to fund their MBS.

Near zero. The great recession was so bad not because loans failed but because many banks had tremendous exposure to them. Not only did they own these bad loans but some like AIG even wrote insurance on them, so when they failed they lost the loan and had to pay for it.

Student loans are much smaller and nobody thinks they're secure enough to pull the kind of shit with housing loans.

And the bank's shareholders made money when the banks bet against these credit derivative products so their moral obligation towards their shareholders wasn't broken? The goal of a firm's management is always to maximize shareholder's wealth.

Not exactly. A synthetic CDO pays various levels of cash flows to investors in it's tranches (which have various levels of risk involved) and this money comes from the PREMIUMS received by the CDSs on the original CDO. It's not made up of CDSs, it's just made up of cash flows from the premiums attached to these contracts which are made as insurance against default of the CDO (which would happen through default of the underlying notes packaged within the CDO). That's why it's called "synthetic" because it doesn't actually have any debt-related products within it, just derivatives.

Most every form of debt is securitized, and then sold on a secondary market to be packaged into a larger investment vehicle for clients with larger appetites. This works because (as Lewie Ranieri explained in the Big Short) as you add these products to a pool, the yield goes up and the risk stays at the same fixed level (assuming you packaged the products correctly no amount of subprime losses should effect the quality loan products underlying the ABS).

I work on a credit derivatives desk, if you guys have any questions about this stuff I don't mind explaining some of it.

>Student loans are much smaller and nobody thinks they're secure enough to pull the kind of shit with housing loans.

You may want to take a look at this link:
>salliemae.com/about/investors/Asset-Backed-Securities/default.aspx

There are plenty of SLABS (student loan asset backed securities) floating around the secondary markets.

I mispoke, I meant investors, which includes shareholders. Specifically the people they sold subprimes to.
Mortgage loans are about 14 times larger than student.

Also if they go under their buyers lose some money and nothing major happens. Unless major banks have taken our massive bets on them.

>the yield goes up and the risk stays at the same fixed level
you just cleared an ass ton up. thats a fucking genius idea. assuming its handled correctly as you stated. who came up with this idea?

are student loans bundled like this? is this what NNI does? they buy the bundles?

can you quantify the risk of these "vehicles"? or is it merely these set is riskier than that set?

>who came up with this idea?
Lewie Raniri and the mortgage department over at (now bankrupt) Salomon Brothers investment bank. They were truly ahead of their time.

>are student loans bundled like this?
All debt that is securitized is bundled like this. I don't know what you mean by "NNI" though.

>can you quantify the risk of these vehicles?
With a surprising degree of accuracy, yes we can. We use Monte Carlo simulation for this most of the time.

sorry, NNI, is the ticker symbol for Nelnet Inc.

what would an average risk factor of say a mortgage bundle? or a student loan bundle be?
if specific criteria is needed just pick a scenario.
monte carlo, interesting

Any of y'all think that trump is going to deregulate the Dodd-Frank act?

Probably. Republican Congress would support it and he made it a big part of his campaign in regards to finance.

THIS MOVIE WAS SHIT

READ THE BOOK Veeky Forums ITS WAY BETTER AND YOU'LL LEARN A LOT MORE

I agree. People think they can buy swaps now haha

because they're retarded it never showed that a regular person can just go and buy them

The movie states that as ISDA is required to buy these credit derivatives right? Why would the average person think that they could start buying swaps?

What is the most popular credit derivative at the moment?

CDS indices:

markit.com/Product/CDX
markit.com/product/itraxx

Great family of products in my opinion

I hope they do. FHA guildelines are so strict.

Anyone have an opinion on Velben?

Thinking of ordering Theory or leisure class and theory or absentee ownership

Republican stranglehold on Congress and the preisdency makes regulatory reform likely. And the 2018 midterms aren't looking good for the Dems either, they've got 20+ seats up for re-election in the Senate ALONE. Five of them are in Montana, Indiana, West Virginia, North Dakota, and Missouri. A handful more are in states that pulled red for Trump (politico.com/story/2016/11/senate-democrats-2018-midterms-231516). Trump could even expand the current Senate make-up if he appoints Heidi Heitkamp somewhere later in the administration, since a Republican would probably win that seat.

The selection of Mnuchin and Cohn seem to indicate Trump will get rid of it.

So I'm almost loathe to ask, but what does Veeky Forums think of this?

Reading all the sources of praise puts me on guard.

It's interesting politically but it's terrible at educating the view about the financial causes of the recession.