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November 24, 2016

The Big Short Film – abstract economy, real economy.


It was great to see the Cube Cinema packed out with around one hundred people on Sunday 6th November, all wanting to learn about and discuss the causes of the 2008 financial crisis and whether anything has changed in the finance industry since. We watched The Big Short Film, which I was pleasantly surprised to find, offered a fairly accurate portrayal of what happened leading up to the 2008 crisis, well-acted by a cast of highly regarded celebrities. The incredibly dramatic and testosterone fuelled financial industry was well suited to a fast-paced drama. In amongst the drama, the film used models and actresses to explain the key economic terms in a casual way, while taking a bubble bath or drinking a glass of champagne. This was an attempt to make things like Collateral Debt Obligation and subprime mortgages understandable to the everyday audience – however, despite the attempt, the film left with more questions than they had answered.

My main question was articulated well by Kit Beazley, the UK Head of Finance and Risk at Triodos Bank, in the passionate and informative panel discussion between himself and Molly Scott Cato, (the Green Party MEP for the South West) chaired by the Director of Bristol Pound CIC, Ciaran Mundy. He asked, “Why didn’t anyone notice? Or was everyone too tied up in it to do anything about it, and therefore they hid it instead.” Molly also explained that it is very easy to get sucked into the excitement of money creation and gambling on debt, so that many people in the industry lose sight of morality and the reality of what they are doing. She is very keen to keep her moral compass when working in politics.

This theme was demonstrated in the film when Ben Rickert, played by Brad Pitt, said “‘Have you any idea what we just did? We just bet against the American economy which means that people will lose their jobs, people will lose their retirement savings and lose their pensions. Do you know what I hate about f***ing banking? It reduced people to numbers. A 1% increase in unemployment equals 44 thousand people dead.”

Kit explained that banking had lost its purpose – “Banking is supposed to be the life blood of the economy – the mechanism whereby the people who have got some money and want to do something worthwhile with it can lend it to some people who have got a good idea. When you get into CDO’s and synthetic credit swaps and synthetic CDOs that is just about making money out of money, it is not about the real economy.”

So, although the film had left me feeling confused – after the panel discussion I knew that my confusion had been caused by a certain disbelief that so many people were part of the creation of the financial crisis without being aware of what they were doing. I think the problem lies in the fact that things like CDOs and synthetic credit swaps are so far away from the real economy, and what banking and money are meant to be about, that many people working in the industry are ignorant of what the things they are dealing in represent in real terms. Their work becomes something totally abstract, and it is easy to be flippant about the abstract, as it doesn’t seem to mean anything. But in the real economy, money is worth what you pay for food, for fuel, for clothes. Savings and pension funds are a result of real people’s time. They are not to be played with.

This shift in mindset from the abstract to the real, all three panellists agreed, is the most crucial thing for the financial industry in creating a more fair and sustainable economy. It is difficult for the majority of us to tell whether that has changed at all since 2008 – so it is our role to make the change and shift money back to what it is meant to be, to bring our economy back to the real economy.

Laurie King is the Community Liaison Manager at the Bristol Pound. You can find her profile on our team page

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