Michael Lewis, The Big Short

Let me be clear. I've always thought of investment planners as hacks, capitalism as a shell game, economists as an embarrassment to real scientists, and financial markets as inherently fraudulent. Business schools have some excellent people in them, as students and as faculty, but I have to force myself to think of them as similar to (um sorry, colleagues!) real graduate programs.

In other words, Michael Lewis' The Big Short: Inside the Doomsday Machine is hardly the kind of book I'd seek out for myself, although I should say that his articles on the 2007-09 financial collapse were very helpful in letting me get enough of a handle on everything that I didn't feel left out. Economics is something that at heart offends me so much that I can barely stand knowing enough to avoid total ignorance, but that's one of the things book clubs are good for: learning things you'd otherwise ignore, deliberately or accidentally.

So I was really surprised, last night, that I found myself unable to stop reading The Big Short, cramming its 270 pages into a five-hour blitz. I was absolutely, utterly riveted, and this morning I think that everyone capable of understanding the text owes it to the future of human civilization to read it carefully.

Mind you, I'm not sure yet what role Lewis himself played or plays in my sudden obsession. As he says in the afterword, people have been treating him as an expert, but he's really just a reporter. A reporter who understands the story, which is exceptional when you're talking about something as complex as collateralized debt obligations, or pay option negatively-amortizing adjustable-rate mortgages, but a reporter nonetheless.

The gist is that the biggest American financial institutions, over the first decade of the 21st century, fucked themselves in search of profits and through their own stupidity (of individuals and of the institutions), by deriving especially fraudulent investment schemes out of the spectacularly corrupt ways in which a number of smaller, opportunistic American financial institutions had already been fucking the American public. A select few people figured out the extent to which the larger institutions were ignorant of the ways in which they themselves were fucked (rather than wildly profitable, as they understood themselves to be), and bet against the institutions.

The machinations of these select few people prolonged and intensified the pre-collapse behaviours of the large firms, and as a result the few made obscene profits, and the institutions almost without exception faced the possibility of bankruptcy. The American government rode in to save most of them by handing over vast sums of taxpayers' money, and as a result most of the financial institutions remained solvent, their employees made bonuses, and their executives made absurd amounts of money after their ignorance had nearly caused the collapse of the American financial system.

If you've seen anything else I've reviewed lately on this blog (like this, this, or this), you'll know that I'm basically green. Non-human nature good; people of suspect value. My own life has too much brown in it, far too much brown in it, but green is where my allegiance lies.

As far as society goes, I've really been in a state of mourning for years, sometimes passionately and sometimes quietly, that environmental change and climate change are combining to mean that the forms of human society I love can no longer function. I've used a lot of breath and ink supporting farmers' markets, community justice initiatives, pollution remediation efforts, and the rest of it.

But after reading Michael Lewis' The Big Short, I'm no longer mourning. I'm perilously close to being on board with Derrick Jensen, who has for years kept saying that the only way to save human society is to bring down the current version of it. No one in Lewis' book deserves to avoid the apocalypse. No one. And if I get nuked with them, well, today I'm not sure I'd mind that.

Angry doesn't begin to describe how I'm feeling, with this extra bit of insight into the unavoidably corrupt, demonstrably fraudulent, criminally parasitical financial services industry. As an academic, honestly, my response is hardly likely to be anything other than text-based and wannabe, but mother of god, there's a gigantic reckoning out there that's richly, richly deserved. Time to raise the black flag, as they say.


Anonymous said…
Sounds like an interesting read.
Fiona said…
Going to seek this one out
Brasil said…
A compelling, well written book on a subject which has directly and adversely affected the U.S. economy. Michael Lewis gives a very good explanation of the complex financial instruments, credit default swaps and collateralized debt obligations, which were at the heart of the subprime mortgage meltdown. He personalizes the narrative with names and personalities to give the reader an idea of what drives many on Wall Street to seek mega-wealth regardless of the consequences to their firms and the economy.

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