Thursday, 3 March 2016

The Big Short is a big lie

Quick test for a con: what questions does it not occur to you to ask?

The movie The Big Short creates a powerful narrative about the 2008 global financial crisis (GFC). And as with any complex and esoteric topic, it pays to watch exactly which details are chosen for display by the director. Something will always be left out, and it’s often the piece that should have been included.

Get the rum, we’re going to need it. No. All of the rum.

I work for a business paper, so, of course, I watched the all-star, 2015 blockbuster – based on the bestselling book by Michael Lewis – hoping to learn a bit about credit default swaps and collateralised debt obligations (CDOs) and a whole lot about the exciting world of high-speed banking.

Instead, I got a lecture on the evils of late-stage capitalism by Ambassador for Everything Holy Brad Pitt, who seems to have forgotten that as a Hollywood actor he personifies the very system he reprimands. If I wanted to be scolded by vacuous imbeciles I'd tune into Newstalk ZB. I don’t need it from someone who clearly lost track of when he was or wasn’t playing a “role” sometime in the mid-1990s.

The Big Short is a classic example of how extremely satisfying it is to blame bankers for this mess, but if we’re going to be honest, many of them did nothing morally wrong. Don’t look at me like that, I’ll explain what I mean in a moment.

The movie was nominated for five Academy Awards, including Best Picture and Best Director. It only won Best Adapted Screenplay, which means its chosen narrative will be lionised in the minds of viewers forever, and that’s a real shame.

It’s a shame because as far as I can tell, the movie completely misses the two nasty problems that caused the crisis. And I’m pretty sure the director did that on purpose because finding wrong financial patterns is gratifying, especially when Lebanese “scholars” forget that Roman bird satire is actually art, not mathematics. Plausible deniability requires that I do not explain how layered a joke that is.

And sure, the global financial crisis was a terrible event and pretty much everyone suffered. But sometime after 2008 the narrative assigning blame for its insanity quietly flipped. The media continued portraying the collapse as a Greek tragedy and everyone adopted the same ideas. We then threw a few people in jail, tightened some laws and pretended the problem was fixed. It wasn’t, because the actual perpetrators are still walking around. And no, I’m not talking about smiling Armani suits who’ve never slept on the same bedsheets twice. I’m talking about you.

The forgotten wall
Every movie has three metaphorical walls inside which the action take place. Yet to explain the GFC, the fourth wall (you) must be included, so it is incredibly suspicious that it wasn’t.

Creating a CDO was a horribly cynical thing to do, I get that but from where I’m sitting surely purchasing the CDOs was the actual madness. I’m really not sure which is worse, but in capitalism it’s pointless to create something if no one buys it. And plenty of people seemed to want to own CDOs.

Which leads me to think that maybe, just maybe, the bankers were scapegoats so we could keep spending our free money on stupid things in a desperate attempt to avoid taking responsibility for credit card and mortgage greed. We were told we could pay it back later because advertising says lifestyle should be a reflection of personal self-worth. But the catch was always that we have to promise to spend more than we earn. How is that supposed to work? Don't worry, Visa will explain.

“Come on,” I hear you say, “how is buying a roof over your family's head part of the problem?” GREAT question: too bad it’s irrelevant. The house isn’t the problem, it is the mortgage. The desire for a roof isn’t the problem. It is the desire to have it now, rather than waiting until it can be bought in one payment, which is the problem. The bankers aren’t the problem. The problem is you.

What caused the GFC, and what the movie failed to talk about, was 50+ years of solid propaganda teaching us all how to want. The bedrock of this system depends on GDP numbers ticking upwards. That can’t happen if we save more than we spend. So advertising masterfully convinced us that the BMW would look much better in your garage right now, wouldn’t it?

I don't resent anyone who has the good luck of making a right place/right time fortune. Credit cards are a bit like that. Take the money and run but first take a knee and be humbled before God that you didn't deserve it. I love getting paid. Do whatever you can to get paid. But do not let the money murmur what you’re worth – it will be lying and you will believe it. You hold a fetish of value and not actual value. Economics reflects psychology, as it always will.

There was a weird line in the movie about how “trillions of dollars of value” vanished in the GFC. It was catchy, but what’s weird is that it was portrayed as though it was a bad thing. Huh. It's almost as if money doesn't exist ... Some of this filthy lucre “disappeared” sure but why was that such a problem when it reappeared a few years later? How does no one find this suspicious? Why, after eight years of a “global recession”, can I screenshot bananastown NZX graphs like this:

How can this possibly be explained? I’ll cycle through the options: Did we discover a new precious metal? No. Did we finally invent cold fusion? No. Did the little green Martians come? Don’t laugh, did they come? Then how are we worth 50% more than in 2009? I get that stock prices aren’t based on our worth but then what are they based on? Our milk productivity? No.8 wire? A wager on New Zealand’s future? I ask you again, did the little green Martians come?

The lesson of the GFC should have been that people want their trinkets now. Waiting is equivalent to torture, and someone should call the UNHRC. So don’t be surprised when the whole structure tumbles again. And if all this new money disappears in a financial fireball, what’s stopping banks from simply printing more to “ease” the problem? Nothing. Because with fiat money, there is no limit to how much liquidity flows into the system. All that matters is the public’s belief that money is real and we can all get a piece.

It doesn’t make people evil
“That’s a ridiculous statement. With great power comes great responsibility. And if you're a big-time banker you've got some big-ass responsibility.” I understand the anger, I really do but calling bankers evil is precisely why these crashes will happen again, and again. The psychology comes from believing the long con that people who follow a particular set of rules are more (or less) moral.

Pretend there is a box. This box represents all the rules of the marketplace. You can move any direction you want, so long as you stay within the box. Stepping outside puts you in prison.

Now, there are conventional ways of moving around in this box, such as up or down or in a figure-8. Most people understand how to move by reading bank pamphlets, attending law classes or listening to PSAs. But some have discovered how to move in hilariously counter-intuitive and entirely legal ways within that box. They’re always careful to stay inside, they aren’t rule-breakers.

The mistake – the ever-so-important error – is to think those crazy movers are “bad.” As if something intrinsic in their movements is morally repugnant. And, likewise, we’re told the conventional movers are “good.” None of this is true. But it is imperative for society to believe it is to keep the whole game going.

When you choose to play inside that box, you are being a normal person. But you must not confuse playing by the rules of some society with being moral. You will be told to do this every day of your life by all the many arms of the state – press, universities, the judiciary, the treasury and banks, the civil service proper, NGOs and transnationals, the military and corporate holders of official monopolies – but you mustn’t believe them.

That following the rules makes you a good person is part of the long con. Most rules were made by people to allow for greater wealth generation at a specific time and place conducive to them. So do not be concerned with where the lines are drawn, be concerned with who draws the lines. They are trying to pick your pocket, which is the entire point of capitalism.

Unlike the movie, I am not angry with the bankers. They simply found a way of moving inside that box that few others could see. They do not have a responsibility because responsibility is synonymous with power, and as individuals bankers have exactly 0% power. Sure, on a larger scale, “bankers” might have power, but then, so do you. So why didn't you rise up?

If you realised that bankers were picking your pocket, why didn't you visit the library or log on to some dusty internet archives where every banking trick or crazy movement sits absolutely free of charge? How do you think those bankers figured it all out? ESP? Why didn't you look at those books? Crack open the rum and take a sip. I’ll tell you why: you didn’t look, because you were told not to.

Do you see? At every step along your life, you are told that only certain people get to be bankers, models, movie stars or politicians. You were told to stay right where you are, perhaps not explicitly, but the message reached you, didn’t it? You never looked. But now can you see now that the reason credit cards are evil is not because of the free money but because they teach us how to want? Thinking you “deserve” a roof over your head “right now” leads to your pocket being picked.

So get angry at the bankers. At least then you won't be plotting to fix anything worth changing. And like an extra 12-month warranty, the long con sells the idea that there is never enough money to make things equal. “Duh, we can't all have a million dollars”. Wrongalongadingdong. Look at the NZX graph again. A whole group of people are making more money than ever before. Now, compare the below graph of the S&P 500 over a similar time:

Call me ignorant but I’m really struggling to see the horror. All I can see is an opportunity. After the money disappeared in 2008, they simply printed more. They printed so much in fact, that there’s never been as much in circulation in history as there is today. Think about the level of hubris and the cradle-to-grave training required to pull off this con. If it wasn't so insidious, I'd actually be impressed.

You can change all of this tomorrow. Just stop believing that following some of the rules, but not others, makes you a good person. It doesn't. It never has. Rules are chains. I'm serious about this. Morals should not be coupled with the system. The only “free” choice – the only way to beat the Game – is not to play. But since you’re reading this on a consumer device, that doesn’t seem very likely.

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