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Patrick Peterson's Reviews > The Big Short: Inside the Doomsday Machine
The Big Short: Inside the Doomsday Machine
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by
Patrick Peterson's review
bookshelves: audiobook, business, history, political, sense-of-life
May 31, 2014
bookshelves: audiobook, business, history, political, sense-of-life
Read 2 times
2020-06-24 - I keep coming back to this book, the movie and the far better book by John Allison mentioned below, because the subject keeps popping up.
But after about three years of pondering all three, I am convinced more than ever that Lewis is fundamentally dishonest, and dangerous, since he is such a good writer. He has obfuscated and misrepresented the basic causes of the 2008 Financial Crash with a pandering to his anti-capitalist tropes. He focuses on "greed" of course, for his explanation for how the financial bubble was created by all the evil &/or stupid people on wall street and how just a few (prescient off Wall St. investors/speculators) benefited from it. His total ignorance or dismissal of all the government programs, policies, tax breaks, cozy deals, etc. etc. is just unconscionable.
The one really great thing about the book and movie was the portrayal of the search for truth and incredible courage of convictions against massive pressures by several speculators/investors, who reaped big rewards by betting against the prevailing bubble craze. The movie in particular very dramatically showed how difficult that bet was in terms of lost customers/investors, short term losses, and incredible pressures to give up on one's own judgement and bet. Because of the very impressive prose and this, I have upped my rating to 2 stars, but only for that reason. I still urge anyone who has ANY concern for the truth about this big issue to check out Allison's book "The Financial Crisis" in addition to this one, to judge for themselves.
2 Aug. 2017 - am starting this review again for several reasons.
Have to grit my teeth an awful lot though, due to the anti-capitalist bias, lack of basic understanding of economics, Lewis's interest in making some people, organizations and industries look bad, and totally mischaracterizing the real nature and history of government regulator activity, motivations and constraints.
Am also reading John Allison's "The Financial Crisis" book in tandem with listening to this, and the contrast is amazing. You can follow my account of both here: https://www.goodreads.com/review/show...
But just to give you a flavor:
Allison uncovers all the various causes to the 2008 Financial Crisis
The Federal Reserve Board's easy money policy, pumping billions of dollars into the economy and keeping interest rates artificially low, then incredibly raising the rates way higher and faster than anything a free market would perpetrate. Plus their failure to regulate the things they were committed by law to regulate.
The FDIC's long history of increasingly corrosive policies which subsidized bad behavior, socializing it, wearing down the incentives for bankers to be prudent, thrifty and watch out for customers' (depositors') interests. The same policies created the complementary problem of weaning investors/savers off of the need to pay any attention to the safety and security of the banks they were depositing in. When your deposits are insured, why pay any attention to the safety of the particular banks?
The SEC's focus on Sarbanes-Oxley regulations, which added huge additional costs on banks and other public corporations, but actually took away from the natural need and desire of market participants to pay attention to real safety and prudent investment risk issues.
One of the very biggest government policies to affect the financial situation, spurred on the bad behavior and which created false signals was the change in WHO paid the fees of the bond rating agencies. Previous to the government mandate for the switch, the fees were paid by the bond BUYERS, the people who needed the most accurate and trustworthy info. But the government changed that to have the bond ISSUERS paying the raters. How is that for a conflict of interest? In addition, the government limited the number of rating agencies to only three, a nice little oligopoly, so bad behavior had a tougher time being exposed and countered. Guess what happened?
Allison reveals many, many more gems, from his very "inside baseball" yet easy and clear to understand perspective. DON'T miss his book, if you have any interest in this subject at all, or want to know just which of the many key points Lewis missed (on purpose or out of ignorance?).
-----------------
My review from June 2014:
This book is wildly misleading.
The author has a sensationalist bent that is not touched by any significant exposure to basic economics.
He's great at labelling people jerks, liars, cheats, etc. but he just does not know what some people legitimately need or desire and can learn from, when they experience bad deals and better deals.
In other words, he thinks he knows better than most everyone else and wants the government regulators to be something they just can't be. He sees some of the flaws of Wall St. and some of the flaws of the government regulators, but almost none of the benefits of Wall St. and wants the regulators to do something they just can't do in the real world.
I only listened to most of the first disc, since the style and lessons from the CD are so awful, unrealistic, and part of the problem. (I later finished the whole thing - see above.)
When I heard that one of the main characters "the only socialist on Wall Street" (Steve Eisman) in addition to being basically a crook, due to misleading people about the soundness of investments, was the author's favorite person, that about summed up Lewis' morality.
2024-01-02 Besides Allison's book, for those who who would like to see other books on the topic of the 2008 Financial Crisis more based in crucial facts than this book, I also recommend:
"The House that Uncle Sam Buil"t by Peter Boettke, Steve Horwitz, et. al. Very short and easy to read pamphlet.
"Meltdown" by Thomas Woods (warning: this book is very polemically written, so may offend those not already understanding of free markets)
But after about three years of pondering all three, I am convinced more than ever that Lewis is fundamentally dishonest, and dangerous, since he is such a good writer. He has obfuscated and misrepresented the basic causes of the 2008 Financial Crash with a pandering to his anti-capitalist tropes. He focuses on "greed" of course, for his explanation for how the financial bubble was created by all the evil &/or stupid people on wall street and how just a few (prescient off Wall St. investors/speculators) benefited from it. His total ignorance or dismissal of all the government programs, policies, tax breaks, cozy deals, etc. etc. is just unconscionable.
The one really great thing about the book and movie was the portrayal of the search for truth and incredible courage of convictions against massive pressures by several speculators/investors, who reaped big rewards by betting against the prevailing bubble craze. The movie in particular very dramatically showed how difficult that bet was in terms of lost customers/investors, short term losses, and incredible pressures to give up on one's own judgement and bet. Because of the very impressive prose and this, I have upped my rating to 2 stars, but only for that reason. I still urge anyone who has ANY concern for the truth about this big issue to check out Allison's book "The Financial Crisis" in addition to this one, to judge for themselves.
2 Aug. 2017 - am starting this review again for several reasons.
Have to grit my teeth an awful lot though, due to the anti-capitalist bias, lack of basic understanding of economics, Lewis's interest in making some people, organizations and industries look bad, and totally mischaracterizing the real nature and history of government regulator activity, motivations and constraints.
Am also reading John Allison's "The Financial Crisis" book in tandem with listening to this, and the contrast is amazing. You can follow my account of both here: https://www.goodreads.com/review/show...
But just to give you a flavor:
Allison uncovers all the various causes to the 2008 Financial Crisis
The Federal Reserve Board's easy money policy, pumping billions of dollars into the economy and keeping interest rates artificially low, then incredibly raising the rates way higher and faster than anything a free market would perpetrate. Plus their failure to regulate the things they were committed by law to regulate.
The FDIC's long history of increasingly corrosive policies which subsidized bad behavior, socializing it, wearing down the incentives for bankers to be prudent, thrifty and watch out for customers' (depositors') interests. The same policies created the complementary problem of weaning investors/savers off of the need to pay any attention to the safety and security of the banks they were depositing in. When your deposits are insured, why pay any attention to the safety of the particular banks?
The SEC's focus on Sarbanes-Oxley regulations, which added huge additional costs on banks and other public corporations, but actually took away from the natural need and desire of market participants to pay attention to real safety and prudent investment risk issues.
One of the very biggest government policies to affect the financial situation, spurred on the bad behavior and which created false signals was the change in WHO paid the fees of the bond rating agencies. Previous to the government mandate for the switch, the fees were paid by the bond BUYERS, the people who needed the most accurate and trustworthy info. But the government changed that to have the bond ISSUERS paying the raters. How is that for a conflict of interest? In addition, the government limited the number of rating agencies to only three, a nice little oligopoly, so bad behavior had a tougher time being exposed and countered. Guess what happened?
Allison reveals many, many more gems, from his very "inside baseball" yet easy and clear to understand perspective. DON'T miss his book, if you have any interest in this subject at all, or want to know just which of the many key points Lewis missed (on purpose or out of ignorance?).
-----------------
My review from June 2014:
This book is wildly misleading.
The author has a sensationalist bent that is not touched by any significant exposure to basic economics.
He's great at labelling people jerks, liars, cheats, etc. but he just does not know what some people legitimately need or desire and can learn from, when they experience bad deals and better deals.
In other words, he thinks he knows better than most everyone else and wants the government regulators to be something they just can't be. He sees some of the flaws of Wall St. and some of the flaws of the government regulators, but almost none of the benefits of Wall St. and wants the regulators to do something they just can't do in the real world.
I only listened to most of the first disc, since the style and lessons from the CD are so awful, unrealistic, and part of the problem. (I later finished the whole thing - see above.)
When I heard that one of the main characters "the only socialist on Wall Street" (Steve Eisman) in addition to being basically a crook, due to misleading people about the soundness of investments, was the author's favorite person, that about summed up Lewis' morality.
2024-01-02 Besides Allison's book, for those who who would like to see other books on the topic of the 2008 Financial Crisis more based in crucial facts than this book, I also recommend:
"The House that Uncle Sam Buil"t by Peter Boettke, Steve Horwitz, et. al. Very short and easy to read pamphlet.
"Meltdown" by Thomas Woods (warning: this book is very polemically written, so may offend those not already understanding of free markets)
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Reading Progress
May 30, 2014
–
Started Reading
Finished Reading
May 31, 2014
– Shelved
May 31, 2014
– Shelved as:
audiobook
May 31, 2014
– Shelved as:
business
May 31, 2014
– Shelved as:
history
May 31, 2014
– Shelved as:
political
July 31, 2017
–
Started Reading
Finished Reading
August 8, 2019
– Shelved as:
sense-of-life
Comments Showing 1-8 of 8 (8 new)
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I'm both a fan of Lewis's writing and a libertarian, and I didn't take such a negative view of the book. One can't review the situation without pointing at least a few fingers, and while I would have appreciated more background on government causes, one can't reasonably expect that from a mainstream author whose background is finance, not Austrian economics.
Lewis is indeed an amazing writer, I should have stressed that. And the stories he weaves are very compelling. But his lack of any understanding of or appreciation for all the government intervention that caused and exacerbated the bad behavior is just not excusable. There are plenty of books, articles, movies, etc. that explain the situation, that he should have brought in to the picture and did not.Justin, have you asked what the "take-away" from the book was for any/all your non-libertarian friends/acquaintances? I would bet that not one would say that it was the government that was to blame for the 2008 crisis, but rather private "greed" or "Wall Str." or some such secondary or lesser contributor that had little to do with the base cause.
You are right about what the average reader would likely take away from the situation, unfortunately, but that's par for the course or seems when it comes to mainstream pop econ books. At least he kept it entertaining and didn't seem to harp endlessly on "corporate greed," at least from what I can recall. Flash Boys<\i>, on the other hand, definitely turned me off a bit, because he seemed to be making a mountain out of molehill regarding high frequency trading, making it seem like some diabolical plot when it felt a bit more benign than that.
Yes, indeed, it could have been worse, probably, as your note on Flash Boys indicates. I had not heard of that one, but it is definitely on my "don't bother" list now.Thanks for your comments, and I certainly agree the book was entertaining and is still keeping me tuned in, despite my objections.
I even like the perverse way he draws the main characters in the book, such that they keep thinking "how could I be the only one who has discovered this madness?" And their constantly trying to check out with smart people if they actually are on to something, or if they are mad. And the assurance that their positions are right on the money when they see the idiots/venal people on the opposite side of the trades. That kind of thing is what I have been feeling and doing over the last 35-40 years, ever since I found out about libertarian and Austrian ideas.
But the guys in the book only had to wait a few months to a few years to get vindicated. For most libertarian and Austrian ideas, we are still working hard to find that understanding arrive among a more sizeable chunk of the populous.
For as interesting as I found Moneyball I worried this book would be a disappointment by reading the blurbs. It goes to show when an author doesn't understand economics he will tackle the subject as if it were nothing but a story of attitudes and intentions.
Reading this book, it was hard for me to tell if the author "doesn't understand economics" or just preferred to ignore it when it contradicted or otherwise made his "story" look bad or at least totally incomplete. Either way though, the authority of the author is diminished to the objective reader.
The main thing was that two of the major characters being profiled were shown to be incredibly intrepid, despite HUGE pressure for them to cave. Their perseverance proved very profitable to themselves, of course, and the movie (because of the book?) did not seem to think totally deserved, despite the real meaning of their perspicacity and endurance.
That is where the author and movie screenwriters could have been so much better - by showing how the insights and intestinal fortitude of these two or three main characters not only benefited themselves, but also, in even larger measure, society as a whole. For they figured out earlier than virtually everyone that something was indeed rotten in Denmark, and were willing to stake their own money, and the money and reputations of their firms, on their research and convictions. But no, Michael Lewis's statist ideological blinders are too thick to see the real economic and moral benefits to society of free markets, entrepreneurs, speculators and capitalists.