ipl-logo

'The Big Short': The 2008 Financial Crisis

778 Words4 Pages

"The Big Short" is a film that portrays the events leading up to the 2008 financial crisis, with a focus on the individuals who saw the housing market crash coming and profited from it. The film is based on the nonfiction book of the same name by Michael Lewis, and it provides a detailed and engaging look at the various factors that contributed to the housing bubble and subsequent crash.

One of the most striking aspects of the film is the way it illustrates the complexity of the financial systems that led to the crash. It shows how the actions of a small group of individuals, such as the hedge fund managers portrayed in the film, could have such a significant impact on the global economy.

The film also highlights the greed and negligence …show more content…

This can happen due to a variety of factors, such as low interest rates, easy access to credit, and speculation. As prices continue to rise, more and more people invest in the market, driving prices even higher.

However, when the bubble bursts, prices drop rapidly and many people who bought properties at the peak of the market are left with properties that are worth significantly less than what they paid for them. This can lead to a decline in housing sales, a decrease in construction activity, and a decline in overall economic activity.

A real estate bubble can also be accompanied by a credit bubble, as people take on more and more debt to invest in properties, and when the bubble bursts, many people default on their loans, which can cause banks and other financial institutions to suffer significant losses, which can further harm the economy.

Real estate bubbles can have a significant impact on the economy, and they are often accompanied by a recession, as the decline in the housing market can cause a decline in consumer spending and investment, which can lead to job losses and a decline in overall economic …show more content…

This made it easy for people to buy homes, even if they couldn't afford them.

Speculation: Many people were buying homes with the expectation that they would be able to flip them for a profit. This speculation led to an increase in demand for housing, which further drove up prices.

Lack of regulation: Many of the subprime loans that were issued during this time were not properly vetted, and many borrowers were given loans they couldn't afford. Additionally, many of the securities that were created from these loans were not properly rated, which led to many investors buying securities that were much riskier than they realized.

Low interest rates: The Federal Reserve had kept interest rates low to boost the economy after the dot-com bust and 9/11 terrorist attacks, which made borrowing cheaper and further fueled the housing market.

Government policies: Government policies such as the American Dream Downpayment Initiative and the Affordable Housing Goals encouraged lending institutions to make more loans to people who couldn't afford

Show More
Related
590 Words | 3 Pages

Even though many factors contributed to cause the Great depression, many argue that the biggest contributor was the stock market crash in 1929. During the years, previous to the recession, real state became very popular market to invest in. People were borrowing a great deal of money from banks to invest on purchasing lands, fixing roads, building houses, and buying houses. Even though people did not have enough money to repay their loans, they continued to borrow more, because of low tax returns. People believed that if they waited longer to invest, prices and interest rates will increase.

Read More
624 Words | 3 Pages

While the lenders get their money without having to inflate prices. Also, financial corruption from banks and wall street had influenced the creation of The Great Recession. There was predatory lending in the mortgage markets and banks had knowingly loaned millions of checks on mortgages . This led to a tremendous Economic crash as stated in (document e ).

Read More
1347 Words | 6 Pages

The Great Depression The Great Depression had multiple causes and forced the United States into many problems in the workforce, schooling, and home life. In the 1920’s, the United States switched to consumer goods which caused an increase in the amount of goods people were buying. Due to people making more purchases, the economy grew stronger. The stock market also began to grow and get stronger because of people, corporations, and banks investing money in stocks.

Read More
982 Words | 4 Pages

By lowering interest rates, an artificial boom is created as people borrow more and make more big purchases like cars and houses. But many of these people overextend themselves, because they have been lulled into a false sense of prosperity. Then inflation goes up and the Federal Reserve decreases the money supply. This causes a bust, as people suddenly can no longer afford the things they could just recently. Many people suddenly lose everything to the banks, and the wealthy get wealthier while the average person is in a worse off situation than before the initial period of economic growth.

Read More
737 Words | 3 Pages

The government was choosing not to regulate businesses with their hands off policy. Since the government did not have control over businesses they couldn't regulate, wages, prices, or even how much could be produced. The prices of goods were decreasing due to overproduction of goods which lowered income. Due to conspicuous consumption in the economy, people felt as if they didn't need to get jobs or these low incomes were good enough to support their family. By using credit they could buy what they wanted and they felt they needed.

Read More
1177 Words | 5 Pages

The Clinton administration forced banks to assist poor people to purchase homes and threatened banks with fines for discriminating against not giving enough loans. Housing prices started falling, which trapped homeowners who couldn't afford the payments, but couldn't sell their homes. The values of the derivatives crumbled, and banks stopped lending to each other. That created the financial crisis that led to the Great

Read More
1536 Words | 7 Pages

A housing bubble was created by banks liberally mortgaging out homes to anyone no matter their credit and bundling mortgages together and selling them to other banks. Because of how they were bundled their credit ratings never reflected the actual risk involved; this practice was unethical but profitable until the system collapsed in 2008 and caused massive losses for both banks and homeowners. The losses were so drastic that Congress voted to bail out several of the banks at the expense of the taxpayers, many of whom were unemployed and facing foreclosure. The economy today is still recovering as interest rates and unemployment continue to return to

Read More
726 Words | 3 Pages

The Great Depression was caused by speculation and installment buying, income maldistribution, and overproduction because each of these factors combined made the economy worse before and after the stock market crash, which led to The Great Depression. Speculation and installment buying helped caused The Great Depression because people were buying so much stuff on credit, when

Read More
672 Words | 3 Pages

Many Americans are also having an easier time than before finding a job after graduating from college and are ready to move out and start a new life. The prices of the homes have gone up by $600 since the previous month. With so many people wanting to buy a new home, homebuilders raise the prices of the home. And property owner also raise their prices due to the demand.

Read More
649 Words | 3 Pages

But behind the booming house market was a series of unregulated and unethical bank practices that so many Americans were bound to. A number of people began to default on their mortgage payments, and the prices of houses began to drop. Subsequently, the housing bubble burst in 2008, and the economy went into recession. It led to the greatest financial crisis since the Great Depression.

Read More
1326 Words | 6 Pages

Sheree R. Curry article talks about 5 contributing factors in the housing market crash, low doc loans, Adjustable rate mortgages, equity line of credit, more money down needed and mortgage insurance. Low Doc Loans are loans that do not require much information and do not require borrowers to provide documentation of their income to lenders, Adjustable rate mortgages were made to adjust periodically to reflect market conditions, equity line of credit is a loan in which the lender agrees to lend a maximum amount of money and has to be paid by a certain time, you also need more money down “minimum has now increased to 10% down.” This quote shows increase in a down payment, mortgage insurance used to get replaced by people putting 20 percent down on a FHA-backed mortgage and avoid paying the

Read More
144 Words | 1 Pages

During the boom the economy grows, the market brings high returns to investors and jobs are plentiful. In the subsequent bust the economy shrinks, investors lose money

Read More
846 Words | 4 Pages

The credit growth resulted in large fluctuations in the economy. Household indebtedness in the US rose rapidly driven by the increased mortgage financing, with low interest rates and financial innovation as contributing factors. Increased leverage, due to inadequate oversight, left houses vulnerable to a decline in prices. This led to a tightening in credit conditions and the economic activity brought to a slowdown. The correction harmed consumers (they ran into debt servicing problems).

Read More
810 Words | 4 Pages

Can a bubble economy affect a whole country? Bubble economy is simply a kind of product or an economy market that have a very big price that is way far above its actual values , this process actually goes on and on until people start realizing the truth which is that none of this is going anywhere and they are just spending money on latterly nothing. It feels like a disaster doesn’t it ,well it is a disaster imagine losing your money while you are the one who wanted it and just to gain nothing at all. When they those malls and cities were built it happened so fast not in years or something but they build they place fast enough that surprised people.

Read More
748 Words | 3 Pages

A prime example is the recent housing bubble which led to the financial crisis of 2008; however, we have limited knowledge of how bubbles arise and how they can be prevented. A bubble burst can have a devastating effect on the economy by plunging it into a recession. Some of the iconic historical bubbles are Tulip mania, dot-com bubble and housing bubble (2006). The three main causes of a bubble are government policies, greater fool theory and technological innovation.

Read More

More about 'The Big Short': The 2008 Financial Crisis

Related Topics

Open Document