The Big Short

I just finished watching the movie The Big Short.

And it was a sobering experience. It’s a movie about the US subprime mortgage crisis and how a bunch of financial guys managed to profit from it.

But to me the movie wasn’t a celebration of guys profiting from the crisis. There’s no joy, no celebration of being right, no ‘I told you so’s. To me it’s a reminder of how a lack of financial education in the general populace caused the crisis in the first place. And how far we have yet to go to address the gap in knowledge.

Some people might laugh when the movie characters talk about ninja-loans, adjustable-rate-mortgages and thinking, that couldn’t be me! Nobody wanted to admit they ever believed in the myth that property prices will never go down. But I see this constantly, people making poor financial decisions because they believed in something without truly understanding the basis. Leveraging up property loans to the max, believing the past forms a trend which will carry on to the future. Unfortunately if one truly understand how the economy works, this is all not true. And in the financial crisis, the root cause was the people buying into this myth.

At one point Brad Pitt’s character was telling his financial protégés that there’s nothing to be happy about: “If we’re right, people lose homes. People lose jobs. People lose retirement savings, people lose pensions. ”

Sometimes as a financial advisor it pains me. We can see the disempowering financial beliefs, but people don’t. There’s nothing happy about people needing financial advisory, it just means that many people will still suffer from financial mistakes without aid.

And the movie ends with Steve Carell saying a quote that many financial writers still like to use today to illustrate why people will not try to educate themselves and instead support Trump or Brexit: “I have a feeling, in a few years people are going to be doing what they always do when the economy tanks. They will be blaming immigrants and poor people.”

For Malaysians and most developing countries, the additional scapegoat is of course corruption and the government too. Yes, that is precisely the enticing short term solution that people like to hear that absolves them of any responsibility to do anything themselves.

The fact is that poor financial knowledge drove people to do what they did. And to really solve the problem in the long term, financial education must be improved.

One thought on “The Big Short

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