- April 13, 2020
The Death of Money and The Big Short Reviews
TheDeath of Moneyand TheBig ShortReviews
TheDeath of Moneyand TheBig ShortReviews
BothJames Rickards’ book, TheDeath of Money: The Coming Collapse of the International MonetarySystem andthe movie TheBig Short haveone thing in common: they are both based on a theme of economiccollapse caused by the international finance system. The onlydifference is that Rickards’ book is predictive in that he predictsthe global downfall of the monetary system and explores itsimplications. The demise of the dollar represents the total collapseof the global monetary system because no other currency in the worldcan take its place in the world currency reserve (Rickards, 2014).The most interesting aspect of Rickards’ book is that it paints agloomy future by foretelling an inevitable downfall of the globalfinancial structure because the dollar, the only reserve currency ispoised for a possible loss of confidence. The BigShort,on the other hand, is a comedy that revisits the 2008 globalfinancial crisis that was caused by a drastic fall of confidence inthe financial markets. The movie is cast as a comedy so that theordinary viewer can relate with the main themes being communicated.Through the film, the viewer comes across some of the major causes ofthe subprime mortgage crisis that caused a near financial crisis in2008. The movie refers to financial concepts such as collaterizeddebt and debt swaps through a tongue-in-cheek approach so that theybecome simple subjects only known to economists. In the book and thefilm, the audience understands the way national and global financeworks and the possible forces that can lead to its destruction. Thus,a review of the film and the book will help in depicting the authors’viewpoints on world finance.
TheBig Shortis a fascinating film that explains the international financialcrisis. The film is about a group of nonconformists who anticipatedthe mortgage and housing bubble a decade ago and benefittedabundantly from the bursting (Gardner, Kleiner, Milchan, & Pitt,& McKay, 2015). The movie enlightens the audience on financialmodels and concepts that most people fail to grasp, for example,collateralized obligations and subprime lending. Thus, it is anenthralling film for those who want to understand how the financialand economic systems link with each other. TheDeath of Moneyevaluates the financial history, economic theories, and distinctplayers who will define the future of financial systems. Rickardsshows how imprudent policies and doctoral principles will exacerbatethe collapse. It contains extensive information on financial matters,global policies, and an imminent downfall of the dollar. The bookpacks revolutionary assessment and cogent outlooks on every financialtopic that the audience needs to know. The audience will find thefilm and the book captivating and fundamental sources of economicexplanations and solutions to the current challenges theinternational community is facing.
Deathof Money by James Rickards
Rickardstakes the reader to the historical background of the main theme inthe book. The intention is to provide a realistic prediction based onwhat happened to the national and world currency markets. Rickards’revisits the 1978 near collapse of the dollar as a world reservecurrency. The United States treasury had to issue government bondsdenominated in Swiss francs because the dollar index had fallen tothe lowest level in history. Foreign creditors lost confidence in thedollar because financial instruments and assets could not bedenominated in dollar terms. He gives various reasons for theunfortunate phenomenon. The first cause was the abandonment of goldconvertibility by President Richard Nixon’s administration.Americans travelling abroad experienced the impact of a fallingdollar when merchants, hotels, and restaurants declined use dollarsat a floating rate risk. The international monetary fund had to reactin order to create liquidity and restore confidence in theinternational monetary system. The IMF mobilized the resources at itsdisposal to issue bolster the liquidity of world currency usingspecial drawing rights (SDRs). Because of the falling demand for thedollar, the price of gold increased by 500 per cent. This backgroundis a significant strength of Rickard’s book. It turns it from beingan apocalyptic masterpiece to a reality check. The next chapterssimply explore the major factors that cause the collapse of theworld’s financial system because of the collapse of the dollar.
Moneyand geopolitics: Rickardspredicts that the United States and the world should be prepared fora possible financial war. He views the usual economic and politicalcompetition as a possible cause of financial war. An aggressivenation may simply use derivatives and currency penetration to causepanic and havoc to the economy of the enemy. The victor in such a waris the nation that can successfully cause a loss of confidence in theeconomy of the enemy. If it is the United States under attack in afinancial war, the collapse will quickly spread to other parts of theworld because the dollar denominates major internationaltransactions.
Moneyand the markets:Rickards predicts a market collapse fueled by an incompetentregulatory framework in the national and international monetarysystem. It allows banker greed. The derivatives market is the firstspot. It is a complex system with a diversity of agents, intricateinterdependence, adaptive behavior, and connectedness. The currentvalue of bank derivatives is $650 trillion and it is likely to doubleor triple. Continued increase of the value of global bank derivativesfurther increases its complexity and the unpredictability of apossible financial collapse. Rickards suggests that big banks shouldbe abolished with a subsequent ban on some derivatives.
Moneyand wealth:Rickards explains many possible causes of a dollar concerning thetransactions that involve wealth creation. Inflation and deflationhave an effect on the value of wealth. Rickards uses theinflation-deflation paradox to explain the way money and wealth canbe the source a future dollar collapse. The Federal Reserve Policyand many other monetary policies in major economies are embedded withentrenched contradictions. Governments are torn between contractionpolicies and those that would help avert a catastrophic risk. Theseconditions may force governments to begin using monetary easing,which will cause a loss of confidence in the dollar and a subsequentcollapse of asset values.
TheBig Short Film
Thefilm depicts the 2008 financial crisis as a product of systemicfailures that caused greed to thrive in the mortgage market. Sardonicvoiceovers reveal that the system was rotten for many years that thecrisis was only an explosion of many regulatory failures that hadpiled up for years. The system was so corrupt and unregulated thateven strippers from Florida could also take a mortgage and ownseveral properties. The choice of simple comedy to illustrate such aserious theme is revealing of the same corrupt nature of the mortgagesector before the financial crisis. The language used in thefinancial sector is deliberately complicated for the ordinary citizenso they do not understand all that goes on including the underhanddealing that caused the crisis. Ironically, the major players in themortgage sector also ended up not understanding their own world aftermaking it overly complicated to be managed. The heroes in the filmare the ordinary people doing the entire math to ascertain the impactof the financial collapse. However, they are not any different fromthe bankers because they contemplate taking advantage of the housingbubble that has just burst by cashing in. There are notablereferences to foreclosures, which is depicted by the ominous shot ofan alligator in swimming pool inside a condominium.
Thetremendous scene is where Baum and his staff go to Florida toresearch about the housing bubble. When they get there, they findthat no one has money, there is massive unemployment, and yeteveryone there owns a lot of property. People there can also borrowmoney at will to acquire more property. Bad loans there are sold inpackages, reclassified, and given high ratings such as triple-A bycredit rating agencies. This scene directly embodies the regulatoryflaws that paved for the financial crisis.
Conclusive,Richard’s book theDeath of Money andthe film theBig Shortshare the same themes about the threats of financial collapse. It ispossible that the events in the run up to the financial crisisinspired Rickard’s book. His apocalyptic views about the future ofthe dollar in national and global monetary system are not far fromreality. Scholars and policy makers can exploit the themes presentedin the book and film to prepare for and avert a future crisis in thenational and world financial market. The two materials containcomprehensive and significant information that can enlighten theaudience on financial matters and the way the world functions. Theyalso contain insight for policymakers to comprehend the variablesthat cause or aggravate economic stagnation and the possible outcomesor solutions of the downfall. In this regards, people should watchthe film or read the book to have a better understanding of world andfinancial matters.
Gardner,D., Kleiner, J., Milchan, A., & Pitt, B. (Producers), &McKay, A. (Director). (2015). The big short [Motion Picture]. UnitedStates: Paramount Pictures.
Rickards,J. (2014). Thedeath of money: The coming collapse of the international monetarysystem.Portfolio.