ipl-logo

The Housing Market: The Big Short By Michael Lewis

488 Words2 Pages

The housing market was highly inflated due to complex financing schemes that in many cases were fraudulent. The Big Short – Based on the adaptation by similar name by Michael Lewis provides us an explanation of what led to the financial crisis of 2007-2008 and gives us a glimpse of few market analysts who predicted the downfall of the U.S housing market and the credit bubble whilst profiting from the same.
A bond is a debt security, which is usually issued by a government or corporation — to make regular interest payments on borrowed money, and, eventually, to pay back the borrowed principal. For generations, financial markets have traded bonds. These bonds have a rating ranging from C (riskiest) to AAA (Safest). The bonds were also good

Show More
Related

  • Summary Of Only Yesterday By Fredrick Lewis Allen

    1071 Words  | 5 Pages

    “Stocks look dangerously high to me” Allen states as he describes the opinion of a banker, who was beginning to lose trust in stocks that were supposed to make the poor rich. The mentality of the banker spread to more Americans who eventually pulled their money out of the market, which was a major cause of the stock market crash of 1929. Before the fear of the banker reached Americans, they were hopeful for their returns from the market as their stocks were reaching their peaks. During this time the “stock market underwent rapid expansion” where the prices skyrocketed and sparked hope for some investors. The articles helped to ensure the public that the time to pull out of the market was near.

    Read More

  • Analysis Of 'Evicted' By Mathew Desmond Evictions And Foreclosures

    630 Words  | 3 Pages

    Living in low-priced neighborhoods were the Landlord will evict without an additional thought abolishes many lives and advancement opportunities. Countless people rent cheap houses or apartments so they can get a foothold in this crazy world, and stand up straight alone. People need a home to get a job, license and government help. When a landlord evicts deprived of a subsequent notice, it completely catches people off guard, and all progress of advancement gets lost in the trash. Based on “Evicted” by Mathew Desmond evictions and foreclosures are the things that keep people from advancing in life because to advance in life a foothold is a necessity and evictions and foreclosures effectively remove that foothold.

    Read More

  • Roaring 20 Dbq Essay

    685 Words  | 3 Pages

    With the invention of credit, or the ability of a customer to obtain goods or services before payment, consumers could purchase goods beyond their financial means. The stock market also became a popular method of making money, as investors tested their luck on Wall Street and hoped to earn a profit from various business schemes. Document G is excerpted from Harry J. Carman and Harold O. Syrett’s 1952 book A History of the American People and discusses the process of buying a stock on margin, or borrowing money from a broker to purchase stock. According to Carman and Syrett, since the buyer only payed for part of the stock, there was a risk that their stock could lose value quickly. The broker may then be

    Read More

  • 1929 Dbq

    994 Words  | 4 Pages

    The excessive spending came to a breaking point when investors traded about sixteen million shares on the New York Stock Exchange in all but one day. Billions of dollars went down the drain in result of the trades and thousands of investors went bankrupt. Speculators got a rude awakening once they lost all of their money in hopes of gaining more. Harry J. Carmen considers speculation as “the final development that set the stage for the collapse of American prosperity” (Doc 5). So much chaos happened in so little time due to speculation and that was just one reason behind the economy collapsing.

    Read More

  • Causes Of The Great Depression Dbq

    1004 Words  | 5 Pages

    Investors poured money into equities, convinced that the market would climb endlessly, “...most of America waited for supply to create its own demand, waited for the business cycle to run its natural course, waited for the stock market to get back on its upward course”

    Read More

  • Economic Inequality In The Gilded Age

    1411 Words  | 6 Pages

    Filled with prosperity and growth, everyone thought the twenties were the start of a great run for the United States. Dr. Dice, a business professor at Ohio State University, predicted that the stock market would continue to gain in the near future, more than ever before (Document 6). But, he went on to say that it would eventually collapse. Not only did he know that it cannot continue to grow forever, but he realized that small investors have begun to take part in the game of stock. He saw that such investors would add to the vulnerability of the market.

    Read More

  • Government Intervention By The Government During The Great Depression

    882 Words  | 4 Pages

    Some critics argue that the Federal Reserve's monetary policies can create asset bubbles and encourage risky behavior by investors, as seen in the housing market leading up to the 2008 financial crisis. Despite these criticisms, the Federal Reserve remains an important tool for promoting economic stability and growth, and policymakers must continue to carefully monitor and adjust its actions to

    Read More

  • Henry Paulson Great Depression Summary

    438 Words  | 2 Pages

    The biggest enemy to the end of the financial crisis and the beginning of an economic recovery is Treasury Secretary Henry Paulson himself. Lets forget for a minute that the decision by Paulson and Bernanke to let Lehman Brothers fail was the precipitating event leading to credit markets freezing up and the first round of financial panic. Since then, the two have been working diligently to correct this collosal mistake. But separating actions from words, we see that words are in fact much more potent. Since the end of September, every time Henry Paulson has opened his month, the Dow has dropped on average 196 points.

    Read More

  • Naked Economics Chapter 6 Summary

    259 Words  | 2 Pages

    The chapter 6 of our study book addresses the interest rates and yield curves. It started by giving an overview of the interest rates fluctuation in the US economy over the last decades and how the demand for bonds increased with reduced interest rates (demand curve shifting right) when the business conditions were favorable. This situation made the bond prices go high while the yields go lower, the opposite is true as well when the business climate was unfavorable. The risk structure part of the chapter explained the difference between corporate and treasury bonds in terms of risk, indicating that the US government never defaulted on its bonds while corporations are more likely to default due to their relying on business conditions.

    Read More

  • Atwood Debtor's Prism Analysis

    2405 Words  | 10 Pages

    In the documentary In Debt We Trust by, Schechter talks about how the mall has replaced the factory as America’s dominant economic engine. The film shows how big banks and credit cards companies drive Americans to become sheep. Schechter is clear when he says that a bubble could burst, and comparison of the USA today is comparable to Rome before its fall (Schechter 358). Government loans are comparable to “mafia loan” because of their outrageous interest rates. In Debt We Trust shows behind the scenes of what the big banks and credit card companies do to their targets.

    Read More

  • The Tragic Causes Of The Great Depression

    1154 Words  | 5 Pages

    It’s a wonder that people missed the exaggerated warnings that were shoved right to them, yet it seemed that would turn a blind eye to them ALL. On March 25, 1929 there was a “mini” crash that if thought about, would make them immediately, think “Hey, maybe this should be looked into, just in case.” But none of them did, which led to even more financial ruin. Even trusted financial advisors, the people the government themselves hired, gave warnings, yet society “ran” on – like running in the street, waiting to get hit, and they were hit badly. After the long and enormous stock-market- crash, it seemed as if the market continued to crash, getting worse every time.

    Read More

  • The Big Short Movie Analysis

    1221 Words  | 5 Pages

    This was a high risk high reward bargain that paid off in the end. Banks were making money off their mortgage loans they were selling off in synthetic CDO’s. These debts were actually worthless. When the housing market and Wall Street crashed, many lost their investments. These were meant to be safe investments but because of the actions of the banks, mortgage brokers and many other factors, millions lost everything.

    Read More

  • The Campbell Real Estate Timing Letter

    1160 Words  | 5 Pages

    Campbell expressly discussed the impact of mortgage rates, a critical factor of the U.S. economy: “Even though mortgage rates had been in a long-term downtrend since 1982, a substantial body of empirical research has found that the Fed’s massive bond buying purchases since 2008 has significantly lowered mortgage rates and long-term Treasury yields. Hence, without QE mortgage rates could likely be 2.0 to 2.5 percentage points higher than they are today – which means most of the people who made money in real estate in the last 3-4 years would not have done so if housing prices weren’t driven higher by artificially low mortgage rates.” Campbell suggests that the bull market in housing may also soon end with the end of QE because of the weaken purchasing power of mortgage owners thanks to growing mortgage rates. However, mortgage rates still kept sinking and it had lasted quite a while longer before the Adjustment phase drives them higher from mid-2014 (See Figure A.2 in

    Read More

  • Economic Crisis In America Chapter 1 Summary

    154 Words  | 1 Pages

    Chapter 1 talk about economic crisis in America, including free-market, Federal, and government. Also, they talk about free-market economy has failed. And they think that the current crisis was caused not by the free market but by the government’s intervention in the market. In addition, the Fed’s policy of intervening in the economy to push interest rates lower than the market. Chapter 2 talk about how government created the housing bubble.

    Read More

  • Lehman Brothers: Financial Fraud In 2008

    2178 Words  | 9 Pages

    A risky investment if the homeowners were unable to repay the mortgage. This proved to be the case when the US economy and housing market crashed in 2008 and Lehman Brothers had billions of dollars invested in the subprime mortgage market and homeowners had no money to repay the

    Read More

More about The Housing Market: The Big Short By Michael Lewis

Open Document