The extension of credit by instrument

Michael Lewis, The Big Short: Inside the Doomsday Machine New York: W. W. Norton and Company, 2010.

Lehman Brothers had vanished, Merrill had surrendered, and Goldman Sachs and Morgan Stanley were just a week away from ceasing to be investment banks. – 18 September 2008

In most of his works, Michael Lewis builds his evidence and argument on the backs of human stories. Part of what makes The Big Short intriguing is that Lewis begins with elements of his own experience, reminding readers about his work that was described in the earlier Liar’s Poker.

The subject of Lewis’ book is the collapse of the United States stock market in 2008. Lewis argues persuasively that for some people, this crash was predictable and avoidable. More important for Lewis’ story, there were ways to make money off of the same situation that was costing some companies their very existence. The characters to whom we are introduced are interesting, possess numerous quirks, and share in common their ability to have both foreseen this economic disaster, and profited from the experience.

Some readers may find the level of detail undertaken by Lewis to be overwhelming – do we need to hear in grand detail about every level of Mike Burry’s idiosyncratic behavior? Perhaps not, but it makes Burry compelling in a variety of ways.

I think what I enjoyed the most about The Big Short is that Lewis described much of the situation with an air of incredulous wonder. The same level of wonder struck many of us as we watched the market tank, though I recall thinking “well, that was fairly predictable.” My students had been pestering me since 2003 regarding the possibility of a return to the Great Depression – I always pointed out that the repeal of Glass-Steagall made me a bit nervous for a crash, though not for something on the same level as the 1930s. As Lewis reveals to use all the ultimate failure of the market was more complex than a simple response to repealed legislation – greed, overreach, and an honest lack of understanding played tremendously important roles too.

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Filed under Sports and Popular Culture, Teaching and Learning History

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