MovieChat Forums > Inside Job (2010) Discussion > What is the real cause of the collapse?

What is the real cause of the collapse?

posted 13 years ago by elimc184
122 replies | jump to latest

Right now, people are doing a lot of finger pointing about the cause of the economic collapse. The real cause of this calamity was government interference in the market. Don't believe me? Lets take a look:

1. Gov. creates FHA. It starts as a noble program that allows homeowners to borrow money to buy homes. Like all gov social programs, it starts out great and home ownership explodes. Like all gov social programs, smart people will eventually figure out how to make money off it (they will take advantage of the forthcoming credit bubble).
2. Fannie Mae, VA loan programs, Ginnie Mae, and Freddie Mac are created to induce more home ownership by creating a secondary market for primary lenders to borrow from. Like all gov social programs, it starts out great and primary lenders have some insurance against defaults. 30 year fixed rate mortgages are the gold standard. Like all gov social programs, smart people will eventually figure out how to make money off it (financial "innovations" will create jumbo mortgages and other crap the average consumer is too stupid to understand).
3. S&L crisis in the 80's caused by, you guessed it, gov intervention in the free market. S&L institutions make risky loans, knowing that the gov will intervene and bail them out. In the aftermath, gov regulations are enacted to prevent this from happening again. The enforcement of these regulations would, ironically, help to create the sub-prime crisis by expanding the influence of the secondary market.
4. The gov enacts a home ownership program to help poor people buy homes. Eventually, it turns out to be a program that gives poor people homes they can't afford. Smart people profit.
5. Sub-prime mortgage crisis hits. Poor, dumb people lose. Smart, rich people end up ok. Poor, dumb people angry. Smart, rich people still looking for next credit bubble (government sponsored school loans . . ?)

Every time the gov intervenes in the free market, even on the grounds of virtue, bad things will happen. We need to be wary when politicians try to do things on our behalf.

[–] DiscoViolento 13 years ago

It's the other way around. The cause was market interference in government.

[–] web-accs 13 years ago

Yeah.. Trying to become totally self regulating for it's own interests.

[–] AtheistRevolution 13 years ago

There is no such thing as a free market.It has never existed.Its nothing but a Utopian dream like Communism.Its just an excuse used to deregulate markets and let the crooks run rampant. What the US currently has is private industry controlling the government.The most obvious being the military industrial complex. You don't know where defense begins and war profit ends.Soldiers being trained on US tax dollar but then joining a private military contractor and getting paid even more on the taxpayer dime.

The government funding all these arms buys that have no benefit.The government spent billions on secondary engine for F-35.Even the pentagon say they don't need some of the crap but they still buy because the politicians are owned by defense contractors.You're just justifying corruption from private industry and government.They both need to be reigned in big time. Corporations exist to make profit.So do you think in some so called "free market" corporations will act accordingly with or without government.Will humans act accordingly without police or laws?

Religion is regarded by the common people as true, by the wise as false, and by rulers as useful.

[–] mdidesidero 13 years ago

Reasons?

1) Deregulation
2) Crooks
3) A whole bunch of #2's
4) Greed
5) Greed
6) Greed
7) Greed
8) Greed
9) Greed
10) GREED

Yep. That about sums it up. These people (and I use the term 'people' very loosely) deserve to be thrown into a blood-infested shark tank, a Lion's den or a firing line. Take your pick. All will suffice. Douchebag Mr. conflict of interest Paulson is at the heart at this disaster.

[–] web-accs 13 years ago

To the OP

Dude your theory/philosophy/opinion as stated above makes you sound like an imperialist, elitist, bigot.

or possibly a wall street financial engineer.

DO THE MATH....
If A. influences B. to do C. and C.=Huge increase in profits, ownership and control for A. at the expense of the majority of society as a whole, then how can B. be held solely responsible for interfering with C.

The idea that free market capitalism with minimal/no regulation creates a solid economic future is a failed ideology, it's a myth.

If the government didn't intervene the so-called smart rich people would screw the so-called poor dumb people even harder and harder than before...

Unless you want profit before people and you would be happy seeing 90% of the people living in *beep* that's why people try to elect a decent government in the first place.

We're not all reptiles anymore, it's called evolution.

Seriously, nothing personal you seem smart but somewhat stoopid, or maybe just ignorant of the eh.. facts, a moral compass, the common good?

:P

[–] winding_nut74 13 years ago

The greed culture of the american people caused them to take out loans they knew they couldn't repay and it caused them to default, the banks just facilitated them.

[–] StatelessRich 13 years ago

http://www.youtube.com/watch?v=EgMclXX5msc

[–] carlsez_1 13 years ago

Looks interesting, I'm going to watch that YouTube vid later, thanks.

Speaking as the dumb guy in the room, one thing has always bothered me, and its right there in the title of the video: How did all this become a surprise that everyone was supposedly blindsided by?

When the basics of the meltdown were explained to me it made perfect sense. I was even able to say in the middle of the explanation "that doesn't sound good". It seems that anyone with the minimal amount of Econ 101, which I don't have, should have seen this coming. The answer must be that many did, but greed made them deaf.

Auto-Tune is not a genre, please stop treating it as such.

[–] Johnny007 13 years ago

Most of those who orchestrated the scam and knew exactly what was happening had already cashed in their cheques when the *beep* finally hit the fan.

I've read most of the replies on this thread and the one word no one seems to have used - the one word (other than fraud) that really caused the collapse itself... Leverage.

The whole *beep* system needs dismantling, heads need to roll in a court of law and governments around the world need to restore 3-6-3 banking and seperate the casino banking sector entirely. Problem is most of those in politics are on the make as well.

[–] 13 years ago

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[–] EyeDodge 13 years ago

I know this movie was based around the facts about the economic crisis that hit us in 2008 but the real collapse of America and the rest of the world will be caused by agriculture which is the same thing that pushed evolution forward in the first place. If you want to see a real documentary about our losses watch Food, Inc. or King Corn or even Fuel instead. This movie is just a snoozer pointing the blame at a bunch of guys who wouldn't even participate. (Who I do think are guilty but at the same time it would have been better to see their side)

[–] twiggy232 13 years ago

Yes it is deregulation and the government that is the root problem as they essentially allowed Wall street to do what it did, without making it illegal.
However the extent to which some of these CEO's etc exploited the situation was ridiculous. THey should also carry the blame, not only for insane greed and disregard for society, but for being heavily involved in biasing the decisions and actions taken by the government and regulators

[–] Craig-Ashley 9 years ago

Good point. Also we need to be advised about who to consume from and who not to. Who to avoid.

My small input to this discussion is simple: whatever the stance of the spokespeople, whatever their affiliation, whatever drove them (money, power, ego, gratification) I was amazed that they found it so easy to become incoherent and seemed to have no answers ready, when grilled. For some, even a 'I was just doing my job, day to day' would have sufficed. The fact that they clearly had no answers ready says it all: no thought for the future.

[–] Cyraxote 13 years ago

"We need to be wary when politicians try to do things on our behalf."

Apparently we should trust the guys trying to take all the money, though?

Your basic argument seems to be that, by analogy, there should be no speed limits because people will just look for roads with higher (or no) limits.

Let me see if I have this right: people are greedy. The government, however, even though it seeks to reduce greed and protect one element of the population from being screwed by another, is even worse than the greedy people. It would be better to let the people screw each other than to let the gov't be involved in any way.

How does that make ANY sense?

[–] LLOwens 13 years ago

And what if--just what if--there is the possibility that Wall Street, the federal government and the Fed were all in bed together? Those who trust their rhetoric and believe the propaganda promulgated by the mainstream media will staunchly deny this. However, if you bottom-line action, such as when it was revealed in this documentary that there was no investigation into who should be held accountable for the cause of the collapse, then this may point to the possibility of a conspiracy with regards to the now obvious lack of regulation in the derivatives market which preceded the meltdown. Of course the excuse the government would give to rebuff this would be to say that Wall Street pulled the wool over their eyes and outsmarted them. Thus the call issuing forth out of the mouth of Uncle Sam is to recruit Wall Street brainiacs to assist the regulators in an attempt to cure this systemic problem.

[–] Cyraxote 13 years ago

You're right. I was just responding to the OP's blanket condemnation of any government action.

[–] deeveed 13 years ago

Of course they were in bed together. If you ask me like minds think alike in this case there was agreemen by ALL groups, i.e the Street, the government and the rating aqencies to use 'derivs' as an valid risk instrument. Only problem is there came to be that illustrious "tipping point" where risk went maniacal until it went out of control. Well, we've attributed all that to greed and irresponsibility. Problem is human nature won't change even if we change risk structure in buying and selling. This is going to be a tough virtually intractable problem if the money men want to continue this game without any changes. I hope they will know what to do but really I'm not too hopeful. maybe cosmetic changes and the banks'l build a building to house maybe some more money to back up their trades but that's about it. A band aid on an elephant kids...;-)...

[–] elimc184 13 years ago

In what universe does the government seek to reduce greed and protect one element of the population from being screwed by another?

[–] deeveed 13 years ago

None and that's why I guess I'm not too optimistic. This stuff will happen again (fill in new financial "instrument"). If we understand "man", we'll understand that, at times, there's no saving ourselves from our own selves regulations or no regulations.

[–] LLOwens 13 years ago

I will have to agree that until regulatory reform is achieved, the big banks and financial institutions will continue to power grab as large of a piece of the market pie in this zero-sum game because they can. This will leave small time investors and those with no money to invest holding the bag. After all, it don't matter whether it's a bull market or a bear market--monopoly power means guaranteed market share for leverage hungry risk takers who manage unregulated hedge funds and bet not just against the economy but against the best interest of their clientele. It's a pity that the intellectuals who work for America's most prestigious business schools appear to be more interested in chasing the smart money--which in some cases have turned out to be dirty money in need of laundering--even blood money. Republicans have proposed cutbacks in the funding of regulatory agencies and bodies which aims to undercut financial reform while economists continue to downplay the role financial fraud has played in every major financial crisis of the past few decades including the Savings and Loan scandal, the Asian market collapse as well as the Dot.com and housing market bubbles.

[–] 13 years ago

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