Question

after watching the Movie Inside Job

write a two-page synopsis of what the movie was about & how it relates to macro

Answer 1

The movie is based on the study of American Financial Crisis of 2008 which cost over $ 20 Trillions, millions of people jobless, homeless and resulting in global financial collapse disclosing how the top 1% people of the world end up getting even more rich by making the other 99% of people suffer.

The entire movie is sliced in 5 parts:

1. In Early 2000s the Internet Bubble had burst and in 1990s derivatives had become popular mode of investment by increasing the risks involved and instability n the market. The responsibility of regulating derivatives was given to Commodity Futures Modernization Act of 2000 and this was backed by several key officials. In 2000s, the industry was dominated by handful of investment banks, credit rating companies, conglomerates and insurance companies.

2. Investment banks had bundled the mortgage loans and other debts into CDOs which they sold to other investors, which were rated as AA or AAAby the credit rating agencies leading to increase sub prime mortgage. At this time, the amount of money borrowed by investment bank v/s banks own assets reached unmatched level. Various CDOs were backed by subprime mortgages. The credit rating companies would rate AAA for most of the derivatives.

3. The recession had begun in November 207, but its effect started showing in March 2008 when where Bear Stearns had ran out of cash followed by Lehman Brothers after 2 days. This led to collapse in the commercial paper market. Merill Lynch was also on the verge of being collapsed but it was bought by Bank of America. These were top investment banks backed by AAA by the credit rating agencies. AIG was also insolvent and was acquired by the government. The Fed Chairperson Ben Bernanke asked Congress for $ 700 billions to bail out banks. The stock markets across globe continued to crash everyday. Unemployment reached over 10% in USA alone.

4. The top 1% of the people walked away with millions of dollars in hands when government bailed out the banks. MAny banks emerged in power doubling anti-reform measures

5. Thousands of workers in USA were employed, factories were shut down and people became homeless. All of these happened because of the weak regulatories and reforms and corrupt politics who wanted only to benefit themselves instead of society as a whole. A handful of people made the entire world suffer for years.

Macro economic effects:

1. Fallen GDP across globe

2. Unemployment

3. Fallen consumption of goods and services

4.trade deficits

5. Inflation