The Big Short Summary By Michael Lewis

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Recommended: Causes of the financial crisis of 2008

The Big Short by Michael Lewis is a well written book on how the financial crisis came to be in 2008. The book simply boils down to a theme of causes and effects with Lewis deciding to show the reader how the events took place through the eyes of characters in the story instead of simply explaining what actually happened. The book gives a great view on both sides of the crisis with how badly it affected everyone’s lives but also how it paid out well for those smart enough to see this event coming in the near future. In this story certain individuals such as, Michael Burry, Steve Eisman, Greg Lippmann, and others, realize that the housing market is going to crash and found out that because of this, they could make a lot of money. Since the 1980’s banks have been selling subprime loans to many unknowing people with the assumption that housing prices will never fall. These mortgages were bundled up into bonds known as CDO’s and these are what started the collapse. Financial institutions invested into these mortgages with the same assumption and …show more content…

Michael Burry is one of the people who luckily saw the future of the market and capitalized off of it by buying credit default swaps which are, in simple terms, bets against the bank. The reason these are “bets” is because if the CDO loses value each month, the bank will pay him. But on the opposing side, if the CDO keeps its value each month, he must pay the bank. Michael made out well by selling these off to other investors then the year 2008 came and this is when everything went downhill fast. As bank and financial institutions continued to fail the government had to step in with a bail out, forgiving them of these loans they had sold over many years. This market collapse did not just affect everyone in the United States, people felt this all over the world. Luckily for some, they made the best of a bad

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