The Great Hangover

Thanks to Saumil for recommending me this book.

A lot happened last year in the US financial industry and people say that is going to be very historical. There are references that we came very close to Great Depression. Yet beyond the main headlines, i had no idea what really happened, its causes, consequences etc.

The Great Hangover is a collection of about 21 articles covering the Financial meltdown by reporters at Vanity fair. The articles are quite detailed and very very interesting to read. My favorite ones are articles written by Bryan Burrough. Michael Lewis, the ones on Bernie Madoff, again, very interesting read.

Highly recommended - http://www.amazon.com/Great-Hangover-Tales-Recession-Vanity/dp/0061964425

So what is the take away from all this -

I think that the one lesson that clearly emerges is that "there is no such thing as free money". If you are seeing any lucrative offer, a scheme paying higher interest rates than others, or if you are earning money more than you think you deserve, it has to pay off through some means in the end. You may win in the start but later on, there is no free lunch and it is a risky game, gamble actually and you can also loose. And thats what happened.

But it is a gamble with a difference. In a gambling game, only players win or loose, spectators can merely watch and enjoy. But in financial world, this didn't happen. People who took risk failed and it was tax payers money needed to bail them out, so even those who were not directly playing had to pay. The explanation here is that you have paid the cost for seeing something wrong and not doing anything about it. The era of "consumption" of democracy is over, either be active or "be satisfied with what you get". This also sends a wrong signal to the people who took risk because they were able to get away with that, well not all of them but many did.
These people still earn more than what they deserve and are unashamed by the fact that they have their jobs right now because of this massive intervention by the govt. Their unabashed attitude is still a problem.

Oh come on, you take someone's money, claim 2% of the money as your fees and 20% of the margins that you earn on it, don't you think that it is too high. Every bubble has to burst sometime, the whole attitude is to make money before it comes and some succeed and some fail. Those who fail are the most vocal, but they forgot it when they were making money.

There is also a documentary - Inside job that explains this whole mess in a different perspective. It is narrated by Matt Damon and is quite a good watch. Although many people declined to be interviewed for the movie, but for the ones who did, they still do no see anything wrong with the system. Many believe that it was just a happenstance and economy will bounce back.The movie does a great job in interviewing economists and asking them the conflict of interest when these same economists are on the board of these different financial companies.

Manas and i were enjoying this movie, laughing , giggling, making fun etc. But the entire hall was shocked after watching the movie. There were many elders in the hall, many who could feel the pain and see that nothing has changed. For us, we watched the movie from a complete detached perspective, the meltdown had not affected me at all, i have a job and it pays me more than i deserve. One old man sitting one row back to us said "This is the scariest movie i have ever seen". People were shocked - and there was an emotion of helplessness, not knowing what to do - the same emotion that comes when you watch Peepli live, i guess.

I would also recommend this movie, to anyone who did not follow what epic event happened in 2009, anyone who wants to know what the future is in store for us.

Inside job : http://www.imdb.com/title/tt1645089/