The Big Short: Inside the Doomsday Machine written by Michael Lewis ia a non- fiction book which is about the events leading to banking crisis and portrayed light on the USA’s real estate bubble mainly on houses in 2008. This book consists of 10 chapters which describes the shortfall of subrime mortgages and the stories of affected people due to it.The faulty mortgage providers created the credit swap default market which promised the customers of real estate to compensate in case of loan default. Lewis condemned the bond market and subrime mortgage bonds which mainly led to the stock market crash in 2008. According to him, financial crisis already started in the country by 2007 when the housing prices of the country started dropping suddenly around the country. Housing market started growing from the 1995 to 1999 in USA and Federal Reserve and banks were expecting to create wealth for the growth of economy with the help of housing market in the wake of recession which further fueled the market introduction of subrime mortgage. Subrime mortgage opened the road for availability of plenty of cheap money for new loans. Many other financial innovations were introduced like interest adjustable loans, interest only loans, zero down loans which motivated people to invest in some secured asset as housing prices were going up. Early signs of financial crisis started to appear when there occured some defaults in subrime loans and housing market prices were going down. stock market crashed in 2008 due to the faltering in housing market. Lewis mentioned some financial anlysts name like Meredith Ann Whitney , Steve Eisman, Gregg Lippman etc who were well versed with the future crash of the financial market but kept mum in the expectation of large flowing investment to the market. He also questioned on the morality of these analysists whose reluctance to the ensuing crisis made the whole nation to suffer. The main aim of the book is to point out the fundemental flaws of bubbles in the housing market and credit system which led to the devastation of the economy which occured in 2008 after the great depression.
Goldman Sachs, Merrill Lynch, Bear Sterns, JP MOrgan and Morgan Stanley etc were Wall Street investment banks who were associated in buying and selling of Mortgage bond who in the 1980s realised that bond like financial products could be created from credit cards, home mortgages and student loans which would make regular interest on borrowed money and help them in growing economically.
This book provides informations about how optimastic nature of Wall Street and other rating agencies like Moodys, S;P used decietful tactics to maximise their profit which completely ignored their effects in the long run. Besides citizens of USA who went beyond their limit to fulfill their consumption desire which brought down their savings below 1% and made them to suffer for their indecisive nature during and after the recession. This book portrays the dangerous effects of debt and sends the message to its readers what will be the effects of debts on a nation’s economy. It teaches the lesson to handle money carefully as no one can predicts the future market potentiality.