While at the DVD store, a documentary caught my eye entitled the 'Inside Job' and a detailed look at the global economic crisis of 2008. I'm not much of a finance guy but the film (produced by Charles Ferguson) was intriguing, in the sense that it attempted to offer a detailed analysis of how the crisis happened.
The movie was surprisingly accessible, thanks to Ferguson's style. A financial novice like myself could understand the gist of things the first run-through, yet the movie is also packed with details. I am now going through it again multiple times to understand the financial details and terms involved.
Much of the movie was US-based. However what took place was a global recession so it was helpful to go through and learn a lot about the interconnections between US corporations and government even if it was complicated. I've always been wary of the big banks and mortgage lenders to begin with, and the movie only reinforces that belief. Frankly, paying CASH for a house is the only way to go. I'm not just talking about a down payment, I'm talking about the whole thing up front like the way the Chinese do it.
What I found astounding from the video was how much money trading and investing was happening that based on debt. I already knew that western consumer culture is built on the concept of borrowing money in order to consume things you cannot afford to pay with cash. But what I didn't know was how much profit was being made by the complex web of financial corporations that are buying, selling, investing, and trading in others' debt. One simply has to ask, "Where is all the money coming from?" The crisis made it rather clear that the financial system was built on a house of cards, but I got really angry as the video documented that many of the CEOs from the biggest players (including Lehman Bros that went bankrupt) ended up walking away scott free with big pay packages.
Maybe now people are questioning the whole idea of mortgages after the financial crisis. But when I was growing up nobody thought it unusual to take out a 30-year mortgage from the bank to finance a house in the suburbs, which is in fact a lifetime of slavery. The idea was you could live in a house your entire life and think of it as "owning a home" when you really were a servant to your bank.
Imagine how different the US culture would be if people simply decided they were only going to buy things they had the cash to purchase. Yeah I know that would never happen, but one principle I live by is the idea that my life is a business. That is to say, if I'm running the business of 'Mr Steve' then I want to try and have a surplus (profit) and use cash for the purchases – avoiding credit wherever possible.
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