Documentary Analysis “Inside Job”, From The Macroeconomic Point Of View

Documentary analysis "Inside Job", from the macroeconomic point of view

The documentary, whose name can be translated as “the work that is done from the inside”, is a Oscar -winning film in 2010, directed by Charles Ferguson and narrated by actor Matt Damon. In it, through interviews conducted to different financial, political, academics, and using illustrative images and graphics, an analysis of those situations that gave rise to the financial world crisis occurred in 2008 is carried out in 2008.

This documentary focuses the argument on the financial system of the United States, which revolved around a corruption network, which, through the lack of regulation and economic interests of the advisors and other actors who participated in the advice , became uncontrollable. It begins informing about the situation of Iceland, a country that had achieved good economic development, and that through regulatory liberation ideas, reached bankruptcy in less than two years. In this way, development continues explaining those circumstances that have led to the crisis to certain countries; When mentioning these circumstances, some relevant aspects are taken into account, such as trends to deregulation policies, new types of risk markets (which are not regulated), and ethical "problems" that could have to have Those leading actors in the financial sector, who manipulated and transformed certain information, such as giving good grades to companies that were not good or reliable.

We found the investment bank that at that time promoted companies that already knew that they were going to fail, as is the case with Citibank, UBS and Enron.

We wonder how the level of employment and internal production of a country can change can be affected by changes in foreign trade and globalization itself. Within the study of macroeconomy, we find what is called "economic cycles", that is, the fluctuations of production, employment and short -term prices. Throughout the entire documentary we can observe the amount of variations at the economic level that the United States has crossed, which led to times of good economic boom, to large and even devastating crises. As an example of this, we see when it is mentioned that after what was the great depression, the United States had 40 years of growth without financial crisis since the activity was regulated, with local banks and businesses and there was a prohibition to speculate with the savings of The depositarians. About the 80s, the financial industry shoots, banks issue shares and acquire a lot of capital; In 1972, Morgan Stanley (US financial entity, investment bank and stock market agent), went from having 110 employees, an office and capital of 12 million dollars, at 50.000 employees, capital of billions of dollars, and offices worldwide; A decade later, savings and loan companies are deregulated allowing risky investments with deposits, some time later, companies break; At the end of the 90s, investment ban.

In the year 90, through deregulation and through technological advances, the explosion of products called derivatives arises. These products can be called “financial instruments whose value derives from the prices of another asset, called underlying asset such as action, fixed income value, currency, interest rate. There are people or institutions that have a surplus of capital funds (lenders) and others that have the need for these funds (borrowers); The money that the lender yields to the borrower has a price which is usually set in a percentage of said money for a certain period. This market reached 50 million dollars, thus initiating a process of great speculation about the credits than mortgages (collateralized debt obligation), the more CDO they were sold, the more profits generated. The so -called subprime appears with this, which had a non -payment risk level greater than the average of the rest of the credits.

The bubble: interpreted as a rise in the price of an asset or product that is considered abnormal, prolonged and uncontrolled, which leads to those prices to move away considerably from their real value. The envelope arising from the ability to acquire homes through the mortgage generated, as we know, an increase in the price of the same. These subprime are doubled by a period of 10 years (of 30.000 to 60.000 per year), which generates benefits that do not exist, are not real. The rates rise, generating the granting of credits that can be considered abusive; lenders can no longer sell their loans leading many of them to bankruptcy. It is here when the CDO collapse market leaving many investment banks with millions of dollars in loans and properties that they cannot sell.

American Group- AIG starts the sale of debt default insurance. If you do not pay there is the insurance. In our banks the so -called guarantees funds appear, but in the international are. “AIG’s financial products division in London issued 500.000 million dollars of default debt insurance; Many of them backed by subprime mortgages ”(Ferguson, 2010). In 2008, Banco Lehman Brothers and collapses the largest insurer in the AIG world, generating a global crisis, "Wall Street earthquake", the actions had the greatest fall recorded in a single day, resulting in a global recession. This cost dozens of millions of dollars to the world, 30 million unemployed and the national debt of the United States doubled.

The documentary clearly shows other consequences such as the rise of relocations and investment in other countries to reduce costs. At the specific moment of the crisis, the fiscal policy appears, where a measure of "rescue" arises by the president of the United States, George Bush, issued in October 2010 the Rescue Law. The unemployment rate, that is, the percentage of the economically active population that is unemployed, increased in the United States by 10%, generating a recession (decreased commercial and industrial activity that involves a decrease in salaries, benefits and employment). Large companies as General Motors and Chrysler begin with the des, bankruptcy; The United States consumer begins to stop spending what causes the sales of Chinese manufacturers to fall considerably. Work export to China is generated, since the cost is lower than producing them in the country, which causes more unemployed Americans. Through technology and computer science, some jobs are generally. The United States should invest more in public spending, especially in universities that are very expensive and inaccessible, in order to create more qualified labor and that can access a better job, earning more money and thus being able to consume more.

Towards the end of the documentary, a company is portrayed in 2010, with a high concentration of companies in the financial sector. This crisis caused the elimination of the middle class and the increase in inequalities with an unequal distribution of wealth. With Obama’s entry into the Government, a change of direction and a lower power of the influential lobbies were supposed, but they still exert pressure and the government has done little to try to solve these problems. Obama makes appointments of people who had worked in previous times and are with the same ideology they had in the previous financial companies. I close my analysis with a phrase mentioned by one of the interviewees, which left me a very good message, and which I share absolutely: “Why should they pay an engineer in finance of four to one hundred percent more than an engineer really? A real engineer builds bridges, a finance engineer builds dreams, and if those dreams turn out to be nightmares,