The Big Short's Michael Burry on the Crash

What Does Michael Burry Say About Today’s Economy and Investment Scene?

Michael Burry was the hero of Michael Lewis’s book The Big Short, about the Crash of 2008, and also the hero of the popular film of the same name.

Burry is a hedge fund investor (Scion Asset Management) who normally keeps a low profile. Lewis is perhaps the most readable writer on Wall Street today. His articles and books are always hard to put down, partly because he finds either very colorful figures or thoughtful, interesting, and little-known figures such as Burry and builds his story around them.

New York Magazine had the good idea to interview Burry for an update of his views and fortunately he agreed to respond by email. The resulting article, entitled “Michael Burry, Real Life Market Genius From The Big Short Thinks Another Financial Crisis is Looming,” appeared on December 28. The Big Short: Inside ... Michael Lewis Best Price: $1.49 Buy New $7.99 (as of 02:35 UTC - Details)

Burry’s central point is one that I found particularly telling. It concerns not only our economy and politics but our society as a whole and especially young people.

“The biggest hope I had was that we would enter a new era of personal responsibility. Instead we doubled down on blaming others…. Enablers for this crisis were varied. We should be teaching our kids… personal responsibility, not… blame.”

Burry also made some other points that will be familiar to Mises readers:

  • The people who brought us the Crash of 2008 profited from it rather than being punished, a replay of the dot-com bubble and crash. It is always “ the little guy” who pays. At the same time, even the little guy needs to take responsibility for falling for the blandishments of snake oil salesmen.
  • The Banks have gotten bigger and an unelected Federal Reserve even more powerful. The Fed continues to apply the same medicine, and more and more of it, that got us in trouble in the first place.
  • The Dodd-Frank “ reform” legislation that followed was named “ for two guys who were bought and paid for by special interests.”
  • The free money ( for Wall St.) interest rate policy  “broke the social contract” that had existed for generations and encouraged people to work and save. There really is no such thing as “ free money.” Somebody always pays, in this case small investors and Main St. businesses. Government is creating the very economic inequality it claims to deplore.
  • Risk cannot be priced without market interest rates, so the economy is floundering without reliable road markers.
  • People keep trying to improve themselves and figure out how to do things better, despite all the obstacles created by government, which offers some hope for the future. This last point echoes a celebrated passage from Adam Smith’s Wealth of Nations, published in 1776, which illustrates how persistant these obstacles are.

Image: 60 Minutes 

Note: The views expressed on are not necessarily those of the Mises Institute.