Patricia & Christian talk to economist Dr Sam Levey about films set in the world of finance, including Trading Places, The Big Short, The Wolf Of Wall Street, Boiler Room and Inside Job. (Conversation recorded in 2023).

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Description:

What can Trading Places teach us about commodities markets? How accurate is The Big Short's portrayal of the 2008 financial crisis? In this entertaining and educational episode, Patricia and Christian welcome back MMT scholar Dr. Sam Levey to explore the intersection of Hollywood and high finance.

The conversation begins with the 1983 classic Trading Places, using this comedic masterpiece (starring Eddie Murphy and Dan Aykroyd) as a springboard to understand commodities broking, short selling, and the mechanics of futures markets. Sam expertly breaks down complex financial concepts like margin calls, leverage, and the bandwagon effect, showing how the film's climactic orange juice trading sequence actually demonstrates sophisticated economic principles.

The discussion then shifts to examine how the culture of finance has evolved from the gentleman's club atmosphere depicted in older films to the more aggressive, deregulated environment shown in movies like The Big Short and Wolf of Wall Street. Sam traces this transformation to the rise of shareholder primacy doctrine in the 1970s and 1980s, connecting Milton Friedman's ideas about corporate responsibility to the toxic trading floor cultures that emerged.

The hosts and Sam delve deep into the causes of the 2008 financial crisis, moving beyond simple explanations to explore systemic failures in business models, widespread fraud, and the role of deregulation. Patricia offers valuable insights about how the apparent prosperity of the 1990s was built on unsustainable credit expansion, whilst Sam discusses the work of his professor Bill Black on financial fraud and control fraud.

Throughout the episode, the conversation weaves between entertainment and education, using cinema as a lens to understand real economic phenomena. The discussion touches on Modern Monetary Theory concepts, particularly around private sector deficits and the role of government spending in economic stability.

This episode brilliantly demonstrates how popular culture shapes our understanding of complex economic systems, whilst providing listeners with the analytical tools to distinguish between Hollywood drama and economic reality.

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Episode Summary

MMT scholar Dr. Sam Levey returns to decode Hollywood's portrayal of finance, from the 1983 comedy Trading Places to the 2008 crisis drama The Big Short. This entertaining discussion uses cinema as a window into real financial markets, exploring everything from commodities trading to systemic fraud.

Key Topics & Timestamps

Trading Places Analysis

• [00:00] Introduction and guest welcome
• [05:30] What commodities brokers actually do
• [12:15] Understanding short selling mechanics
• [18:45] Futures markets and derivatives
• [25:20] The bandwagon effect in trading
• [32:10] Margin calls and leverage explained

Financial Culture Evolution

• [38:45] From gentleman's clubs to trading floor debauchery
• [42:30] Milton Friedman and shareholder primacy
• [47:15] Executive compensation changes since the 1970s

The Big Short and 2008 Crisis

• [55:20] Causes of the Great Financial Crisis
• [62:40] Deregulation and fraud (Bill Black's work)
• [68:15] Systemic failure vs individual bad actors
• [75:30] Credit expansion and apparent prosperity

References Mentioned

• Trading Places (1983)
• The Big Short (2015)
• Bill Black: "The Best Way to Rob a Bank is to Own One"
• Milton Friedman on corporate social responsibility
• James Tobin: "On the Efficiency of the Financial System" (1984)
• Glass-Steagall Act and its repeal
• Gramm-Leach-Bliley Act

Guest Bio

Dr. Sam Levey is an MMT scholar, writer, and teacher who, at the time of recording (2023) had recently completed his PhD dissertation on mobilisation theory. His work focuses on the intersection of economics, policy, and institutional analysis.

Key Takeaways

1. Hollywood as Economic Education: Films like Trading Places can effectively illustrate complex financial concepts when properly analysed
2. Cultural Shift in Finance: The move from relationship-based to transaction-based finance culture reflects broader economic changes since the 1970s
3. Systemic vs Individual Failure: The 2008 crisis represented a failure of entire business models, not just individual bad actors
4. The Role of Fraud: Financial fraud thrives in toxic workplace cultures that dehumanise customers and workers
5. Credit and Apparent Prosperity: Much of the economic growth of recent decades has been built on unsustainable private debt expansion

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All our episodes in chronological order: https://www.patreon.com/posts/43111643

All our patron-only episodes: https://www.patreon.com/posts/57542767

Relevant to this episode:

• All our episodes with Sam Levey: https://www.patreon.com/posts/43189679
• Sam on Twitter: https://twitter.com/SamHLevey
• Sam on Medium: https://slevey087.medium.com/
• In this episode, Sam makes a case for the MMT Job Guarantee, for more on that see our Job Guarantee episodes (below) and this episode with Sam is a great introduction - Episode 125 - Monopoly, Monopsony, And What To Do About Them: https://www.patreon.com/posts/61954971

For an intro to MMT:

• Our first three episodes: https://www.patreon.com/posts/41742417
• Episode 126 - Dirk Ehnts: How Banks Create Money: https://www.patreon.com/posts/62603318

Quick MMT reads:

• Warren's Mosler's MMT white paper: http://moslereconomics.com/mmt-white-paper/
• Steven Hail's quick MMT explainer: https://theconversation.com/explainer-what-is-modern-monetary-theory-72095
• Quick explanation of government debt and deficit: "Some Numbers Are Big. Let Me Help You Get Over It": https://christreilly.com/2020/02/17/some-numbers-are-big-let-me-help-you-get-over-it/

For a short, non-technical, free ebook explaining MMT, download Warren Mosler's "7 Deadly Innocent Frauds Of Economic Policy" here: http://moslereconomics.com/wp-content/powerpoints/7DIF.pdf

Episodes on monetary operations:

• Episode 20 - Warren Mosler: The MMT Money Story (part 1): https://www.patreon.com/posts/28004824
• Episode 126 - Dirk Ehnts: How Banks Create Money: https://www.patreon.com/posts/62603318
• Episode 13 - Steven Hail: Everything You Always Wanted To Know About Banking, But Were Afraid To Ask: https://www.patreon.com/posts/41790887
• Episode 43 - Sam Levey: Understanding Endogenous Money: https://www.patreon.com/posts/35073683
• Episode 84 - Andrew Berkeley, Richard Tye & Neil Wilson: An Accounting Model Of The UK Exchequer (Part 1): https://www.patreon.com/posts/46352183
• Episode 86 - Andrew Berkeley, Richard Tye & Neil Wilson: An Accounting Model Of The UK Exchequer (Part 2): https://www.patreon.com/posts/46865929

Episodes on inflation:

• Episode 7: Steven Hail: Inflation, Price Shocks and Other Misunderstandings: https://www.patreon.com/posts/41780508
• Episode 65 - Phil Armstrong: Understanding Inflation: https://www.patreon.com/posts/40672678
• Episode 104 - John T Harvey: Inflation, Stagflation & Healing The Nation: https://www.patreon.com/posts/52207835
• Episode 123 - Warren Mosler: Understanding The Price Level And Inflation: https://www.patreon.com/posts/59856379
• Episode 128 - L. Randall Wray & Yeva Nersisyan: What's Causing Accelerating Inflation? Pandemic Or Policy Response?: https://www.patreon.com/posts/63776558

Our Job Guarantee episodes:

• Episode 4 - Fadhel Kaboub: What is the Job Guarantee?: https://www.patreon.com/posts/41742701
• Episode 47 - Pavlina Tcherneva: Building Resilience - The Case For A Job Guarantee: https://www.patreon.com/posts/36034543
• Episode 148 - Pavlina Tcherneva: Why The Job Guarantee Is Core To Modern Monetary Theory: https://www.patreon.com/posts/episode-148-why-73211346
• Quick read: Pavlina Tcherneva's Job Guarantee FAQ page: https://pavlina-tcherneva.net/job-guarantee-faq/

More on government bonds (and "vigilantes"):

• Episode 30 - Steven Hail: Understanding Government Bonds (Part 1):https://www.patreon.com/posts/29621245
• Episode 31 - Steven Hail: Understanding Government Bonds (Part 2): https://www.patreon.com/posts/29829500
• Episode 143 - Paul Sheard: What Is Quantitative Easing?: https://www.patreon.com/posts/71589989?pr=true
• Episode 147 - Dirk Ehnts: Do Markets Control Our Politics?: https://www.patreon.com/posts/episode-147-dirk-72906421
• Episode 144 - Warren Mosler: The Natural Rate Of Interest Is Zero: https://www.patreon.com/posts/71966513
• Episode 145 - John T Harvey: What Determines Currency Prices?: https://www.patreon.com/posts/72283811?pr=true

More on Silicon Valley Bank and bank runs:

• Episode 162 - Warren Mosler: Anatomy Of A Bank Run: https://www.patreon.com/posts/80157783?pr=true
• Episode 163 - L. Randall Wray: Breaking Banks - The Fed's Magical Monetarist Thinking Strikes Again: https://www.patreon.com/posts/80479169?pr=true
• Episode 165 - Robert Hockett: Sparking An Industrial Renewal By Building Banks Better: https://www.patreon.com/posts/81084983?pr=true
• MMT founder Warren Mosler's Proposals for the Treasury, the Federal Reserve, the FDIC, and the Banking System: https://neweconomicperspectives.org/2010/02/warren-moslers-proposals-for-treasury.html

MMT Courses:

• Details of Modern Money Lab's online graduate and postgraduate courses in MMT are here: https://modernmoneylab.org.au/

MMT Academic Resources compiled by The Gower Initiative for Modern Money Studies: https://www.zotero.org/groups/2251544/mmt_academic_resources_-_compiled_by_the_gower_initiative_for_modern_money_studies

MMT scholarship compiled by New Economic Perspectives: http://neweconomicperspectives.org/mmt-scholarship

A list of MMT-informed campaigns and organisations worldwide: https://www.patreon.com/posts/47900757

We are working towards full transcripts, but in the meantime, closed captions for all episodes are available on our YouTube channel: https://www.youtube.com/channel/UCEp_nGVTuMfBun2wiG-c0Ew/videos

Show notes: https://www.patreon.com/posts/146366375?pr=true