Broke, a new documentary by Michael Covel, offers an extremely engaging look at what went wrong with the macroeconomy but in a very interesting way: he provides close examinations of several microeconomic sectors that affect the financial well being of the household.
Most impressive is his contemporary history of the housing bust. Most of the energy of the film seems to have been focused on this area, and it is the most successful part of the film. Covel illustrates the vast gulf that separates the promise from the reality. It is especially interesting to see the film maker’s conversations with real estate brokers, lenders, and homeowners on their way to foreclosure.
I was also thrilled to see his relentless hammering of the financial press, especially the television press. He argues that the talking heads on CNBC (he really has it in for Jim Cramer) and elsewhere are as clueless as anyone about why stocks go up and down or what you should do with your money. He puts guests on his own camera where they admit that what they say may or may not be useful but the main purpose of these shows is not to help viewers with their finances but rather to keep people glued to the set: in other words, this is entertainment. This point can’t be made enough and it applies more broadly than financial news. A vast majority of viewers, and this includes even smart people, continue to be under the impression than the news industry is about distributing news as versus the driving need to provide a compelling time suck.
In another section, he takes a look at state lotteries to show what a scam they are, and compares them to the poker industry in which individuals can in fact win money. Guess which of the two government loves? Which of the two is government always regulating and banning? Very interesting point here.
He concludes with a satisfying attack on the “buy and hold” investment strategy, which he sees as nothing but broker-promoted propaganda to keep you from ever selling stocks. In contrast, truly savvy investors and poker players understand that the well-orchestrated sell order is the key to long-term profits. One point I found interesting: he shows that the largest earners in the poker industry are not the people who win the most hands.
Nothing in the film contradicts Austrian theory, and one portion shows the way that the Federal Reserve compounded the problems of the housing boom through crazy interest-rate manipulations that overstimulated investment. I would have liked to see more of this. This section is much too short, and I would have liked to hear and see more, but of course I’m a viewer with a bias.
While the film seems to lack a bit of overarching theoretical focus and periodically seems to lose its analytical drive, it is still an excellent corrective to a wide range of myths out there, such as the one that claims government can solve the problems of the bust or that you can trust the media or large firms to give sound economic advise.
If there is an overarching theory to the film–would that he would have made this more explicit–it is that there is no one who knows the future, despite every promise. This is the job of serious entrepreneurs, and some of them are very good at it. While this film will not help anyone become such a person, it might help some people who might otherwise be taken in by the myriad phonies out there trying to hawk their wares.