Are you confused about how we got into this economic crisis? I know have been from time to time. One day it’s housing. Another it’s credit and liquidity. It’s a lot to get your head around! Well I found this 2-part video on You Tube called The Crisis of Credit Visualized. It’s a nice overview of how this economic mess came about.
Check it out:
I can’t say it covers every issue thoroughly but I think you can come away with a better understanding of how the crisis grew then snowballed.
Let me know what you think!
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{ 9 comments… read them below or add one }
Thank you for posting that. I’m a college freshman and I really had no idea what was causing this whole financial crisis. This definitely put things into much simpler terms. I guess the question now is, how can we fix this? It seems like the bailout is really a dangerous idea to me. Where is our government taking all of this money from and are they planning on making new laws to prevent this from happening again?
@ Emily – Well, the economic stimulus and the housing crisis plan are out there to help stem the problem. Unfortunately these bad mortgages are on comany’s books and they won’t go away and their value seems to constantly change. The gov’t has some plans to try to buy some of them up to help banks shore up their books and increase their credit-worthiness.
I’m not sure if specific laws could prevent this so much. Perhaps more transparency on the part of banks and more oversight of credit rating companies who said CDO’s were as good as they said (when they weren’t).
The money will be coming from taxes but probably more from debt which means we’ll owe more to foreign countries such as China. The price of fixing this today is paying a LOT back tomorrow. Though maybe it will be our grandkids who will be paying it?
This is the best de-mistification of the current economic crises that I have seen to date. It is so important that the layman down here on earth gets a good understanding of how things work up there in the financial Olympus, because it is the layman down here who is the source upon which all the higher heavens feed and are fed by.
Greed blinded both those up there and those down here making everyone act foolishly, yet those up there knew better while most down here were mere innocent ignorants.
Here is what I still don’t get. If playing by the rules of the game was good enough to let endless white collar paper pushers get filthy rich from merely pushing papers while others sweated day after day for crumbs, why is it not good enough to let white sweatless shirts stay with the fruits of their foolish greed, that is pennyless and shirtless.
In a true free market capitalism, isn’t winning big as important as loosing big? Money is reward for good work, it is facility for good work, but it can never replace it. Money is the product of real work.
Shony
I, too, really like this video. It simplifies things a great deal — especially in terms of the concept of leverage! Unfortunately, we run the risk of repeating this cycle as we bailout those who made poor decisions. After all, if these guys can make tons of money with greedy practices and then socialize the losses, what’s to stop them from doing it again?
Miranda’s last blog post..Book Review: The Cure for Money Madness
@ Miranda – We’re handing out life boats but are we building better boats and teaching people to swim? This socialization/nationalization is a bit disturbing to me. Though we need something done we’re also encouraging this to happen again. I think most people don’t want the full effects of failure and starting over. It does beg the question of Do we really want the government to be there as a safety net of last resort and what are the consequences?
I heard some say that this is not socialism really, it’s a temporary socially responsible measure in time of crisis to save the free market capitalism from total collapse. I beg to differ. If we play free market capitalism as long as it sails hunky Dory, but rely on our society through government to bail us out when we sink the ship with bad play, then we only pretend that we have true free market capitalist system. That little “thingie” there that says “no worries, if things don’t work, society at large will bail us out” renders the entire game Socialist where you can grow “freely” with no worries to ever fail by being saved through social means.
So maybe if pure socialism is not the golden way, also pure capitalism is not, and just maybe some magical blend of the two with a secret mix to measure is the golden way. We are still babies really in terms of developing our perfect social structure.
Shony
@ Shony – I’m all for a mixture of the two but the problem is figuring out what should be capitalism and what socialism. With talk of banks being nationalized I think we’re crossing the line. I wouldn’t mind if we had one national bank but when we start taking over banks that gets a little too Atlas Shrugged for me. (Great read BTW!)
Yes, you sparked a great read indeed.
You know? I am not sure that a blend of the two must mean nationalizing banks, or even some of the banks, rather something is telling me that in the end that magic blend will be more in the form of a free market capitalism under better and broader socially responsible set of regulations. Regulations I think is a key word here, or rather should be once we are there in that golden spot. I think we can close many holes where capitalism fails with better and greater regulations that would represent our social responsibility side of things.
In a way what I am thinking is that we have just run a bit too wild and too free with this free market capitalism, know what I mean? That it has lots of good things in it but letting it run wild and free is not one of them.
Inspiring discussion indeed,
Shony
@ Shony – What we need is intelligent regulation that doesn’t hamper free markets but at the same time doesn’t let the market run without real checks and balances. This whole credit issue seems ridiculous. Either we regulate something to fix it or we let those industries that took part fail. But we can’t use bailing out as an after-the-fact regulation.