A friend shared this video with me explaining the how and why of the credit crisis. The video does a superb job of taking a complicated issue and boiling it down to it’s simplest form so that it is much easier to understand. It lasts about 11 minutes – enjoy! Thanks Todd!
These are a few of the topics covered…
- What is the credit crisis?
- Why we are all affected by it.
- How it happened.
- How leverage works and why banks use it.
- What role greed has had in the crisis.
- Collateralized Debt Obligations (CDOs) explained.
- Credit Default Swaps explained.
- Why lenders were so loose with their money a few years ago and why they aren’t any more.
- Why some homeowners have walked away from their mortgages.
The Crisis of Credit Visualized
Now you know why the Government is willing to offer a $8000 tax credit to get the housing market going again!
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Good video. I can’t think of a better example of the dangers of debt.
An informing video, thanks for sharing it Bob. I second Mark’s comment. This only reinforces that the reward offered by the risk of debt is hardly worth it.
I find it frustrating that the government, while trying to help, continues to encourage the process (credit and more debt) that ultimately led us to where the financial system is today. Perhaps the system is broken?
I also continue to see how thing swings from one extreme to the other. The pattern appears in many areas of life (politics, economy, etc). Banks loaned with moderation, then pulled out all the stops, and now are afraid to loan.
I have to stop and wonder why few, if any, look down the road and extrapolate their actions. I first thought of this with the Ponzi (or pyramid) schemes in the news. At some point these things come to a painful end, no? Was it easier to think some other poor soul will have to figure out how to keep this working, as the risk was passed to another party?
We can estimate the result of compound interest with our investments, but apparently not give second thought to causing what unfolded? An indication of shortsightedness?
I hope and think that we can all learn from this.