Some very smart people have provided some help explaining how the finance crisis has become an economic crisis, and how it all started. To remind us, if we need it, of the gravity of the situation, I can't resist repeating this graphic that Guy sent me a few days ago.
Start with this great cartoon slideshow "A Subprime Primer" (adult language) explaining how the sub-prime mortgages made by some banks in the US spread financial toxicity all over the world.
Next listen to this episode of the This American Life with Ira Glass. This covers:
- the proximate cause of the bail-out: the seize-up of the commercial paper market (and why that happened)
- credit default swaps (CDSs) - like "buying insurance in a house you don't own"
- regulating (or not regulating) CDSs
- is the $700 billion bailout a good idea