Credit crisis explained

[Kadayi]

http://www.crisisofcredit.com/

Pretty good animated guide for those who are confused about how we ended up where we have.

 

[No Limit]

Link doesn't work.

 

[AtomicSpark]

The tl;dr version is that banks gave out money to people who couldn't pay back and companies relying solely on credit/loans to stay in the black. This couldn't have lasted forever.

 

[The Monkey]

The tl;dr version is that banks gave out money to people who couldn't pay back and companies relying solely on credit/loans to stay in the black. This couldn't have lasted forever.

Is this news to anyone? That's what everyone's been saying all along.

 

[jimbo118]

That guy's voice could make anything boring.

Sounds like Al Gore.

 

[No Limit]

That animation was kick ass though.

 

[Warped]

I liked it and although I knew a lot about the subject its a lot easier explaining it in animations like that. What makes me mad is that a lot of people are greedy, including myself. I have around 10-13 thousand in debt and I'm slowly paying it off. My one credit card had 4grand on it and now its down to 1, and the others are slowly going down too

 

[Kadayi]

I liked it and although I knew a lot about the subject its a lot easier explaining it in animations like that. What makes me mad is that a lot of people are greedy, including myself. I have around 10-13 thousand in debt and I'm slowly paying it off. My one credit card had 4grand on it and now its down to 1, and the others are slowly going down too

Might be an idea to see if you can lump all of your debts into a single consolidation loan (at a decent interest rate) rather than piecemeal a bunch of different debts.

 

[Escaep]

That was cool. But I didn't even really understand the explaining. I'll learn that in economics next year.

 

[Top Secret]

That was cool. But I didn't even really understand the explaining. I'll learn that in economics next year.

- Banks gave loans to people who should not have been given loans.

- The people could not afford to pay for the loan.

- After not paying for the loans, the banks took the houses back.

- Because so many houses had to be taken back, a huge surplus of houses was put on the market. (Simple economics, surplus of products = drop in price) and the value of houses dropped immensely.

- The people who COULD afford to pay their loans get screwed over, because they bought something for 250,000 dollars and it is now worth 90,000. But they still have to pay the 250,000. So they put the keys in the mail box and walk away.

- Even more houses go on the market and housing prices continue to drop.



That is the bank/consumer side of things.

 

[AtomicSpark]

Wow, the YouTube videos were really well done.

 

[Kadayi]

A lot of the problem also (at least in the UK) came down to the banks making it stupidly easy for people with a small amount of capital to take out second mortgages on properties to rent (Buy to let as it's known). People doing this weren't looking at making money on the rent, more that the rent would pay the mortgage, but with house prices going up so much, the Value of the property as an asset would double in a couple of years. Buy a 2 bed flat for 60K, get someone in (aka sucker) to pay the rent (mortgage) for 2 years, then sell it on in 2 years for 130K..50K return..not bad at all (better than stocks & shares). The problem is, buy to letters, buy properties that can be easily rented, I.E:- 1, 2 bed & studio flats. The very same properties that first time buyers generally have to look at. Subsequently this increases demand, and naturally people with houses that are more upmarket (3/4 bed town houses etc) are like 'Well if a 2 bed flat is worth that, then my 3 bed house should be worth X more' and thus the spiral continues...

Financial case of the emperors new clothes in full effect.

 

[Warped]

Might be an idea to see if you can lump all of your debts into a single consolidation loan (at a decent interest rate) rather than piecemeal a bunch of different debts.

i looked into that but I'll only have 2 credit cards to worry about in about 2 months time so I'm not really worried about it right now. and lets say i get fired from work, and i can't get unemployment (because they'll be no $$ in the system) then those bills would be impossible to pay and I'll have harsher penalties under a consolidation loan. I did sit down with my folks and they offered to lend me $$ but I refused because if I can't do this on my own, how will I ever learn??

 

[Adabiviak]

I like the image of the 'irresponsible' family, with tats, cigarettes, too many kids... that's funny.

 

[kazsymonds]

- Banks gave loans to people who should not have been given loans.

- The people could not afford to pay for the loan.

- After not paying for the loans, the banks took the houses back.

- Because so many houses had to be taken back, a huge surplus of houses was put on the market. (Simple economics, surplus of products = drop in price) and the value of houses dropped immensely.

- The people who COULD afford to pay their loans get screwed over, because they bought something for 250,000 dollars and it is now worth 90,000. But they still have to pay the 250,000. So they put the keys in the mail box and walk away.

- Even more houses go on the market and housing prices continue to drop.



That is the bank/consumer side of things.

+Banks lose money, so investors in the banks themselves sell their shares, as more investors sell the prices go down, and so does the value of the bank.

With less equity the bank cannot borrow from other banks to cover it's existing debtors.

Bank has to ask for government bailout.

Investors have lost confidence, and with interest rates so low will not get a good return so have gone to asia.

****ed economy is ****ed.

Am i doing it right?

 

[Kadayi]

I like the image of the 'irresponsible' family, with tats, cigarettes, too many kids... that's funny.

There's a lot of truth to humour. Unfortunately in the Western world a hell of a lot of people are irresponsible and don't take a long term view of where they are going, financially, emotionally or socially, but instead stagger through their lives from one disaster to another and bring nothing positive to the party.

 

[Raziaar]

Why are banks still not lending, even though we gave them all this ridiculous amounts of money?

We should force them to lend god dammit! We should criminally prosecute them! GRR.

But seriously, is this answered in the OP video?

 

[Escaep]

There's a lot of truth to humour. Unfortunately in the Western world a hell of a lot of people are irresponsible and don't take a long term view of where they are going, financially, emotionally or socially, but instead stagger through their lives from one disaster to another and bring nothing positive to the party.

So, so true.

 

[Kadayi]

Why are banks still not lending, even though we gave them all this ridiculous amounts of money?

We should force them to lend god dammit! We should criminally prosecute them! GRR.

But seriously, is this answered in the OP video?

Watch the film, it's not long.

 

[MJ12]

Good video, if I was an instructor, (especially of the teenage age group) I'd show this.

 

[clarky003]

Was good at addressing the ins and outs of the process of the credit retraction in the housing market and banking institutions. But didn't explain the root cause of the credit crunch at all. In fact it's just stating the obvious for people who really don't have a clue.

It's the Fed and all the benefactors of investment bankers that allowed all this to happen, by actively over lending in the first place, they could of prevented it and stopped their investor banks from going broke by not lending stupidly in a time of downturn.

The Fed, the bank of England, and other fractional reserve central banks around the world are and always have been the root cause of the credit crunch's throughout history. They ultimately control the decision on whether to hand out loans to banks/bankers in certain economic situations, because they control the money supply.