Friday, February 20, 2009

The Mortgage Crisis Explained...


The Crisis of Credit Visualized from Jonathan Jarvis on Vimeo.
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3 comments:

ballin4life said...

Not a bad movie... notice how the federal reserve holding interest rates too low starts the crisis as tons of people wind up borrowing tons of cheap money and looking for places to invest it. This causes the temporary boom until the bills come home and people realize that their investments weren't as good as they thought, which is the bust.

So yeah, the federal reserve holding interest rates low is not a good thing for the economy.

February 21, 2009 at 1:27 AM
Michael Donath said...

That clip was extremely well made. Simple, yet informative.

@ballin: I feel like the credit crisis isn't falling on the heads of the federal reseve because of their low interest rates, I feel it's the banks, brokers, and investers problems because they were the greedy ones desperate for money the invested in sub-prime morgages ("like a playing hot potato with a time bomb) which in the end, just blew up in their faces.

February 21, 2009 at 10:42 AM
ballin4life said...

But how did the investing frenzy start? The low interest rates

Also, in a free market, all these people that took ridiculous risk on leverage would have failed...but wait the government steps in and rewards them for their ridiculous risk taking.

Greed isn't really a bad thing, and these investors would have to take into account risk (ie losing money, the opposite of what a greedy person wants) when they make investments.

In the end, the continual slashing of interest rates causes these bad investments as they can't make any money just by saving or buying bonds so they have to find other ways to invest their money, plus the fact that they are getting super cheap loans. Then during the boom where there is tons of investment it looks like prices will go up forever and everyone thinks they have a lot more money than they do.

At the least, if the federal reserve didn't hold interest rates at 1% or lower this wouldn't have happened (at least not nearly as badly).

February 21, 2009 at 3:36 PM

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