Explaining the credit crisis
Whether it’s on Reuters.com or during the presidential debates, one of the most vexing aspects of the financial crisis is that it’s difficult to explain in simple terms. Nevertheless, the problems that began in subprime mortgages have rippled outwards for more than a year, not only taking out storied names like Lehman Brothers but affecting everyday people far removed from the world of Wall Street.
Where to start? With an explanation of a collateralized debt obligation, or a TED spread? With a flow chart showing the outsized importance of Fannie Mae and Freddie Mac? You would be forgiven for clutching your head in your hands, but do not despair.
There are some very good online resources that are designed to explain the credit crisis, beginning with our own site. We can explain recent major events , which countries have been affected , and yes, even the TED spread.
Here are a few more resources from around the Web:
Online journalist Matt Thompson — “I’m not an economist, or even an economics geek, or even someone who knows anything about economics” — created this blog in late September after despairing on finding a single site that compiles “useful, authoritative, and comprehensive information about our current financial crisis in an accessible way.”
It includes links to background, key facts, timelines and scenarios, as well as advice from money gurus and even a little light relief in the form of clips from “The Daily Show.”
The popular public radio show “This American Life,” working in conjunction with National Public Radio, produced a radio program called “The Giant Pool of Money” in May that still stands as one of the best comprehensive pieces on the roots of the housing crisis: “We explain it all to you. What does the housing crisis have to do with the turmoil on Wall Street? Why did banks make half-million dollar loans to people without jobs or income? And why is everyone talking so much about the 1930s?”
If you can download this free podcast and spend an hour listening in the car or on your iPod, you’ll come away with a much better understanding of the underlying factors that gave rise to the crisis. There’s an accompanying daily blog, Planet Money , and the team recently recorded an update, “Another Frightening Show About the Economy.”
Wired magazine has created a Wiki — an online document that many people can edit — to help explain the crisis:
Most of us aren’t economists and aren’t expected to understand what exactly is going on on Wall Street, but we all have a pretty good sense that things aren’t going well and it’s bound to affect our economy and eventually our homes, if it hasn’t already. … So let’s get educated on the financial crisis before it’s too late. Here’s our syllabus.
The Wired page includes lessons from similar crises in the past, links to articles by economists and journalists, and questions and answers from readers using the micro-blogging service Twitter. It even promises to let you “learn from Warren Buffett.”
What sites do you find helpful in understanding the credit crisis? Leave your answer in the comments section.