Global Investing

Explaining the credit crisis

Los Angeles-based designer Jonathan Jarvis has created a great animated video explaining the credit crisis, produced as his part of his thesis at the Art Center College of Design:


The Crisis of Credit Visualized from Jonathan Jarvis on Vimeo.

If you prefer your explainers audio-only, you can’t go wrong with “The Giant Pool of Money” and “Bad Bank,” from Alex Blumberg and Adam Davidson of Planet Money.

from Funds Hub:

The new wrong

Most hedge funds agree that the credit crisis has thrown up some interesting assets at bargain-basement prices, particularly in credit markets.

rtr23v8sThe problem? When you have to report net asset value performance to jittery investors and prices of these cheap assets are getting even cheaper, when do you buy?

That's the dilemma facing many fund managers, some of whom have got burned by snapping up asset-backed securities and other assets too quickly.

Bowling for Whistleblowers

Attention Wall Street whistleblowers: your banking job might be at risk, but here’s your shot at Hollywood stardom.


The Academy Award-winning filmmaker is looking for “brave” financial industry insiders to help him make his next film which will focus on the financial crisis – or what Moore calls “the biggest swindle in American history.”

“Based on those who have already contacted me, I believe there are a number of you who know “the real deal” about the abuses that have been happening. You have information that the American people need to hear, “ Moore said on his website.

Moldova — ultimate crisis-proof country?

It’s the poorest country in Europe and its main export is alcohol but it can still beat the world’s largest economy when it comes to financial muscle. Yes you’ve guessed it, Moldova trumps the United States in the Banker magazine’s 2009 World Financial Health Index.

Caution is the watchword of the magazine’s latest index, which is careful not to reward financial risk-taking. According to the Banker’s new model, Moldova, Chile, Bolivia and Peru are less likely to be affected by the global financial storm than the U.S., UK or Japan.

Small is beautiful when it comes to debts and that’s where Moldova wins. Its debt is $763 per capita, compared with the UK’s $171,000. Its banks have only extended loans worth 35 percent of GDP, while in the mighty U.S., the figure’s 230 percent.

A riot of a recession

Every month, the financial services company State Street studies the trillions of dollars in institutional investor money it looks after as custodian and tries to gauge where things stand. Over the years, it has come up with a map consisting of five different regimes, or moods, to reflect this. They range from the bullish “Liquidity Abounds” in which investors buy equities and focus on growth, to the uber-risk averse “Riot Point”.

Guess what? Investors moved into “Riot Point” last month after flipping about for four months in the slightly less bearish but still risk averse “Safety First” regime. This essentially means that they gave up in October – which is not a particularly stunning finding given that many stock markets had their worst performance in decades.

So now comes the bad news. In the 11 years State Street has been drawing its map, the longest period of risk aversion as measured by investors being in “Riot Point” or “Safety First” was the nine months between February and October 2001. This almost exactly coincided with the then-U.S. recession.

It’s nickel and dime time for banks

Belt-tightening measuresIt’s nickel and dime time for banks as they come under pressure to cut costs in order to survive the worst financial crisis in 80 years.

According to banking sources, a U.S. bank in Canary Wharf has banned colour printing and has asked employees in the back office to chip in 25 pounds each for the office Christmas party.

A bank in Mayfair has told its employees to only hail cabs on the street instead of booking on the phone. Another bank in the City has pushed back the time employees can take taxis home to 9.30pm from 8.30pm previously.

Investing with Dante

You know things are bad on financial markets when an investment research note starts talking about Dante‘s visit to the nine circles of Hell with tormented lustful souls and gluttons living in filthy slush.

In the case of State Street Global Markets’ latest report, however, there is a more direct link than simple hyperbole about the way investors are feeling. The firm recently had a chat with former U.S. Treasury Secretary Larry Summers who defined what he saw as the five viciousrtx8t2k.jpg circles of the current financial crisis.

It goes like this:

Circle One: House prices fall in value, putting some people into negative equity and leading some to default on mortgages. Foreclosures further erode asset values.

Explaining the credit crisis

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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.