In the Loop: February 19, 2009 Archive

Our credit mess - visualized!

Posted at 6:34 PM on February 19, 2009 by Sanden Totten

Ran across this today on the 'tubes. There have been some great attempts to explain the credit crisis already (check out Giant Pool of Money if you have an ipod and an hour). But The Crisis of Credit Visualized is right up there with the best of them.

It gets really good when he starts breaking down how collateralized debt obligations work.

The guy behind this video, Jonathan Jarvis, says he found some similarities between this story and the tale of the Sorcerer's Apprentice from the Dinsey classic Fantasia. You know, where Mickey tries to get out of his chores by borrowing the Sorcerer's hat and turning an old broom into his personal work horse. Jarvis writes:

"While the apprentice (Mickey) created the broom to haul water out of the well for him, so similarly did the captains of Wall Street create derivative securities to haul profit out of bad mortgages. Both lost control. To use Tom Wolfe's term, these Masters of the Universe used their incredible power to create the very situation responsible for their downfall."

What's interesting about the credit crisis is that a year ago it seemed like just a big mess of complicated relationships and fancy phrases. But since then a lot of talented story tellers and educators have found ways to turn it into a simple narrative. One that deals with human desire, confidence and greed. It's kind of like the story of Icarus in some ways.

And it's been encouraging to see how well clever people have used new tools, like this video, to explain what happened. Maybe if we worked this hard to understand our world before things fell apart, the whole disaster could have been avoided.