Friday, October 17, 2008

Understanding the financial crisis

Chirag's blog has a funny and sobering explanation of the crisis which does not need an MBA to understand:

"A lot of people have been asking me what this whole "economy in crisis" situation really is. How can banks in the world's most prosperous countries run out of money? Is it because the houses were overvalued? Is it because the people aren't saving? Or is it because of a variety of reasons like health-costs, unemployment, inflation, gas prices, or political instability? On the surface, it would seem prudent to say that it is a deadly combination of all of the above that's causing the financial crisis. We hear statistics being quoted on the news constantly that inflation rose, unemployment rose, new-home sales fell, auto-sales fell, and stock prices crashed. As I see it, these are the effects of the financial crisis not the causes. The causes are far too murky and boring in details for the average person to identify and enumerate. Luckily for you, I have all the time in the world and I love talking in metaphors instead of confusing finance terms when explaining something, so here it goes..."

For the whole article, go to Chirag's blog

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