Unless you've been living under a rock over the past few months, it's clear there's a credit crisis that's been very costly for US taxpayers--in short, we've had to "save" companies too large to fail. There's a lot of debate about what could and should have been done instead of bailing out these companies, as well as discussion concerning what we should do now that we're knee-deep in this financial crisis. This kind of debate will only intensify with the latest stimulus package.
How we got here is pretty simple, from a financial standpoint: the cause was a combination of greed and complex financial instruments, which even senior people on Wall Street didn't understand. Credit default swaps and collateralized debt obligations allowed risk-averse funds to invest in high return assets that were supposed to remove the risk. As people know now, this all fell apart and caused a global financial crisis.
The credit crisis is a complicated issue, which makes it the perfect candidate for a visual explanation, which can sometimes be easier to understand. Jonathan Jarvis created this video about the credit crisis, and it's nothing short of awesome. In just over 11 minutes, "The Crisis of Credit Visualized" explains--in a very powerful and interesting way--the actions that caused the crisis. The video is pure simplicity:
A more detailed whiteboard presentation about collateralized debt obligations (CDOs)
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