If you want the lowdown on what exactly has happened in the global economy to cause the panic and strain we’ve been seeing over the past few weeks in finance markets worldwide, you could do a lot worse than the following links:
In The Giant Pool of Money, This American Life producer Alex Blumberg teams up with NPR’s Adam Davidson to tell the surprisingly entertaining story of how the U.S. got itself into a housing crisis.
In the follow up show, Another Frightening Show About the Economy, Alex Blumberg and Adam Davidson recount what happened when the credit markets froze, and how the housing crisis started impacting the markets as a whole through the ‘evils’ of unregulated credit default swaps.
In plain spoken English these guys do a great job of informing the rest of us exactly what the hell happened.
As an added bonus, they’ve now started the Planet Money Podcast and Planet Money Blog, essential material for anyone who wants to keep abreast of what is happening in the world of money.
2 replies on “The Global Financial Crisis for Dummies”
US Housing Crisis, SA BEE Crisis.
As investors pull money from emerging economies, so stocks in those economies fall and their currencies weaken. SA is no exception. (see our rand for details) Now some South Africans have been convinced by corporations like SASOL, Vodacom, MTN, Multichoice etc to by vast amounts of BEE shares. Some companies like SASOL offered these shares on credit. SASOL for example sold the shares for R366 (discounted) at the height of the oil price. Last time I checked SASOL shares were trading at R266. (Oil price is dropping further)
What about those BEE individuals that borrowed money to buy shares in white owned companies, or companies that lent money to BEE individuals so that they could buy shares.
All of a sudden the debt is higher than the asset. At least in the US you could still sell your house (discounted rate) most BEE schemes have a lock in period. What if the banks say we can not take the risk and want some money to cover the deflation of the asset. Smells like our own Sub Prime Crisis.
People who opted for the Sasol Inzalo shares cash option got fucked the most. 10 shares for R3660 is worth less than R2800 now.