http://www.youtube.com/watch?v=5Z9eOZpRVuQ
Here is a clip of two British guys doing a comedy sketch on the housing crash. But I think they do a pretty accurate job on describing it in a simple way that an idiot like me can understand. I’ll need to search if they have on on derivatives. But is almost sounds similar.
Paraphrased excerpt:
“So the mortgage seller gives a poor black man in Alabama a mortgage. That mortgage gets combined with other risky mortgages from other poor black men in Alabama. It is then sold as a package as an investment to say somebody in Japan.
They in turn sell it to others, and so on.”
AND YOU MAKE MONEY ON THE SALE?
“Well of course, you don’t expect me to work for free?! And every time it is resold someone takes a cut.”
AND WHY DO PEOPLE BUY THESE FUNDS?
“Because they have good names. No - not the names and reputations of the banks. But good names. Like “High Value Enhanced Capital Managed Fund”
OH - HIGH IS GOOD!
“Yes, a very good name. Better than having ‘poor black man’s mortgage’ in the name somewhere.”
They also talk about the bailouts, etc.
21..That was an excellant video on the housing crash and in such simplist terms anyone can understand it. Oddly enough just changing their vocabulary makes this all the more deceptive.