The Credit Crunch Explained

[Ex0dus111]

Part 2: Also the cost of borrowing HAS NOT gone up in any significant way.

And the idea that this stopped money from traveling around the world thus causing the credit crisis is so fucking stupid u should have ur head examined.

Hedge funds are making so much money off the market that there is nothing left for the rest of us, and thats what they want now, the rest.

[Ex0dus111]

Im sorry, this is NONSENSE!

Sub Prime mortage debt has never been a bad marked if handled properly, what happend was finansial institutions decided to make money by betting against them, and so adopted Predatory Lending practices. First by using political power to deregulate Fannie Mae in 2001 allowing higher loans to poorer people. Then by instituting a a system to the bank employees that instivised them to trick their customers. When the bubble collapsed SOMEONE made a shit load of money.

[lolcatish]

No, it is much more simple then this, international JEWRY.

[Zimnyification]

You forgot the federal reserve guaranteeing loans being the reason for the bad loans to begin with

[VidaMusicDivision]

The above video does not descride the credit cruch. Contrary to what 'home' say her - the credit cruch was not caused because banks lent to poor people who were unable to pay back their loans. For a more detailed, entertaining and inteligent theory pls see RSA Animate - Crises of Capitalism

[Thisishomevideo]

@VidaMusicDivision Hello there. I thought i'd drop you a note. I would expect all viewers who look at this 2 min film to not take the information verbatim. Clearly this is just an simple engaging overview. With more time, more detail can be explored as other longer films on youtube show. Thanks for taking interest.

[plung3r]

i knew british people would make me understand better

[mw01908]

This video only tells half the story. It was far more complicated than that. Credit crunch story for the financial illitrate. ANd it didn't all start in the USA either!

[2itch]

@mw01908 Oh really? And where did it start?

[sataricon111]

@mw01908

Ohh but it did start in the US.

[mw01908]

This video only tells half the story. It was far more complicated than that. Credit crunch story for the financial illitrate.

[NearAbbeyRoad]

@mw01908

"This video only tells half the story."

That is true. The ROOT CAUSE was LAND. Debt after debt was poured into land because it was not taxed. Gains in LAND are tax free. Loans can secured against LAND as if repossessed the lender pay not tax on the LAND. So much money was poured into land rather than enterprise that it fell over and took all with it.

SOLUTION: Tax the VALUES of all land and its RESOURCES. Not the house (the CAPITAL), the LAND, ALL LAND, even fields. Look up Geoism.

[sysrq120]

Positve credit crunch story from me...i got me a dro ,debt relief order,cost £90 and guess what?I had all my debts stopped..awesome ,its not all domm and gloom folks.

[natsaddict1012]

@KennedyCorey It may seem dumb now but home prices used to keep rising and thus houses kept increasing in value. had this stayed true you would be correct and the banks could have simply taken the homes and gotten their money back, or even made a profit. unfortunately the banks were naive and home prices crashed. the people who lost their homes owed more than their homes were now worth, so it was impossible for the banks to get their money back

[KennedyCorey]

I dont understand how the lenders loses....once the people default dont the lenders just repo their houses....which are still worth money....they just have to wait awhile to resell them, or rent them out in the mean time.

Not as good as making money on the interest but still not a loss. What am i misssing here.

[LikeMindedIncident]

@KennedyCorey - Lenders are not flexible enough to employ your ideas. They'd rather sit on the over-inflated value of the house. At the same time people don't have money for a mortgage to buy those houses (due to cuts, there's no economy to support purchasing/renting in the housing market). And if those houses are in poorer areas, they're not going to attract gentrified buyers/renters.

Those houses will sit empty with no cash return until economies grow and prices become realistic.

[KennedyCorey]

@LikeMindedIncident Thanks for the exlplaination, it makes sense...so heres another one...the investors who own the CDO's or packaged mortgage securities, do they lose as well? If all these homeowners are defaulting on their mortgages then those securities end up droppoing in value as well, no?

[TheLahness]

"It all started in the United States"

Bas****'s!

[twinqletwinqle]

I think the labelling of risky borrowers is not entirely truthful. The book Merchants of Misery written in the mid 1990s by Michael Hudson pretty much explained sub-prime mortgages

[e0307a]

search "The Crisis of Credit Visualized - HD" for a video that explains how it actually happened...

[Prepare2Drive]

nice video, but i am amazed, how do you make this animation?

[spenningtor]

Hello thanks for this informative film. Have you done any other "finance simply explained" videos? like p.a.y.e and other things. Thanks once again

[Thisishomevideo]

@spenningtor Hi there.

We make a lot of videos and animations that are used in internal communications.

It ranges from pensions to policy documents.

We have many clients in the UK and throughout the world we do animations for.

[londoncin]

Thnx chronodarknesslord. You enlightened me sooooo much. You, just like the narrator of this video jump to conclusions without thinking straight!

You should justify why im "reasoning".

Here is a killer quesrion for you...

How do you explain a crisi BEFORE there were mortgages? If you read anything worthwhile u will understand.

P. S im a fully qualified mortgage adviser for your information.

[ChronoDarknessLord]

@londoncin strange channel is not avaliable... wonder who did that? :3

[koolchloe]

Blames it all on sub prime borrowers. There are plenty of people with upside down mortgages that are stuck because they don't want to screw up their credit and they're middle class. Now the republibaggers want to screw them over if they're in a union. That's all we need is more people unemployed and unable to pay their mortgage.

[londoncin]

This video is really bad and wrong!

It explains results of a crisis but it doesnt actually explain how a crisis occurs, or rather it blames it on "sub prime" lending!

Well, what about crisis' in history, lets say in 1929? There was only a hand full of so called "subprime" borrowers, beside they werent called sub prime back then. So how did a crisis occur in 1929????

Karl Marx's "das kapital" explains it all in better detail.

In short. Its called, "the internal contradictions of capital accum

[ChronoDarknessLord]

@londoncin acually hes right and your "reasoning" is misleading

[kungfoolai]

i fucking hate learning about the credit crunch in school!

im doing a essay on it right now lol....sucks!..

[SnarkLicker]

I'm considering the source, here.

You know, you guys are perfectly free to operate your own damn affairs without us if you'd like.

You just have to stop cashing our checks, homey.

[Dre4dwolf]

30 Trillion to the Banks, 0 to the people.

Inflation to the people

Wealth to the banks

Forced Labor to the people

Vacations and Yachts to the bankers

The system seems a little off... I thought usury was illegal.

[creditandloansolutio]

Thanks for the vid

[Nautilus1972]

Buy gold, people. Save yourselves and your families for when the shit *really* hits the fan. Inflation and devaluation is because the money is backed by nothing. The Fed are private gangsters who have a printing machine. That's it! They lend the USA every dollar printed WITH INTEREST!!. Stop the madness, demand your congressman to repeal the Federal Reserve act of 1915 AND TAKE BACK CONTROL OF YOUR OWN MONEY !!

[TheWolfje777]

"credit crunch visualised" is also a good explanation

[AroundSun]

You forgot the part where congress mandated that they make these loans and gave them safety nets. You also forgot about the federal reserve causing all the inflation and government rewarding incompetent behavior.

[se7ensnakes]

@AroundSun

Also the FED banks looked to penalize smaller banks if they did not loan.

[ifginc]

IFG, Inc brings you easy and hassle free mortgage to help you live in your very own home.

[MultiHobbyist]

hello

[Nautilus1972]

@MultiHobbyist banks MUST be regulated - they are robbing us blind !!! Wake up !!!! They're getting rich off YOUR money and then charging you interest for the privilege of using it !!! WAKE UP !!! Every American citizen past, future and present was sold into slavery in 1933. Your birth certificates, and the natiopnal parks and forests were all used as collateral on a bail-out loan from the Federal Reserve to the U.S. government. Go and ask Fort Know to show you your gold.It's gone. UR broke.

[25195287]

Good vid, it's just history repeating itself imo, in 1929 lending became uncontrolable and people started borrowing 90% compared to capital investing in the stock market, and in 2007 the bubble has burst yet again. I don't know if having banks being regulated is a good thing for growth but then again it's less likely to bust

[ericace801218]

Great vid ! It's those greedy investers ruining it for the rest of us!

[AroundSun]

@ericace801218 No its the government making it desirable to be incompetent.

[AroundSun]

@ericace801218 That is what hitler told his people too

[qwertynasigoreng]

@Thisishomevideo Thanks for the vid, small minded people like me cant understand this stuff without simplification...haha, good day!

[AroundSun]

@qwertynasigoreng thats why this country is mislead

[helpAmerica1]

Great report, so the banks now need to loan to business, to restart their system.

[marshalparshal]

a lot of things affect us this is one

[shortsale1000]

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[chiliheadwizard]

This and a few similar (excellent) videos explain the credit crunch very well, but perhaps they need to be updated? It needs to be explained how it hurt a lot of businesses, which could no longer grown (and employ more people). In fact, the reverse happened. Unemployment is very high and businesses cannot get the financial backing to grow, so people who had prime credit scores along with stable jobs cannot make payments anymore.  The next tsunami...

[drodga]

Sadly though here in the UK, we have limited space to expand and as we know limiting supply drives prices higher so house prices didn't fall anything like as much as in the US. Thus prices have been rising for ages and you can only really buy sensibly with a big salary, (DINK professionals), having had a big inheritance or being a lottery winner! Um, I'm none of the above..... :(

[hootini88]

in addition to last sentence: This make it difficult for money to flow around the world...money that never even existed. Fuck banks!!!

[AcousticDoc]

The housing prices fell because as more people defaulted on their loans, more houses were foreclosed and put back on the market, which indirectly lowers the cost of other people's homes around the neighborhood, until people were paying out mortgages that were now costing a lot more than their home was worth.

[blackprincess82]

Why doesn't the news just explain it like this? Sheesh.

[TheJokest]

some illuminati type bullshit

[MrGeedare]

the EU created this opening the door to europe no money being spent hear all getting sent home to poland now there country wealth has grown while we struggle to get jobs and they under cut our wage which creates messed up britian along with paying for a war that we didnt even want

[triumphadvocacygroup]

Visual thinking is a great technique. Loved the video and how it broke down complex concepts into simple ones using visual images. Very helpful video in understanding the credit crunch

[freetrafficsecrets]

Love the video,money money is so funny in a rich mans world?

[fonejacker0]

Why did the house prices fall?

[qpwo6]

@fonejacker0 i think it was because there were more of the getting built or something

[zbeast]

@fonejacker0

Because the home's were over priced.

A 2 bedroom home in my area that should be selling for $150k to $250k

were selling for $600 to $1.2 million.

Also something skipped in that video, lots of the sub prime loans had interest rate increases that were insane. 0 percent down at 3%, after 2 years your interest payment could end up as high as 23% ... On a home loan!!!!....

[kakashi365]

right im doing an assignment in college around the credit crunch and i honestly was having trouble understanding the ecanomic jargen, but this was very helpfull :)

[mclarenf45]

Graphical animation used to explain things are done in national geographic/ discover channel, this can be used for companies, as the animation is more easier to understand, it has a more concrete explanation of events.

[rollingcube]

homer simpson sucks nothing

[JoshTheNinja19]

very good very well done

[Kickboxing187]

DEBT IS MONEY, IDIOTS

[Fawks121]

Informative, but shortsighted. How can you talk about homelessness and the scarcity of jobs without talking about why and how those poor people became poor in the first place? Their poverty didn't just drop out of the sky. A lot of HISTORY is left out. HISTORY explains our PRESENT. We can't talk about this recession as if it is new...for some people and groups, there has been a recession for decades...Let's talk about racism, sexism, homophobia, age discrimination and the accumulation of wealth.

[NyloStar]

This video explains why the global market de-railed. Not why you hate capitalism.

[JoshTheNinja19]

u fuckin retard grow up soft lad

[janslatter]

misleading video!!! blame poorer people struggling to pay for over valued (basic) housing. if less credit were given by the (greedy) banks, house prices would reduce to their true market value, if property speculators etc...

[qpwo6]

@janslatter i think its blaming everything equally

[MrMortgage1]

if you really want to get out of debt, check out

nomortgage4u. com

Free, simple, effectiev tips and resources to get you debt free fast. Take a few minutes now to ave yourself years of payments later.

[newcoolvid27]

So people are losing money and houses because currency conversions are being destroyed all because of lending money and debts stretching.

[23580578]

this is the greatest video on earth ,,,,,,,,,,,,guys you have explained such a complex thing in such a simple way ,,,,,,,,,,even a primary school kid can understand ,,,,,,,,,,,,,shame on you cnbc guys i will kick you in the butt

[MrMortgage1]

mortgage artist. com

Your path to the best mortgage information resource around.

Educating yourself costs you nothing, ignorance can cost you everything.

[MrMortgage1]

great vid

[qtwithbooty]

ive been reading over articles for ages trying to understand this and nothing but your video worked!! thanks so much!

[shazykaliye]

lol...dat was hilarious but helpful...fanx man!!

[elvylith]

This was really helpful, thanks alot.

[DANIELEVANS94]

FUCK THE BANKS!

[joejjohnston]

good video for someone who doesn't know much about economics but overall it is quite a vague and simplistic explanation

[globalhitz]

Ron Paul is Great!

[RogueRotting360]

I understood almost everything up to 1:13 - when the narrator brought up "mortgage backed securities". Can someone define what mortgages are, and also what are mortgage backed securities?

Why did the housing market decline?

What are interest rates?

What are cheap loan deals?

Overall. Not enough definitions.

[globalhitz]

yes just look up ron paul because he talks about it all the time

[cronaldo7manchester]

nice vid man!

five stars!

[JuzzChiln]

As for me, I'm 38 years old and I've always bought EVERYTHING with cash, I detroyed my credit card when I was 22 and never purchased a house. But I came pretty close. Thank god I didn't..

[JuzzChiln]

The average home in a safe area in Southern California is around $400k-500k, with prices rising every month. People in California who had any hope of getting into a home felt they had to get in or forever loose the oportunity. It's the subrime mortages that was the solution and trigger for the increasing home prices. A lot of people had good credit but lacked the rediculous average downpayment monstrosities for these homes. Leveraged financial system amplified an otherwise benign collapse.

[JuzzChiln]

The average home in a safe area in Southern California is around $400k-500k, with prices rising every month. People in California who had any hope of getting into a home felt they had to get in or forever loose the oportunity. It's the subrime mortages that was the solution and trigger for the increasing home prices. A lot of people had good credit but lacked the rediculous average downpayment monstrosities for these homes. Leveraged financial system amplified an otherwise benign collapse.

[JuzzChiln]

The rising prises made purchasing a home a mere dream for most. You see, it's nearly impossible for an individual to save 15 percent on a $600,000 3 bedroom, 1500 sq. ft. home. Sub prime mortgages made it possible for people to purchase a home that seemed to be increasing in value by the week. Painting them all as low income morons is extremely fucked up. Afterall, how many people ignore a bargain. Intead why don't you blame the assholes who opened the door to such bargains in the first place.

[JuzzChiln]

This video is not completely true. For those who know why , there's no need for me to explain. And for those who don't, you need to do a little more reading.

[hesaidicouldntjoinin]

I Don't Understand, Why Don't They Just Print More Money ? :'(

[thejobloshow]

Because that decreases the value of the dollar - because more money in circulation means less scarcity. It would cause inflation and prices will rise.

[MuayThaiBeginner]

money as in paper form merly represent gold in the countrys vaults so they cant just print more paper if they dont have the gold. thats what germany did after ww1...i think? but it got them inot more trouble.

[mullensk8ter15]

He's kidding guys.

[soley111]

Thirdly, as you again rightly say, this is a very complex and intricate issue to deal with. I am really interested in real solutions. But, I don't think any is forthcoming. The same senarios are played over and over again.

My solution would be, very briefly: let's halve the world population, educate the inhabitants of the earth, find a new way to go on/ about our lives, putting respect, responsibilty, equality at the fore front.

I know that some of you will be up against me on re-creation.

[soley111]

Well, this was the right thing to do really. I don't understand why the richest people on earth everywhere couldn't think of it. I guess, they are only after the power that only the money can beget. The rest of the time they keep singing, "we are all in this together"-rightly said.

Obama's ideas are very good, realistic and clever. But he is up against very powerful individuals. It remains to be seen what will become of him. I personally wish him well.

see next.

[soley111]

Well of course it could not go on forever. It had to stop sometime. And it is here and now. Money have been printed, people spent it, and now they can not pay it back. The banks books are turned upside down. They could no longer balance their books. The result is, what you see on the TV and radio.

Secondly, the "Kitty" idea. I don't know if you heard "Obama Congress Speech". But he has allocated $75 billion to those people who are in dire need of money.

see next.

[soley111]

The western world, nowadays, is dependent on the "service industry". In other words, we, todays' generation do not really create any wealth at all. It is all fantasy, eg. any fancy ideas sell. Nothing has been created but hey! presto, a desire is satisfied. Who creates the money? The government-of course. The government oils the cogs of the big wheel, as long as they can keep the people happy. So, they print money, offer it to the people in terms of credit, and people fall for it.

see next.

[soley111]

hi poenaensis,

I hope you are well.

Firstly, I agree with you on the 1929 depression, and the way USA got out of it. However, the times have changed considerably since then. Nowadays, there is great wealth in this world. As you rightly say, "monetary value of money is not wealth". What can be created by the workers, as you say building houses, producing goods, technological progression etc. are the things which the workers create in "real money" terms.

Pls see next entry.

[soley111]

Settimatti, thanks for the video it surely made me think. I hope it will make others think too and everyone will contribute.

Best wishes.

[poenaensis]

I think you make a valid point, but you miss the biggest one. The money is not wealth. Houses, food, medicines, technology, oil, raw materials. These are the real wealth. Previously, the monetary value ascribed to particularly the house market was too high, and the predictions made by the banks to the future price were also incorrect. Therefore the banks said they had money that they didn't. If we wan't to help people keep their houses it doesn't have to be through a common kitty idea.

[poenaensis]

Contd. The best way is to legislate. To keep peope in their houses force the banks to give them a rate at their previous value rather than forclosing. To keep people in work enforce reasonable lending rates. Unfortunately, there is no equal amount of money in the city slickers to that which has gone from ordinary people's pockets. It has literally vanished as people adjust their evaluation of the weath. This time it was on house prices. In 1929 it was the stock market.

[poenaensis]

Contd. I agree that the problem is caused by the greed of the already rich. It is always the banks taking insane risks. I also agree that the ordinary person takes the hit. Solving the problem is not easy, but it is important to remember that no cities have been flattened, no crops been plaugued by locusts, or no new super virus has emerged. If we look at how FDR got America out of the Depression, it was through maintining and increasing public projects, things that increase long term wealth.

[soley111]

What I don't understand is? They (the rich people) see that the people (sub-primes=workers who produce the real welath all over the world) are suffering, and yet none of them are giving up their wealth. They are not saying "look I have £500 million I would like to donate it to a common kitty, and this should help the difficulties they are in".

You see according to "Einstein" nothing can be created from nothing,and nothing can be destroyed from something.

Please see next entry.

[soley111]

So, the answer to the question "where did the money go?"

The money went to the "Rich Peoples' Accounts". I don't think they (the money) disappeared.

Who are those people?

Well, I don't want to be shot at by their hit-man by disclosing their names, but, if you look around you will see them every day in the newspapers.

Their wealth,if you calculate their fortunes, will be equal to the alleged lost money in the money markets.

Please see next entry.

[soley111]

Then, the whole bubble burst. The public could not pay the banks, as the banks borrow from each other in their daily transactions, in turn they could not settle their accounts with each other. Distrust creeps in. As the banks are obliged to keep the rich peoples' money in their accounts, they called up the money from the public. The public does not have money. So, they (the members of the public) lose their homes, cars, credibilty etc.

Please see next entry.

[soley111]

So what happened?

The money, indeed, did not go to the sub-primes (the general public). In fact, the money went to very few individuals who played the stock market game, deceitfully. As you may have heard in the news, they accumulated millions if not billions of pounds/dollars in their accounts.They are known as "insider traders". Very powerful men until their veils come off.

Please see next entry.

[soley111]

Thanks for your replies, Settimatti. I, surely, appreciate it.

However, I think that, in the last couple of days, the answer to my question has been clarified in the mass media.

[Settimatti]

ok that didnt make any sense :D

nwm

[Settimatti]

above here, sorry.

So the paper didnt disappear, but people bought expensive houses, and then the price dropped. since they bought it with the money that the bank loaned, it wasnt theirs. they had to pay back, so they sold the house, but still didnt have enough money. so bank didnt get their money back, and people had negative on their bank accounts. The money went to those who sold their houses just before the crunch. they bought them a while ago for little money, and sold them for big money.

[soley111]

Sooooo! Where haaaas all the money gone, then? Where are they? Who has them? Surely, not the people (sub-primes).

[Settimatti]

well, the money kinda disappeared. It helps if you think of money in another way. Dont think money as valuable, its paper. think of it as something temporary. You have to sell something to get money (can also be labour, like you sell your work in your job) and then sometime later you go buy something. Money is just what you have in between so that you dont have to trade your work right away for your food, but you can do it a week later. money is proof. (see comment below)

[GFMarshallx]

Which global currency did the 'Y' with two horizontal bars in it represent.

[Thisishomevideo]

The Japanese yen, thanks

[majesstic786]

helped a lot , thanks

[Poojapatel1992]

Wow...wot a fantastic explaination!!...thanks!

[creaturecreator5000]

this is only the beginning. over the next six months to maybe a year things will get worse, and the CC will really kick in. people will really be tested on what the really value.

[CR7hind]

ok........

[markwalk10]

goddammit ppl spend money keep it flowing seriously!! the money is at a standstill right now if you keep it flowing about then nothing will change its mostly in your head but there is still some problems like

now if i was taought like this in school id be a genius

[Jugman10000]

u wish.

[markwalk10]

wish what?

[Jugman10000]

wish america wasn't in trouble.

[BestPiperonMars]

Great vid, helps explain the basics that is for sure... Sooooo now what happens?

[VonTyrant]

I'm supprised this video only has so many views. :/

[capricornbloke]

US subprime collapse bill estimated at £472 billion The collapse of the subprime mortgage market in the US will cost the world economy

former chief economist of the World Bank and winner of the Nobel Prize in Economics, has stated the total costs of the Iraq War on the US economy will be three trillion dollars when counting the huge interest costs because combat is being financed with borrowed money

[Jaffaboy1984]

imagine... the things you could do for the world with 3 trrrrrrrrillion dollars. i also just found out that 1 trillion in english speaking countries has 12 zeros, 1,000,000,000,000. but the rest of the world a trillion has 18 zeros. 1,000,000,000,000,000,000. you sound like you know what its all about, what's that all about? lol

[capricornbloke]

they thought that house price's would always rise ? rubbish they aint that daft so i dont see how this is correct.

[monkeymonkeywoman]

crunchtastic

[smltyler]

Right now, I'm working on a presentation to give to my school, and I really needed to understand exactly what this "credit crunch" was. This video was SO helpful!

[musicisayush]

thanx a lot.. this video explained stuff really well.. thanx 4 the effort....

[KYPMbangi]

So it all started in US? Hm.. no wonder

[daddio]

well done good visual explanation