Saturday, April 25, 2009

The Credit Crisis Visualized Summary

My friend showed me this video a couple weeks ago and I just have to share it with you all. It shows how giving loans to homeowners with poor credit scores (sub-prime loans), affects the banks, affects investors, affects the economy, and ultimately, affects the prices of precious metals.

The summary is good, but stops a bit abruptly. We do see that since the loans the investors had bought from banks ended up going into default and the investors lost money, however, it doesn't go on to say the rest. So, I'll explain the rest after you watch the video:

The Crisis of Credit Visualized

(This video was provided by Jonathan Jarvis of

The Rest Will Affect Precious Metals Palladium Prices

Pretty good, right? He did a great job. I love the sub-prime loan family and when the investors say "No Thanks"! Anyway, the rest of the story is as follows:

Rest of the Story

The investors lost out on the money they were making every month from the loans. They were protected though: if the homeowners defaulted, they were given the deed to the house. But, buy the time the investors got the homes, home prices had already dropped and, since homes were in abundance, investors couldn't resell the houses. Investors lost millions. These "investors" were individuals and more importantly, big companies. Now, if the big company lost millions, wouldn't its stock drop? That's what happened. The other investors--stockholders--also lost millions. When stocks drops it doesn't mean there is a wealth transfer, it means that the money evaporates into thin air. That's right. It's gone. The money supply tightened. When that happens investors in companies, banks, individual investors, companies, employees of failing companies forced to do layoffs...everyone has less money. People spend less. The economy becomes "recessed," and we find ourselves where we are today.

With the Credit Crisis Video and my above summary, you can pretty much tell how we got into the situation we're into. For more information I have a book recommendation. I'm about two-thirds of the way through right now, but he really goes into deal of why everything has happened how it has. I'm excited to get to the end of it because it makes predictions for the future and what must happen. Go buy this book now to have a view of the future on palladium prices and a professional outlook on all your investing needs.

And here's a similar book by the same author. Both of these were printed in 2009.

And two more recommended titles:
The Two Trillion Dollar Meltdown: Easy Money, High Rollers, and the Great Credit Crash

The Trillion Dollar Meltdown: Easy Money, High Rollers, and the Great Credit Crash [TRILLION DOLLAR MELTDOWN]
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