the credit crunch explained

Joe had a bar…

The credit crunch explained in 10 slides: it’s a simple story, really!

But it was a bit run down…

Joe had his dreams…

Yet his costumers, ‘though loyal…

…were all unemployed drunkards!

So Joe decided to open up credit, running tabs on everyone, and even raising prices a little to cover credit costs!

All the costumers thought this was a wonderful idea,and started consuming much more!

Joe thought “I’m on my way to my dreams coming true!”

So off he went to his bank account manager, to ask for a loan on his new business growth perspective!

Business is growing, I’d like to do some renovations on that run down

old bar of mine!

Sure, these tabs are accounts receivable, here’s your money!

The bank lends him the money, with Joe’s clients debts as collateral!

A few bank managers and finance engineers on down the line, we see Joe’s tabs transformed into papers and structured funds, CDB’s, CCO’s, SOS’s and UFO’s, all leveraging up the finance markets, no one the wiser as to the original asset they all were leveraged on: that’s right, Joe’s tabs!

Evryone was happy, untill…

These structured funds and derivatives were transactioned in the finance markets of 73 countries, as serious and solid bonds, as if backed by real garantees!

Someone finds out Joe went bankrupt because the drunkards couldn’t pay their debts, blows the lid on it…and the hole chain of events flattens out like

domino chips! (a.k.a. as a “bubble burst”)

See? It’s simple!