8 Ways to Explain the Economic Crisis

There are so many ways to explain things. Words, pictures, words with pictures, moving pictures, moving pictures with voice, just voice, or moving people with voice (movies).

A study by Siegel+Gale found that 75% of those surveyed believe complexity played a major role in the current financial crisis.

> “Three-quarters of survey respondents (75%) say that complexity and lack of understanding have played a significant role in the current financial crisis.”

Fortunately, when it comes to the financial crisis, there’s no shortage of explanations. As I’m writing a book on using comics to explain ideas, I was initially drawn only to the comic explanations but as I researched further, I found a slew of great explanations across various medium. Looking at them together really helped me pick out the strengths and weaknesses of each. I’ve decided to put together these explanations here.

1. The Subprime Primer: Comic / Slideshow
From BusinessPundit.com comes a low fidelity (and lowbrow) walk-through of how a “stinky” mortgage goes from Ace Mortgage Broker’s to the RSG (“Really Smart Guys”) Investment Bank in the form of a slideshow/comic. Unfortunately, while entertaining, it doesn’t paint the whole picture.

2. This American Life: Radio / Podcast
There are two episodes of This American Life, both of which include great insights and explanations into the crisis. The primer, “The Giant Pool of Money“, was coproduced with Planet Money and is definitely one of my favorite explanations. They have a follow-up episode, entitled “Another Frightening Show About the Economy“. It never ceases to amaze me how this show manages to tell such intricate stories and explain complex concepts with audio alone.

3. Informed Trades Crash Course: Video
While the explanation is quite detailed, the use of video here isn’t harnessed at all here, making it little more than an audio track. Few audio tracks challenge ‘This American Life’ in their clarity.

4. Economic Meltdown Funnies: Comic
A donation supported graphic novel that is a co-production of Jobs with Justice and the Institute for Policy Studies — Program on Inequality and the Common Good. Tales of the meltdown as narrated by a Bison… or a Buffalo depending on which page you’re reading.

5. The Crisis of Credit: Animation and Voice
A fantastic independent project from designer Jonathan Jarvis maximizes the utility of video–moving the diagrams and talking over them to help explain process and flow. If you enjoy this style, you’ll also like Common Craft’s economics series.

6. Diamond and Kashyap: Interview
The Freakonomics blog on New York Times has an interview with Doug Diamond and Anil Kashyap, two University of Chicago Booth School of Business professors about the details of the economic crisis.

> “Fannie and Freddie were weakly supervised and strayed from the core mission. They began using their subsidized financing to buy mortgage-backed securities which were backed by pools of mortgages that did not meet their usual standards. Over the last year, it became clear that their thin capital was not enough to cover the losses on these subprime mortgages.” more

7. Two Cows: Text / Analogy
The Business Insider took the simplest route they could think to explain the AIG meltdown: describing it with a story of two cows.

> “A third of the country goes vegetarian.

> You thought your two cows were worth $200 and now they are worth $140.” more

8. Don’t But Stuff You Cannot Afford: Video
Still confused? Perhaps this book will help.

Bonus. Degrees of Hank Paulson: Visualization
This just came this morning from Stephen Anderson. A visualization of how U.S. Treasury Secretary Henry Paulson is connected to the CEOs of the various banks.