...But I do know why, and I do know how.
It's pretty straightforward.
People bought stuff with hundreds of trillions of dollars of debt (credit, not capital). This debt-spending inflated the prices of assets (Stuff. Mortgage Backed Securities and CDO's and all kinds of stuff.) to levels that did not in fact reflect real worth. Why? Because debt that cannot be serviced with real productive capital is worthless!!! You can write me an IOU for a million dollars for my 2000 Toyota Echo, but if you don't have a penny to your name---in fact, if you yourself are in debt up to your eyeballs---your IOU ain't worth poop. And neither is my Echo.
Read on...
Peacenik likes posts that explain what is happening in simple language. Dan W. lays it out in this post. All the bailouts are to protect the wealthy, special interests. All the bailouts are to redistribute money from you, the taxpayer, to the already wealthy. But it won't work. They'll take the taxpayer money. But it will all come crashing down. Think back three years ago, and the public didn't give a hoot about $100 million dollar salaries for executives. Because everyone was rolling in phony money. But it was phoney money, phoney wealth. Executives now need bodyguards to go to the corner store. Peacenik gets discouraged when Peacenik reads and sees how corrupt the whole system is. Peacenik is going to have a real beer. Paid for with real money. And Peacenik is checking Ebay for pitchforks.
Update: Three banks failed on Friday and two credit unions. Did yours?
