Steven D. Levitt, the University of Chicago economist who wrote the best-selling book Freakonomics and runs a blog over at the New York Times, asked two friends and colleagues of his, Doug Diamond and Anil Kashyap, to explain the financial crisis to those of us who aren’t so good at deciphering all the jargon and convoluted details.
Diamond and Kashyap explain here, in clear layman’s terms, why the stock market has been so erratic in the last weeks, what steps the government is and isn’t taking (and why), why the private market cannot take care of this problem on its own (ostensibly), why bank assets are so hard to value right now, what the Treasury is doing about bad assets, whether the government’s plan will work and how soon, and how long the crisis is likely to continue.
If you’re still scratching your heads about what happened with the financial markets in the first place to spark this crisis, this episode of NPR’s This American Life is still the best thing out there that’s made for normal people like us. They talk to the people who were undermining the mortgage market in the first place, with a lot of refreshing honesty about why they did it and how… and it’s just a little bit reminiscent of the historically problematic attitude that, Hey, I was just doing my job. Following instructions. You know.
