For all those who are still wondering what went wrong in the US and the difference between CDO and CDS, here is another simpler, layman's version of the credit crisis.
So, what are the key take aways from the credit crisis:
- Human beings are motivated by short term gains and greed. And it is very difficult to turn us into good citizens, all in one day.
- We might try to act and do good for some times in the near future because of the impact credit crisis has created in our lives. But I think eventually greed will win over our mind (and heart) again-which means as long as money exists recession will occur again. Let us accept recession and recovery as a part of nature.
I am surprised how Darwin's theory can be used to explain this credit crisis. He aptly called it as "survival of the fittest". And it is true everywhere - be it explaining human evolution or life or credit crisis.
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3 comments:
social darwinism.
another thing the credit crisis reminds me of is the prisoner's dilemma. for institutions like big banks who take on risk in good days and lean on the Fed in rainy days, the prisoner's dilemma says they are better off each to take more risk than they should. if all do so we get a credit crisis.
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