Debt and America

As a follow up from the previous post it seemed only logical to InfoTip you with a very related subject. So where did all the money? The infographic is pretty accurate and rich on that information but let's take a go at it for a shorter explanation.

It basically starts with the banks themselves, back before the housing market crash, credit was indeed easy to obtain, really easy. People needed credit to get their dream house and banks lent it with the usual interest. Well the problem with how things were going is that they started "betting" on loans, which would be successful and be paid and which would fail basically, the riskier the better and so loans were given to people that didn't met the requirements to have one. This went on for quite a while a huge bubble, everyone is buying homes and so due to various reasons but mainly supply and demand rules, the house prices dropped, a real vertigo fall. What follows is the crash of the entire system built around the loans and houses banks where giving to people. This whole situation made major lenders stop lending due to panic and fear to never get their money back plunging the global economy, which is heavily established on lending and and debt, into the current downturn we're living many banckrupcies, unemployment and stock selloffs all because of the lack of credit and the very strict rules now active to control it.

It's a very informative graph and accessible and it gives the general idea of the why's of the situation we're in as well as explaining a bit of the value of money which is quite interesting to know about since every day we're presented with news about money printing by the FED or the European Central Bank and many people don't know or don't realize where exactly does it come from.