Economics 102
Mortgage-backed securities, credit default swaps, stock injections. These and more are components of the global financial crisis. If you’re like me, they’re not things we learned along with supply-and-demand in basic economics classes. And yet, we’re being told we have to shoulder the burden to somehow solve this mess. Wouldn’t it be a good idea to have some understanding of the issues?
Along comes my favorite radio program, This American Life with its ongoing patient and entertaining coverage which explains some of this. As is always the case, you can listen to the episodes for free online, download the most recent episode or go to iTunes to buy the shows.
First up is Episode #355, originally broadcast on May 9, 2008, entitled “The Giant Pool of Money”. This one deals with the mortgage crisis and those very odd financial instruments called mortgage-backed securities.
Then comes the show from last week, Episode #365, “Another Frightening Show About the Economy”. Here they deal with credit default swaps and how the government failed us miserably in deciding to not regulate that market. They discuss an alternative to the bailout which involves the government investing money in the banks, something called stock injection. Prescience indeed… this is precisely the approach the European Union countries have taken today. It looks as if our government will reverse course in favor of stock injection as well.
By the way, remember how McCain said he would “fire” the chairman of the SEC? (Strictly speaking the President can’t do that.) You can hear about the man himself, Christopher Cox in Episode #363, “The Enforcers”. There they talk about how he declined to regulate another financial practice that contributed to the current debacle, naked short selling.
One of the ongoing reporters on the financial crisis, Alex Bloomberg, returns to the show this week, in Episode #366, “A Better Mousetrap – 2008” with updates. (If you haven’t heard this on your local NPR station, the episode should be up on the website tomorrow.)
Since we’re far from the end here, This American Life has updates on their homepage.




