so the world ran out of money because of some bad

[onethatcares]

loans were made. How the hell did the entire world lose confidence in all the banks and all the trading exchanges? This entire fiasco doesn't make any sense to me, did the money just disappear or get put in mattresses or what? I apologize but I just can't make heads or tails of whats' going on worldwide.

[amdezurik]

1. becuase money not backed by anything is just paper?

the banks ONLY exist as long as we trust them to keep the "money" safe. As soon as that little delusion is burst well, this is what happens...

[knowbody0]

2. Because that little sub prime loan

of $200,000 was traded 300 times betting on inflation.

[soothsayer]

5. Yup, it's the derivatives and CDOs and other phony instruments that aren't secured

[Possumpoint]

15. We Developed An Economy Based On Debt

Those debts were actively sought and sold, re-sold, split and added to other debts and sold again. The original dollar was allowed to continue to circulate that way. When the sub-prime loans started going south all of the investors realized they were caught holding worthless paper. Their reserves evaporated over night. They started hoarding cash to cover their margins. The ones who couldn't cover, folded or were merged with others. When an economy becomes over leveraged this is what happens when a problem occurs.

[gordianot]

3. Remember the little man in 2004 who said he had capital and intended to spend it?

Well he did and there is none left.

[SammyWinstonJack]

9. Yep!

[liberal N proud]

4. The last 20 years has been the ultimate paper chase

[Pale Blue Dot]

6. It's not that hard to figure out. Honestly, it's not.

You can't continue to spend more than you have forever. Not you, not companies, not banks, not state and local governments, and not federal governments. Yet they all did. And now everyone is shocked - shocked - that it's all collapsing around us.

I think nobody wants to admit this obvious fact because of the implications; that nothing - nothing - can pull us out of this tailspin.

[jwirr]

12. I'll admit it - I am desperately over spent. Even if Obama fixes the

whole mess I am still going to have to pay for my own foolishness.

[YOY]

7. They wanted financial slavery of the masses.

Any MBA who actually looked at things in the long run and the reality of the situation could have told you it was bad mojo. Of course the best way to get where you are in the business world is by giving high profit returns fast regardless of risk.

Risk be damned they got their short-term profits at the cost of some serious long-term losses...shame some of them got away with it scottfree without jumping from their windows this time. Brilliant if you think about it really. The fat cats win at any possiblity and the public loses at any possiblity.

I knew there was a reason why I hated them in biz school...cocky prepschool pissant blowhards.

[Speck Tater]

8. There never was as much money as the banks pretended there was.

Watch this 47-minute documentary about how banks create artificial money out of thin air, and why, when confidence fails, that imaginary money that ordinary people thought was real money, simply vanishes into the thin air from which it was created. (BTW: Don't forget that the "con" in "con game" stands for "confidence", and banks require continued confidence in their make believe money in order to survive.)

This is 47 minutes well spent, and will help you understand why it's all falling apart:

http://video.google.com/videoplay?docid=-9050474362583451279

[LiberalEsto]

10. No. the rich CEOs and their pals grabbed it all.

They're raking in those multimillion dollar salaries and bonuses while laying people off and outsourcing jobs to cheap foreign labor.

[Stuart G]

11. I think it goes something like this:

The most prosperous country in the world, lead by a fool's fool, sold to the rest of the world a lot of bad debt. The bad debt, which was packaged in such a way, that an honest person could not tell if it was really bad debt; was bundled together with a lot of very good debt. These packages were sold as a whole, in a lot more packages around the world.
..Therefore, when the bad debt turned out to be really bad, it could not be separated from the good debt. Trillions of dollars in debt was sold around the world to the world's financial institutions. All of the debt, the good and bad got infected and because the fool, and the fools bank, had no regulations to prevent this kind of contamination, much of all the debt for sale became...let's say... became infected.
..

.. If the bad debt had been kept separate, and stayed withing the country of the fool, none of this would have gone world wide. But it went world wide, and now we all gotta pay for the fool's mistake and the fool's banker...a fellow named.... Alan Greenspan., who said it couldn't happen.

... ..Cause everyone trusted the fool and his banker and the packages of good and bad debt were sold to the world like bundles of corn....absolutely sure to increase in value with no risk..

Jokes on the fool and all of us........end of fairy tail...

[valerief]

13. Because the govt didn't stop weasel financiers from selling bogus securities. nt

[onethatcares]

14. what's next then?

Do we all starve or stand in bread lines? Can price and wage controls be put in place to keep people in their jobs and homes? This is so much larger than the depression of the 30s and we should have enough intelligence to figure something out for the good of all of us. Of course the bankers and the hedge fund managers are not going to eat as well as they have been used to but fark em.