Financial crisis visualized

Part1

Part 2

Jonathan Jarvis at the Media Design Program, a graduate studio at the Art Center College of Design in Pasadena, California did this visualization and simplification of the financial market crisis which began as a mortgage crisis, then became crisis and now is an economic crisis affecting all of too. As the author writes at credit crisis visualized, the goal is giving form to a complex situation like the credit crisis is to quickly supply the essence of the situation to those unfamiliar and uninitiated, rather than figuring a way out. Neither does it mention the larger historical development of mortgage lending business, nor does it talk about state regulation and the role of institutions, e.g. social security or the lack of it. And the black screen at the end of the short film is just the beginning of the downward circle affecting the real economy of production and innovation, as well. Moreover, it is anything but a solution to the problem. Nice work for a thesis and cool visualization, but the limits are also clear. Via Mike Wesch & Spreeblick. Thanks!

Coming up: Post on the involvement of the German economy and the flip side of institutional change of corporate capitalism in Germany, together with the dissolution of „Germany Inc.“ In the meantime, I can offer an older post from July 14, 2008: Why the US recession will bite the German economy, too.

Update: PBS documentary of financial breakdown „On Thursday, Sept. 18, 2008, the astonished leadership of the U.S. Congress was told in a private session by the chairman of the Federal Reserve that the American economy was in grave danger of a complete meltdown within a matter of days.“ [56 min]. Via Sprechblase.

4 Antworten zu “Financial crisis visualized

  1. Interesting thoughts, to be certain.

    Neither does it mention the larger historical development of mortgage lending business, nor does it talk about state regulation and the role of institutions, e.g. social security or the lack of it.

    I’m not certain what you have in mind connecting to social security here, though. As far as limits, I would also say that banks were more egregious that even this (they also, for instance, took that last tranche of CDO, then sliced it into three tranches, and bundled these into CDOs of CDOs, or CDO-squared’s – things like that). I also think that we keep thinking of this as specific to sub-prime, but if it weren’t housing it would have been something else that provided the catalyst. We’d be talking about the consumer debt credit crisis or something. Collateralized whatever obligations are potentially problematic when there is little regulation and a severe downturn in the economy.

    I also like your thoughts on the black screen – even if, like during that last systemic crisis in 1998, there was little connection between the financial and real economies.

  2. Thank you for your comment, Peter. I am just trying to write down my thoughts in a more orderly manner. It would become very lengthy if I put together thoughts on how we globally got into this situation and ideas about possible starting points of how the development could be turned around as to find a starting point for the economy to pick up again in one single post. So I’d appreciate your patience of letting me digg down in a few posts coming up next.

    With regard to your question, the video assigns Greenspan a central role in letting the crisis emerge, but the low income rate contributed to the availability of money such that not all things went bad as a result of Greenspans policy alone. There were other factors that added to the emergence of this crisis, namely social factors: institutions. As far as I could learn from the distance, average income has been declining since 2000, debt of private households has been going up, an increasing number of people has not been able to pay bills and interests for their loans, the value of real estate has been deteriorating (I saw this FT Video), but the business model of financing and dealing with financing has continued until it became unbearable and the selling started. Right now, governments (e.g. Angela Merkel & Gorden Brown) are pushing toward regulation of financial markets to limit the amount of money that can be created on basis of a given value X, but there should be also a limit as to how far a highly industrial nation such as US, Germany & Japan lets people get down, the degree to what these societies let people experience scarcity as to incentivize them to take entrepreneurial initiative. No doubt those irresponsible borrowers mentioned in the video above exist, and no doubt about the irresponsibility in the behavior of banks that you mentioned. But not mentioned in the video above are ordinary people who try to get credit just to feed other credit, just not to be confronted with a social security system that lets people’s situation deteriorate to a level where they lose just about all their property and depend on food stamps.

    As for the black screen at the end of the short film: I read it as a symbol for a gridlock in the trust between banks, leading to the drying up to interbank lending and lending of banks to business and people and affecting economic exchange all over the spot because both markets and economies are so densely interlinked internationally. Bill Clinton mentioned at Larry King live on CNN that $ 30 trillion in assets went down the river. Elderly people in Germany remember well the gridlock of economic activity that made the Währungsreform in 1948 necessary (that was an inflationary spiral due to the scarcity of the most basic goods, including food) leading to worthless money and extreme scarcity, and Germans were dependent on food stamps until 1956. That’s certainly an extreme example, but basically the black screen at the end of the short film symbolizes a setback in economic development, it symbolizes well established industrial societies going back in history to a state of scarcity that we had been sure we had overcome. Thus, instead of thinking what might be behind the black screen, we should be making up our minds in how economic activity can be stimulated and what can be done (economically & politically & otherwise) to re-initiate economic activity.

  3. Nice visuals, but I could not detect the role of Fannie Mae and Freddie Mac as intermediaries and guarantors of traded mortgages. And I also know why… Because that doesn’t sit well with your (not so) carefully contructed explanation blaming entirely „Wall Street“.

  4. I too, think, the visuals above reveal only a part of the story. The role of quite a few actors and institutions are not mentioned. I have given my critique, too. On the other hand, the visuals by Jonathan Jarvis are part of a thesis work at a media lab designed to offer a first glance into a very complex process involving many actors and institutions, and that achievement deserves recognition, as well. Moreover, I find making efforts for an appropriate explanation and the search for potential solutions more important and more productive than a rhethoric of blame and guilt (Hence, this video was not made by „me“, it is not about „blaming“, and my post was not about „only Wall Street“).

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