THE CRISIS OF CREDIT VISUALISED:

Hi everyone! 

As we are working on writing summaries this semester, we were asked to provide a "Before & After Comparison" which I will present in my blog. I will therfore highlight the changes I made after my professor corrected the first versions of my summaries. 

In class, we recently watched a video which is about the credit crisis (2008). After watching it we had the task to do a summary which I will provide you below so that you get an idea of what a credit crisis is and how it is caused. 

Jonathan Jarvis’s video “The Crisis of Credit Visualised”, provides an overview of the 2008 credit crisis. It explains what a credit crisis is, who is involved and its evolution.

The credit crisis is a global financial fiasco which causes frozen credit markets and bankruptcy. Examples of involved parties are homeowners, investors and institution like the US federal reserve who sells treasury bills to low interest rates. This makes borrowing money easy.

Furthermore, it is explained that links between the “participants” of the financial system  are created through mortgages which are paid by homeowners and possessed by investors. The mortgages are combined in a Collateralized Debt Obligation (CDO), which in turn is split into three AAA, BBB and unrated tranches. The AAA is insured with a credit default swap. Dependency is created which is not necessarily negative because it guarantees stability.

This changes if parties depend on each other unequally. Defaults on mortgages affect investors negatively as their investments turn into houses. The more defaults exist the more houses are for sale which cause devaluation of properties. Since involved parties are affected, a knock-on effect evokes instability which in the case of a credit crisis results in collective bankruptcy, as it is concluded.

The problem in this summary was that I could have condensed more than I actually did and that I could have included more specific terminology (CDO). Another problem I had was that I referred unnecessarily to the source...like "According to the video" or "In this video the credit crisis is described as a global financial fiasco".

Nevertheless, think I included the most important information in my summary and hope that you got interested in watching the video. Here is the link to it, if you want to know detailed information about the credit crisis: https://www.youtube.com/watch?v=bx_LWm6_6tA.

That's all for now.

See you.

S.