Thursday, October 09, 2008

Meltdown Round Up

It's been a while since I've posted here but given all the economic meltdown panic and confusion floating around I felt obligated to toss in my two cents (which apparently just became worth one cent while writing this sentence) in the hope of shedding some badly needed light on exactly what got us into this mess.

A few caveats;

- I'm not a finance geek (but I could probably play one on TV)

- I'm not heavily invested in any markets or complex financial instruments

- I don't own a TV (nor do I watch much)

In my opinion what's happening right now is not a stock market meltdown, it's a truly global, fully international, credit and commercial banking crisis the likes of which the world has never seen. Consumers everywhere (all of us, if we're not too busy panicking) are scratching our heads trying to figure out how we've become ensnared in something so complex...

How did we get here? I mean seriously, how did it come to this?

One of my heros was and is the late physicist Richard Feynman. Now I can't say I'm too crazy that he helped invent the Atomic Bomb but while serving on the Space Shuttle Challenger investigation commission he brilliantly (in front of panel members, NASA engineers and TV cameras) explained how the Shuttle exploded, simply by clamping some booster rocket "O" ring seal material, dipping it in ice water for 30 seconds and then saying (paraphrasing) "when this material is at or below a temperature of 32 degrees it looses it's resiliency (gets hard) and fails... and when you guys launched on a cold morning, the "O" rings were frozen and failed". You can see him here (30 sec clip).

For the past two or three weeks I've been waiting for someone of Feynman's caliber to come along an explain this economic meltdown to the world... but I'm afraid there's no one in sight. Even amidst the the US Federal bailout no one really knows the quantum of the problem.

Below are some of the clearest and most concise (non-TV, non-corporate controlled mainstream media) resources I've seen, heard and studied over the past few weeks and feel obligated to share them (and encourage you to share them with the people you know and love). My objective: help promote understanding of exactly what got us here in the hope we can rationally fix / rebuild / repair the situation via informed decision making... before it's too late.

There's a little over two hours of audio here so take your time plowing through it. Given its potency, relevancy, accuracy and high quality it's probably better to digest the links slowly, one at a time. Might even be a good idea to load up the MP3's on your iPod and listen (or share in the listening) with friends or loved ones, then have a discussion;

AUDIO: NPR's "This American Life" Part One:
The Giant Pool of Money (59:00 min)
Explains the nature, origin and history of the US Mortgage Crisis. Simply the best explanation of what led to this situation.
Download MP3 file here.

AUDIO: NPR's "This American Life" Part Two
Another Frightening Show About The Economy (59:00 min)
Recorded the Friday after the $700 billion bailout bill passed congress.
Download MP3 file here.

VIDEO: PBS NewsHour explains Credit Default Swaps. (7:00 min)
Those pesky, complex, unregulated, global financial instruments that Warren Buffet has called "weapons of mass destruction".

AUDIO/PODCAST: NPR's Planet Money is an outstanding daily audio resource that translates breaking news about global financial and economic matters into easily digestible bite sized chunks. Really easy to subscribe it it via iTunes.

PRINT: A great piece from The New Yorker's Think Tank section called The Rationality of Panic by Steve Coll.

UPDATE: Here's a recent Twitter exchange with Paul Kedrosky.

Given the gravity of the subject matter it's a disturbingly mixed blessing to be called "precise" by a guy this smart.

UPDATE: Here's the full slide deck (containing information and advice) that silicon valley venture capital firm Sequoia Capital presented to it's portfolio companies earlier this week. Budding entrepreneurs should pay close attention to slide #49.

UPDATE: Great slide deck on making sense of the mortgage meltdown from the Milken Institute in Los Angeles (via Paul Kedrosky).