How To Create A Financial Crisis

This post is sponsored by the National Film Board of Canada. All expressed opinions and experiences are my own words.

In 2008, there was a financial crisis that was probably the worst one since the Great Depression.

This financial crisis was followed by a period from 2008-2012 known as the Great Recession.

Maybe you’ve read about these things on Wikipedia or your cousin works in finance and one year over the holidays she tried to explain it all to you in simple terms.

She used words like sub-prime, securitization, regulation, bailouts, and “too big to fail”.

And you were like:

“Yeah, totally, oh I see now – wow – what a mess.”

But really you still have no idea what happened and just didn’t want to look dumb.

And the truth is: you actually want to understand this stuff!

If only there was a fun and engaging, online experience that would guide you through what happened.

You would even spend 30 minutes of your time if at the end you thought you would walk away with even a little more understanding of what happened.

Well, the National Film Board of Canada has created this interactive experience and it’s called “How to Create a Financial Crisis”.

LEON COURVILLE BECOMES A FLOATING HEAD​

At the core of the experience is Leon Courville, former head of the National Bank of Canada, who has been converted into a chatbot. He guides you through all of the steps and if you don’t understand something at first, there are additional layers of information you can access by clicking buttons with names like “Why’s that?” or “Huh?” instead of just the “OK” button.

I really recommend that you don’t click OK right away unless you are really solid on the subject. There were times when I was thinking that I totally got the concept, but I clicked the “Huh?” button, and that additional piece of info really helped it all sink in.

In a couple of instances the final “Why’s that?” option is a video of Leon, talking to you, and trying to break down the concept in a very simple way.

We all learn in different ways so with the chatbot, infographic videos, plus the Leon videos and animated slides, you have many options.

Also for the francophones: vous pouvez choisir la langue française facilement dans le menu anglais ou ici. En français c’est “Comment créer une crise financière”. L’expérience est entièrement bilingue.

SO IF THE ONLINE EXPERIENCE IS SO INFORMATIVE CAN’T YOU JUST EXPLAIN THE FINANCIAL CRISIS TO ME YOURSELF?

Sure, I’ll give it a try, but the whole reason the NFB created this online experience is because the story behind the financial crisis is really complex, and if I try to summarize it, or if anyone does, they are bound to miss something, or maybe over-simplify.

Also, like I said earlier, everyone learns in different ways so my quick summary might not help you and leave you with more questions.

But here’s my rough take on it, which should be read as almost an intro before you start your journey with “How to Create a Financial Crisis”:

BEAU DESCRIBES THE 2008 FINANCIAL CRISIS IN THE SIMPLEST WAY POSSIBLE (WHILE PROBABLY STILL MISSING SOME KEY POINTS)

The reason this happened at all: Banks wanted to make more money. (SURPRISE!)

Your bank realized that they could take your mortgage and sell it to someone else. By selling your mortgage, they get that money back and then they can make money with it by lending it out again to someone else.

As long as you pay your mortgage, then everything is good.

The investor that bought your mortgage gets paid if you keep up your mortgage payments.

Everybody’s happy!

Then the banks start thinking (dangerous, yes):

Man, we need even more money. But, hmm, everyone who has good enough credit to qualify for a mortgage already has a mortgage.

THERE ARE NO MORTGAGES LEFT TO SELL!! HOW WILL WE FEED OUR BANKER CHILDREN!!

Hmm, the rules are way too strict. Let’s let ANYONE get a mortgage! What a great idea!

And we can still sell those risky mortgages to our investors. We’ll just sell them together with the safe mortgages and roll them into a really complicated investment so know one even knows that there is any risk in there.

WE CAN DO THIS FOREVER!!

Then people (who shouldn’t have had mortgages in the first place) weren’t able to make their payments, the investors stopped getting paid so one wanted to buy the mortgages anymore, and the banks basically went bankrupt.

And because the country depends on the banks to keep the economy going, the banks are deemed “too big to fail”. The government gives the banks all the money that they want, and the banks are happy again.

The banks are happy and the only losers in this crisis are EVERYONE BUT THE BANKS.

THE END.

IT’S OBVIOUSLY NOT THAT SIMPLE

What I just said might even be close to what your cousin told you over the holidays that time.

The point is that the NFB put a lot of time and effort – and thought – into making this online experience fun and engaging but also educational.

And at the end there is an optional 10 minute video where Leon goes through everything that was just discussed. I fully recommend you take the time at the end to watch this video as it will definitely fill in any gaps that you have from the experience and solidify any points that were shaky.

So if you’ve ever wanted to really learn something about financial crises, why they happen, and why they will probably keep happening, check out “How to Create a Financial Crisis”.

Happy Financial Literacy Month!

This post is sponsored by the National Film Board of Canada. All expressed opinions and experiences are my own words.