This is part two of Bad Attitudesí primer on the meltdown. The excerpt below is from the full transcript (PDF) of a terrific episode of NPRís This American Life. Itís long, but worth your time. For one thing, it goes a considerable ways toward answering the question Iíve raised a couple of time here: Exactly what scummy lies did the Wall Street usurers tell to convince so many presumably sane people to take on more debt than they could possibly repay?
Adam Davidson: Right. The global pool of money. That's where our story begins. Most people donít think about it but thereís this huge pool of money out there, which is basically all the money the world is saving now. Insurance companies saving for a catastrophe, pension funds saving money for retirement, the central bank of England saving for whatever central banks save for. All the worldís savings.
And, by the way, before you finance enthusiasts start writing any letters, we do know that 70 trillion technically refers to that subset of global savings called fixed-income securities. Everyone else can just ignore what I just said. Letís put 70 trillion dollars in perspective. Do this. Think about all the money that people spend everywhere in the world. Everything you bought in the last year, all of it. Then add everything Bill Gates bought. And all the rice sold in China and that fleet of planes Boeing just sold to South Korea. All the money spent and earned in every country on earth in a year: that is LESS than 70 trillion, less than this global pool of money.
Alex Blumberg: Wow, thatís a lot of money.
Adam Davidson: It is a lot of money. And that money comes with an army of very nervous men and women watching over the pool of money: investment managers. This army is nervous because they don't want to lose any of that money and they also want to make it grow bigger. But to make it grow, they have to find something to invest in. So, for most of modern history, they bought really, really safe, really boring investments: things called treasuries and municipal bonds. Boring things. But then, right before our story starts, something changed, something happened to that global pool of moneyÖÖÖ