Education, Technology and Games

This American Life Podcast

Posted on October 8th, 2008 in Uncategorized

Check out the actual podcast

http://www.thisamericanlife.org/Radio_Episode.aspx?episode=365

 I listened to a wonderful podcast today. This American Life and Radio Lab are two amazing podcasts that I have used in my classroom in the past. Theses podcasts are informative and very entertaining. They both use very high production methods. They both use interesting sounds and songs to break up otherwise simple stories that teaches the audience something new. The topics can be about anything and they use their sounds and words to paint wonderful pictures.

This is a perfect time for a high school economics class. The economics of white collar crime can be unbelievably complex and irrational. The drive for money and power which can boil down to basic greed will make once pure hearted men and women turn into irrational beasts. Our economy is based on basic capitalistic principles. After the Great Depression the powers that be realized the “Pure Capitalism” can create havoc and despair. The fundamental concept of pure capitalism is that there will be winners and losers. The winners will ultimately take all, and it only takes playing a couple games of the popular board game “Monopoly” to understand this concept. The post Depression leaders made some changes to the system and instituted some Socialist policies that would regulate the private sector. Once government intervention was introduced into the private sector a new game started. The game turned into a complex strategy of cat and mouse. Who ever could understand the new government laws and rules best and then bend them in their favor would become the new winner. All the while the public was idling sitting by, trusting that the new government entities were doing their job to make sure the greedy capitalists were not able to repeat their tricks that brought the economy to a halt the first time. Over the years the tricks and rule bending became more and more complex. The government was doing their best to keep the laws up with the 21^st century digital age, but to no avail. White collar capitalists became more and more careless with their investments. Junk bonds, Hedge funds, Sub-prime Mortgage Loans were the quickest way to get rich. While the public had some clue about the dangers of these types of high risk investments, they had no idea about the true economy killer, Credit Default Swaps.

Credit Default Swaps are wagers that only a person or company with over five million dollars can wage. The way it works is a person or company can make a bet on a any company by placing the wager with a willing bank. If the company actually fails then the failing company gets a huge chunk of money from the bank and the person who made the wage wins too. Why would a bank allow a person to take a bet out on a company? Most banks saw tons of money fall into their hands knowing (or thinking) that the business was never going to go under. The bets were more like insurance policies. A person could pay 20 million dollars to insure a company for a billion dollars. Thousands of bets were being placed subsequently the bank was pulling in billions of dollars. This new money was invested and more money was be made. It is just like a thousand people who “you” dont know taking out life insurance on You! If you die, then all these people win if they bought in when you were healthy. No bank expected the large companies like Lehman Brothers to collapse. Once the collapse did occur the banks couldn’t pay the bets; too many bets had been made. Over 40 trillion dollars in bets dues were owed when in fact only about four trillion dollars of actual bet money had been placed. Remember these bets were more like insurance policies. All the banks froze their lending/credit because they weren’t sure if they were going to have any money to lend. The scary part was that banks were betting with and on other banks. All of this was totally unregulated. If banks don’t have any money to lend, then the whole economy stops. That is because almost every daily transaction happens through short term money market loans. Businesses and governments (state and local) depend on these credit lines to be open to pay for bills, payroll and capital improvements. Uh oh. You have only seen the beginning. Let’s pray for the best.