The Financial Crisis, As Explained to a 14 Year Old

I stumbled upon this and thought it was hilarious and a pretty accurate, easy to understand explanation of the financial crisis. This was originally published at (at this link) so they over there deserve all the credit. It was published almost a year ago so some of you may already be familiar, nevertheless, enjoy.

Kevin: Imagine that I let you borrow $50, but in exchange for my generosity, you promise to pay me back the $50 with an extra $10 in interest. To make sure you pay me back, I take your Charizard Pokémon card as collateral …

Let’s say that the Charizard is worth $50, so in case you decide to not return my money, at least I’ll have something that’s worth what I loaned out.

But one day, people realize that Pokémon is stupid and everyone decides that the cards are overvalued. That’s right—everybody turned twelve on the same day! Now your Charizard is only worth, say, $25.

At the same time, you’re having trouble paying back the $60 you owe me. So what would you rather do: try and pay me back the $60 or just default and give me your $25 Charizard?

Olivia: I’d give you the Charizard.

Exactly. Who wouldn’t? Now, the bank — I mean me — has lost $25 when I expected to make $10. What’s the lesson here?

Olivia: Pokémon is dumb

Enough said 😉

If you liked this, please subscribe to my triweekly updates via RSS or Email. Thank you!

2 People have left comments on this post

» SS4BCNo Gravatar said: { Aug 24, 2009 - 03:08:18 }

Hahah this is really cute. Kids can be really smart sometimes. =)

Jesse MichelsenNo Gravatar Reply:

Like they say, kids can be very perceptive 😉 luckily my kids arent old enough to make such comments 😉

Sorry, comments for this entry are closed at this time.