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Why Do We Get Financial Crises? Pt 1: Credit Addiction DONE

By Fallible. Originally published at ValueWalk.

You ever wonder why financial crises happen?

And not just once, but over and over again?

You think we would have learned by now right?

By the end of this video you’ll understand why we humans are addicted to credit and why we end up causing financial crises because of it.

When you think of money, you’re really thinking about two separate things: cash and credit.

When you buy something with cash, the transaction is over. There’s no more tie between the two people.

But when you buy something with credit, you’re promising to pay a person in the future, for something they’re giving you right now. The transaction isn’t over until that person actually gets paid.

Any two people can create credit. And doing so is basically like creating money out of thin air.

The problem is that people abuse this power.

And that’s where our economy gets into trouble.  

The video above will describe this process and how it creates both debt cycles and financial crises.

My partners at Macro Ops wrote an article that goes deeper into credit and debt cycles. You can check it out here.  

Make sure to subscribe to the Fallible channel here.

And if you’re on Facebook, you can find our page here.

The post Why Do We Get Financial Crises? Pt 1: Credit Addiction DONE appeared first on ValueWalk.

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