what went wrong with the economy?

Marina Lee explains. Read it all here.

Short version:

1. Low interest rates –> heavy investing and heavy borrowing
2. Extra borrowing and low regulation –> extra subprime mortgages
3. Extra subprime mortgages and speculation –> housing bubble
4. Housing bubble starts to burst –> Homes are worth less than loans –> more foreclosures
5. More foreclosures –> mortgages back securities fail –> Credit default swaps are collected –> banks fail
6. Banks fail –> Crisis of Confidence –> banks won’t lend to other banks
7. Banks won’t lend to other banks –> Credit Crunch
8. Credit Crunch –> Stock market falls –> Crisis of Confidence
9. Repeat 6-8 –> Negative feedback loop, “rolling crisis”