You’ve been wondering how Extreme Money would tie in the global economic downturn, right? Well, it seems to have been all about the housing.

For a while now, people have been selling financial products, basing the price on the faith that people in the future might pay more for them. No objects were involved, not even money, and all the players understood that they were playing. Electronic claims for wealth flicked back and forth, but it all mostly affected the very people who were making it all up in the first place. X borrows money from Y to buy stock A, and when stock A goes up a little bit, sells it and earns enough to pay Y back with a little interest, and still to keep a little profit. The price went up because more players have bought stock with borrowed money for the same purpose. No real world things are being sold and really not very much real world money is involved, because it’s all being done with debt. It’s like an electronic game of hot potato, and the losers are the ones who get stuck with stocks they can’t pay for — but they just default, declare bankruptcy, and get back in the game.

Then mortgages became one of the things being played with. I’m inclined to think that the houses were the problem, since they exist in the real world and people actually want to live in them. But people used borrowed money to buy houses, and in some cases they flipped them, paid back the debt, and made a profit. In many cases, though, they couldn’t pay, lost their homes — and the lenders had houses. They didn’t want houses and didn’t know what to do with them. The game got clogged up with real stuff.

It all fell down.

I’ll let you know what happens next. In the meantime, having completed the Summer Top Project, I’ve decided that I will continue sewing a garment a week and end up with a travel SWAP for my trip. I’m including some tops from the STP and probably won’t actually take exactly these things with me (I don’t think wool skirts pack that well), but my fabric collage turned out pretty well and I’m going to give it a shot. I’m also working on Italian with Rosetta Stone, and as long as we only need to talk about children, cats, and eating, I’m going to be fine. However, since I’m only on lesson 2, I assume that I’ll gain more facility before I leave.