Monday, January 05, 2009

Candyfloss economics

Gillian Tett, assistant editor of the Financial Times, gave a very nice explanation/analogy of how the credit crunch came about on Womans Hour today

It’s like candy floss. You start with a certain amount of sugar – our real assets - & spin it round & round until you have a great ball of candy floss. We think it really has grown bigger, but we have only the same amount of sugar we started with. The rest is hot air

It is easy, especially when you are young & innnocent, to consume too much & be sick before you know it

And it doesn’t take very much to shrink the floss right back down again into a squidgy mess



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