gmsc’s money tips #20:

With the current financial crisis happening, anything else you do with your money is going to be affected by it. The more you understand it, the better.

The best way to start is to forget names of the parties involved, and understand the process as a whole. Jonathan Jarvis has put together a well-received video that describes the process that happened, called The Crisis of Credit Visualized, which is just over 11 minutes long. It’s also available in YouTube, broken up into Part 1 and Part 2.

Once you’ve got your head around the process itself, it’s time to learn about the particular parties involved in the building of the financial crisis. Not surprisingly, with the government involved, these details get political very quickly. The blame gets placed on Republicans or on Democrats, and quickly escalates to capitalism vs. socialism. Take a look at the approach used by FOX News’ Saving Our Economy: What’$ Next? versus that of NPR’s Bad Bank episode of This American Life.

The best approach, however, is to delve into the principles behind the personalities and the politics. John Allison, the chairman of the board of BB&T Corporation and the longest-tenured CEO of any top-25 financial services company, gives an interesting 90-minute talk delving into the principles that started this mess longer ago than you may think. The talk’s slides are available as a PDF, which helps make this talk much easier to digest.