A timely must-read: Kevin Nguyen explains the financial crisis to his kid sister using Pokémon cards as an analogy.
Kevin: Imagine that I let you borrow $50, but in exchange for my generosity, you promise to pay me back the $50 with an extra $10 in interest. To make sure you pay me back, I take your Charizard PokÃ©mon card as collateral.
Olivia: Kevin, I don’t play PokÃ©mon anymore.
Kevin: I’m getting to that. Let’s say that the Charizard is worth $50, so in case you decide to not return my money, at least I’ll have something that’s worth what I loaned out.
Kevin: But one day, people realize that PokÃ©mon is stupid and everyone decides that the cards are overvalued. That’s right–everybody turned twelve on the same day! Now your Charizard is only worth, say, $25.