KEY POINTS:
This chart is getting a lot of airplay in the financial services world at the moment. Produced by US banking conglomerate JP Morgan, it paints a clear picture as any of what it looks like when a financial bubble bursts.
For those readers who can't be bothered following the link above, the bubble-pop graphic depicts the market value of 15 of the world's biggest banks as at the end of June 2007 and again at January 20 this year.
While the statistics could have been compiled by almost anybody, the image works because the JP Morgan marketing wonks have cleverly presented the current bank valuations as green circles within the expansive blue circles of 2007 - they even look like bubbles within bubbles.
Some institutions fare better than others but the overall picture is one of massive destruction of wealth - and/or credit.
How the world's biggest banks get into such a mess so fast is explained in this article published in the high-minded US magazine City Journal. The story, which also features some nice cartoons, takes a mainly bleak outlook but does try to muster up a semi-optimistic ending. It also describes quite plainly some of the basics of how banking and credit works - the conjuring trick at the heart of modern finance.
If you're looking for something a bit more technical on how banking works (or doesn't), try this classic from the annals of the US Federal Reserve.
David Chaplin
