NOT knowing the meaning of financial terms, and how the system works can, in the words of John Lanchester whose 2013 book is titled How to Speak Money, says in this 2014 New Yorker article, WILL hurt you financially.
“…when the finance industry says ‘credit’, what it really means is ‘debt’. If you don’t know that, you are likely to get into trouble.”
He goes on to give us really good, readable and interesting explanation of why in the rest of article.
The world is full of priesthoods. On the one hand, there are the calculations that the pros make in private; on the other, elaborate ritual and language, designed to bamboozle and mystify and intimidate.
The latest episode (the 2008/09 crash) had even many so-called-experts fooled. If you haven’t read the Michael Lewis book The Big Short about the mortgage mess, the movie (staring Brad Pitt) is coming soon and I recommend it.
Reading this Money Talks article will give you a good basis for understanding Lewis’ book. As Lanchester explains:
During the recent credit crunch, many suspected that the terms for the products involved were deliberately obscure: it was hard to take in the fact that C.D.S.s were on the verge of bringing down the entire global financial system when you’d never even heard of them until about two minutes before.
While I certainly don’t recommend anyone spend time watching daily financial media like CNBC or Bloomberg TV, understanding how the financial sector functions is a critical part of building wealth in the 21st century.