How do you explain to an innocent citizen of the free world the importance of a credit default swap on a double-A tranche of a subprime-backed collateralized debt obligation? He tried, but his English in-laws just looked at him strangely. They understood that someone else had just lost a great deal of money and Ben had just made a great deal of money, but never got much past that. I can't really talk to them about it, he says. They're English.
The quote reflects the disconnect between the complexities of financial instruments, like credit default swaps and collateralized debt obligations, and the everyday understanding of finance by the general public. The speaker, Ben, struggles to convey the significance of these concepts to his in-laws, who recognize the profit and loss but fail to grasp the underlying mechanisms. This highlights the opaque nature of high finance and its impact on ordinary people's lives.
Furthermore, the anecdote illustrates how advanced financial products can alienate those who are not part of the financial world. Despite being in a position of success, Ben finds it challenging to bridge the gap in understanding, emphasizing that financial literacy varies widely even among educated individuals. This situation encapsulates a broader issue within the finance industry, where the complexities involved often create barriers to comprehension for the general populace.