Can someone please explain?

[Old Mike]

I have never invested in the stock market, because I realise how ignorant I am. I do not make the astronomical amounts of money that bankers seem to.
As far as I understand it, billions of dollars have been lent to people who had track records of not paying their debts.  A whole mob of banks, with highly paid "experts" and gee wiz computers, took over these debts. Then, when the debtors did not pay up these huge banking institutions, showing all the forward planning skills of lemmings in the swimming season, panicked. Then various governments started printing money to pay off these debts.
Is this a fair analysis? What is happening?

[Vulcanl]

Rising housing prices in the US created a situation where banks loosened lending standards (1.  people required larger loans, 2.  "homeowners" used their homes as ATM machines and became serial refinanciers, 3.  The more lenders lend, the more money they and the lawyers, real estate agents, etc make - to generally keep the party going) and that continued to feed the virtuous spiral upward in prices. 

These lenders sold these loans to Wall Street, who repackaged them into bond instruments and turned around and sold them to institutions (hedge funds, banks, etc).  These bonds were supposedly backed by the mortgages that were in turn backed by frothy housing markets in the US.

When the speculative bubble that was the US housing market was pricked, people began defaulting on their loans, no payments made, mortgages now worth less and thus resulting in the bonds held by the hedge funds/banks now being worth significantly less than before. 

Now investors in these hedge funds are taking their money out, forcing these institutions to sell to pay investors.  This is now the vicious spiral down.

Same thing is happening now that has happened countless times in financial history.  A speculative bubble (US Housing) has been pricked.

What is different this time around is that this time the repercussions will be felt everywhere - a truly global event, as the buyers that purchased these bonds were spread out all over the World

[Investor]

There is a good anology in the Scotsman today (UK press).I can't post the link but I'm sure you'll find the article.

Very simply describes how its all going pear shaped in USA and global effect.Basically the money men got greedy (wow thats a surprise) and bad debt is coming home to roost creating liquidity issues.

However looking on the bright side the more US banks in trouble the better off we'll all be in the long run.

[Ur pension]

If you have a pension in UK, shift it into your pensions 'Cash Fund' asap for a bit.