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Hedge Funds & Ponzi Schemes for Dummies

With 1.1 million monthly downloads, “Planet Money” podcasts spread plain talk about the faltering economy.

Any idea what capital asset pricing model is? How about collateral debt obligations? Short-term solvency ratios?

Maybe Jim Cramer, the Wall Street Journal and Maria Bartiromo assume everybody knows. Adam Davidson (at left in photo above) and Alex Blumberg of NPR don’t — and that helps explain why their podcasts of “Planet Money,” which teach the financially unwashed how the global economy got so sideways, are all the rage.

In November, just two months after its debut, “Planet Money” podcasts hit 1.1. million downloads for the month — a stunning number for a news program. Last Friday, the most recent episode ranked fifth among the tens of thousands of podcasts available on iTunes.

For financial reporting, they’re sui generis. Unlike Cramer’s “Mad Money” on CNN, Davidson and Blumberg don’t screech. Unlike the Journal, they’re always easy to follow. Unlike Bloomberg News, they use adjectives and adverbs.

What they don’t do is recommend, predict or speculate — which takes them off Jon Stewart’s radar screen.

“It’s a great opportunity to reach a mass audience,” said Jeff Orr, senior analyst for mobile content at ABI Research in Oyster Bay, Long Island. “They’re not trying to appeal to the financial industry. It’s for that part of the population that gets current news from MP3 players, iPods and iPhones.’’

By untangling complex issues, “Planet Money” helps level the financial information playing field and sooth anxieties among ordinary citizens angry at the Wall Street geniuses who got us where we are. Now that we’re poor as hell and not going to take it anymore, we can at least understand what happened.

A podcast last week featured an interview with a guy named Josh Bearman, now grown, explaining how, as a third grader in the 1980s, he conned his classmates into trading him their lunchbox goodies for the promise of a cake he knew his mother would never bake. His scheme netted lots of fruity rollups and Nutter Butter bars but finally unraveled when a skeptical classsmate named Spencer argued for refunds, exposing Josh as a fraud.

By the end, who could not be even madder still at Bernie Madoff.

In another program, Davidson, Blumberg and NPR reporter David Kestenbaum used 20 $10 bills to simulate how Madoff’s ponzi scheme worked, with Kestenbaum as Madoff promising returns of 10 percent a year on every $100 of investment. Talking through it step by step, they explained that as Blumberg returned $10 a year in profit and kept $40 for himself, he managed to stay afloat only by convincing Davidson to invest his $100.

When the “market plunged” and Blumberg demanded his initial $100 investment back, the jig was up.

“So we’re clarifying why we hate him,’’ said Davidson. (Or someone else … see last paragraph).

  
“Planet Money” has grown from a segment on the Public Radio International program “This American Life” to a full-blown industry, with weekly radio reports, a monthly deep radio dive into a timely subject, a blog and once five-weekly, now thrice-weekly podcasts of 20 to 30 minutes each available through iTunes, Yahoo, Zune and npr.com.

And who among us now can afford not to understand what’s roiling the economy. For the financially curious, the range of options has always been heavily weighted toward outlets of assumed-prior-understanding, like the Journal and CNBC. “Planet Money” brings it down to base level, using expository formats, often humorous, that leave ranting, noisy debate and predictions to others.

So who’s listening?

Consider this from Montana Sen. Max Baucus at a Senate hearing on the economy, as recorded by The Hill, a newspaper that covers Congress: “I think one reason that confidence is not restored — there are tons of reasons — but one is because people just don’t understand TARP and TALF and all these different toxic assets and purchase and repurchase and so on and so forth. They just don’t understand it. When you try to explain it, when Chairman Bernanke tries to explain it, members of Congress try and explain it, it’s Greek. It’s no language. It doesn’t — it’s not understandable.”

After Treasury Secretary Tim Geithner agreed, he added: “You know, I don’t want to overstate this point, but I have been listening to NPR. I think it’s ‘American Experience,’ American something, about a week or two ago, and trying to explain all this in simple terms, starting with a balance sheet. This guy had $10 and he had loaned to somebody who had a piggy — (inaudible) — doll house and so on. It just got more and more and more. I thought it was very well done.”

Okay, so Baucus got the program name wrong. But the larger point is, with “Planet Money” you have a couple of guys chatting, kibitzing and playing taped interviews, as if we’re down at the corner bar, drinking beers.

One small annoyance: Davidson and Blumberg — and Kestenbaum, for that matter — sound enough alike that it’s not always easy to know who’s talking.

Oh, and the one who agrees with the others by saying, “exactly” all the time might consider an alternative.