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Comment by kypro | Hacker News Reader

Would be slightly more insightful if it was inflation adjusted. The circles on the right should be ~30% smaller.

And if the circles’ areas, not their radii, were the failed assets. As it is, a circle’s apparent size (we judge 2D shapes by their area, not any one linear dimension — although this is difficult to do in practice, and linear marks are generally superior) is the failure size squared, which distorts the data a boatload.

Here is a, er, more faithful representation of the data. The recent failures don't look quite so crazy anymore!

https://observablehq.com/d/d85ce0c639bc4df7

I have also built an alternative as a stacked bar chart https://observablehq.com/@mjbo/bank-failures-as-a-stacked-ba...

The circle version is terrifying. The stacked bar chart is even more terrifying.

Right, it makes me wonder whether we are really good at looking at areas or not.

They still look pretty crazy to me! https://www.fdic.gov/bank/historical/bank/index.html

Total assets of banks failed in 2008 + 2009 => 373 + 171 = 544 Billion

Total assets of banks failed in 2023 (so far, still 2/3 to go) 548 Billion

The total bank assets doubled in the meantime (from 11-12TN to 23TN)[1] so proportionally it's half than 2008 + 2009, but that's still gigantic.

[1] https://fred.stlouisfed.org/series/TLAACBW027SBOG via https://nitter.lacontrevoie.fr/2Steady4U/status/165337475754...

FWIW, I think the size of the insolvency is more telling of the failure than the AUM. E.g. First Republic was about ~$13B in the hole when it was taken over. Otherwise a large bank with a large hole looks way worse than a small bank with a huge hole.

The circles' areas are showing the failed assets. Observable Plot defaults to using a square root scale when encoding a quantity with the radius of a circle.

https://observablehq.com/plot/marks/dot#dot-options

TIL, thanks. Guess they are crazy after all.

You'd think that radius meant radius, but that'd be too simple.

So weird, should it not be the area of the circle being the value? The radius should be √(Area/π) not the square root of the value or am I misunderstanding?

Circles don't have volumes?

The volume of a circle would presumably be zero, but yes I've used the wrong word. I'll change it above. I sometimes wish there was a forum that allowed editing of spelling in other peoples posts and they could just accept the changes (same with Twitter). You could spend all your days correcting obvious mistakes...

> The volume of a circle would presumably be zero, but yes I've used the wrong word.

i guess?

> I sometimes wish there was a forum that allowed editing of spelling in other peoples posts and they could just accept the changes (same with Twitter). You could spend all your days correcting obvious mistakes...

nice and interesting idea except some people are awful and would abuse that feature :(

maybe you should make a forum with that feature!

In this case, the x-axis is a different unit from the unit of data measured by the radius, so the fact that it's off by a constant multiple doesn't matter; it's just an arbitrary scale.

If both the x- and y-axes were encoding data in the same unit as the area encoded, then it might make sense to correct for the area, but I don't think I've ever seen a plot like that.

> we judge 2D shapes by their area

I've seen this claim a few times in discussions about such charts, but it's far from obvious to me that this is really true. My best guess based on my own perception is that we estimate quantities represented by circles as proportional to something between the diameter and the area.

Wouldn't that be even worse for interpretability?

Well is the unit is the diameter, then why add extra dimensionality at all then?

That’s literally what bar charts are for.

I can feel a Tufte monologue coming on, even.

Human beings are spectacularly shit at comparing areas. If you put two circles next to each other, one with double area of the other, most humans will say their relation is 3:2.

You ploted the size on a log scale and claim "the recent failures dont look quite so crazy anymore?" Is this a joke?

Log 10, and the scale doesn't start st zero as if to compensate.

What i find with graphs is that they scales and ranges are often chosen to look "alright" and always to communicate an intended message.

Aside those datasets anyway what's truely going now is most likely under the surface still. RemindMe! In a year.

When I posted this the only change I'd made was to sqrt the assets (which I now see was wrong). The lollipop chart came later.

That's a log scale...

I would also have a 2nd plot that has all banks / banking / bank assets with the failures in a different color, so we could identify the relative size of the failed banks, and also see the actual size of the big players in banking.

This uses a log y axis. The circles are actually better for visualizing.

Thanks for that!

It's also leaving out non-FDIC bank failures like Lehman, Bear Stearns et. al. which would make the '08 crisis much (MUCH) larger.

Basically post-2008 the class of "investment banks" basically disappeared. But none of that is shown in this chart.

They didn't hold deposits. So it's kind of reasonable. They are called "bank" but they aren't the same kind of institution.

but it's misleading. The financial crisis was basically triggered by those, and not by the ones shown here in 2008-2009.

But they held "value" that was "gone" from one day to the other which triggered the financial crisis.

In reality they weren't worth anything but the realization that those values were worthless was the trigger. But those values were on the balance sheets and should therefore be visualized as well.

Only where "deposits" are defined as FDIC-insured consumer accounts. Clearly they held other people's money for them, which is pretty close to the economic definition of a bank.

I can understand why these banks were omitted but it completely changes the picture. Lehmans and Bear Stearns were the bank failures of 2008.

Are you trying to say that the current crisis is nothing ? These are famous last words.

Voices of moderation are just that.

This person adjusted the values for inflation

https://twitter.com/viralhysteria/status/1653369995877908481

"More insightful" is too gentle. At best the chart is misleading. But the _mistake_ to not adjust money for inflation is very common unfortunately...

If we are comparing the impact, shouldn't it be adjusted for the size of the economy? The U.S. GDP was under $15T in 2008 and is over $23T today.

And how about relative to M1 money supply?

Comparing to M1 doesn't make much sense, but “total bank assets” roughly doubled in the meantime: https://fred.stlouisfed.org/series/TLAACBW027SBOG

The definition of M1 and M2 money was changed in May 2020, conveniently right as the government started printing money for their pandemic response.

But inconveniently long after savings accounts started being demand deposits due to online bill pay, atms and easy access to electronic funds transfers.

If you are going to complain about changing the definitions you should complain that they did it too late.

Yep you raise a great point, but I'm not quite sure how I'd peg the "right" time for them to have changed the definition.

Whenever the definition is changed at a minimum it means historical data can't be compared easily across the different definitions.

My main point here was simply that comparing M1 or M2 money between now and anytime prior to May 2020 is likely not a useful number.

I was thinking the same!

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