Here's a second try. Imagine that lots and lots of people own shares in the mineral rights to various oil fields. Oil is at a really high price, all those righ

Here's a second try. Imagine that lots and lots of people own shares in the mineral rights to various oil fields. Oil is at a really high price, all those rights are being traded for tons of money, and they're assets collectively valued at billions of dollars. All of the sudden, the value of oil plummets to a fraction of its former price. So cheap, in fact, that it costs more to get the oil out of the ground than you can sell it for. So all these mineral rights aren't worth anything anymore, there's no more income coming in from selling the oil, the fancy drilling and exploration equipment is being auctioned off for pennies on the dollar, and all the people depending on that money go broke. Then their employees, accountants, lawyers, dentists, real estate agents, grocery stores, furniture stores, and everyone else that depended on that cash flowing go broke. And, of course, a lot of people bought those oil rights or that expensive equipment on borrowed money that they can't pay back. So now the banks go under, and hurt anyone depending on those banks. That's a brief synopsis of how billions of dollars vanished in the blink of an eye in the Texas oil boom collapse (and then the Savings and Loan collapse) in the 80s. The real estate thing is more or less the same thing, but with mortgage backed securities. Once it turned out that people couldn't pay back all those ridiculous mortgages they'd been getting, suddenly the right to collect those mortgage payments was worth a fraction of what it had been. And all the high-flying companies that were getting rich off of owning, trading, and packaging those securities suddenly were left holding little pieces of paper that went from being worth billions to being worth a tiny fraction of that. Because it turned out that those mortgages were worth way less than everyone had thought they were worth, all that money effectively just vanished.