Stathis, I think Bruno is not realistic enough. Here is a better story - a solution to understand the situation: ---------
*The Financial Crisis Explained* Heidi is the proprietor of a bar in Berlin . In order to increase sales, she decides to allow her loyal customers - most of whom are unemployed alcoholics - to drink now but pay later. She keeps track of the drinks consumed on a ledger (thereby granting the customers loans). Word gets around and as a result increasing numbers of customers flood into Heidi's bar. Taking advantage of her customers' freedom from immediate payment constraints, Heidi increases her prices for wine and beer, the most-consumed beverages. Her sales volume increases massively. A young and dynamic customer service consultant at the local bank recognizes these customer debts as valuable future assets and increases Heidi's borrowing limit. He sees no reason for undue concern since he has the debts of the alcoholics as collateral. At the bank's corporate headquarters, expert bankers transform these customer assets into DRINKBONDS, ALKBONDS and PUKEBONDS. These securities are then traded on markets worldwide. No one really understands what these abbreviations mean and how the securities are guaranteed. Nevertheless, as their prices continuously climb, the securities become top-selling items. One day, although the prices are still climbing, a risk manager of the bank -- subsequently, of course, fired due his negativity -- decides that the time has come to demand payment of the debts incurred by the drinkers at Heidi's bar. However they cannot pay back the debts. Heidi cannot fulfill her loan obligations and claims bankruptcy. DRINKBOND and ALKBOND drop in price by 95%. PUKEBOND performs better, stabilizing in price after dropping by 80%. The suppliers of Heidi's bar, having granted her generous payment due dates and having invested in the securities are faced with a new situation. Her wine supplier claims bankruptcy, her beer supplier is taken over by a competitor. The bank is saved by the government following dramatic round-the-clock consultations by leaders from the governing political parties. The funds required for this purpose are obtained by a tax levied against the non-drinkers. Finally an explanation I understand ... JohnM On Tue, Apr 28, 2009 at 8:59 AM, Stathis Papaioannou <stath...@gmail.com>wrote: > > 2009/4/28 Bruno Marchal <marc...@ulb.ac.be>: > > > Sure. I will ask a bank to lend me huge amount of money, I promise > > them to reimburse when I will win ten times the big lottery in a row. > > Not so far fetched, really. > > > -- > Stathis Papaioannou > > > > --~--~---------~--~----~------------~-------~--~----~ You received this message because you are subscribed to the Google Groups "Everything List" group. To post to this group, send email to everything-list@googlegroups.com To unsubscribe from this group, send email to everything-list+unsubscr...@googlegroups.com For more options, visit this group at http://groups.google.com/group/everything-list?hl=en -~----------~----~----~----~------~----~------~--~---