2009/4/29 John Mikes <jami...@gmail.com>:

> 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

Excellent story, worth the brief deviation from the thread topic!


-- 
Stathis Papaioannou

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