The
financial crisis explained in simple terms:
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 (subsequently of course
fired due his negativity) of the bank decides that slowly 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
fulfil 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 on the non-drinkers.
There you
have it.
Finally an
explanation I understand.
Have
a great day and thanks for stopping by Almost Heaven South.
Larry
Larry
Haha that did make much more sense than anything I've read in the newspaper!
ReplyDeleteI thought the same thing Joanne.
DeleteSad but true, oh so true.
ReplyDeleteSam
HA! Well, there you have it.
ReplyDeletenailed it - sounds so familiar - and yes, explained so even I can understand...
ReplyDeleteThis drives me to drink.
ReplyDelete