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Explaining the economy....using drunks as examples

Discussion in 'Politics, Elections & Legislation' started by Brian in Oregon, Jan 29, 2012.

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  1. Brian in Oregon

    Brian in Oregon Well-Known Member

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    Explaining Modern Finance And Economics Using Booze And Broke Alcoholics<br>
    Submitted by Tyler Durden on 01/27/2012 14:08 -0500

    http://www.zerohedge.com/news/explaining-modern-finance-and-economics-using-booze-and-broke-alcoholics

    -----------------------------

    "Helga is the proprietor of a bar.

    She realizes that virtually all of her customers are unemployed alcoholics and, as such, can no longer afford to patronize her bar.

    To solve this problem, she comes up with a new marketing plan that allows her customers to drink now, but pay later.

    Helga keeps track of the drinks consumed on a ledger (thereby granting the customers’ loans).

    Word gets around about Helga’s “drink now, pay later” marketing strategy and, as a result, increasing numbers of customers flood into Helga’s bar. Soon she has the largest sales volume for any bar in town.

    By providing her customers freedom from immediate payment demands, Helga gets no resistance when, at regular intervals, she substantially increases her prices for wine and beer, the most consumed beverages. Consequently, Helga’s gross sales volume increases massively.

    A young and dynamic vice-president at the local bank recognizes that these customer debts constitute valuable future assets and increases Helga’s borrowing limit.

    He sees no reason for any undue concern, since he has the debts of the unemployed alcoholics as collateral!!!

    At the bank’s corporate headquarters, expert traders figure a way to make huge commissions, and transform these customer loans into DRINKBONDS. These “securities” then are bundled and traded on international securities markets.

    Naive investors don’t really understand that the securities being sold to them as “AA” “Secured Bonds” really are debts of unemployed alcoholics.

    Nevertheless, the bond prices continuously climb!!!, and the securities soon become the hottest-selling items for some of the nation’s leading brokerage houses.

    One day, even though the bond prices still are climbing, a risk manager at the original local bank decides that the time has come to demand payment on the debts incurred by the drinkers at Helga’s bar.

    He so informs Helga.

    Helga then demands payment from her alcoholic patrons, but being unemployed alcoholics they cannot pay back their drinking debts.

    Since Helga cannot fulfill her loan obligations she is forced into bankruptcy.

    The bar closes and Helga’s 11 employees lose their jobs.

    Overnight, DRINKBOND prices drop by 90%. The collapsed bond asset value destroys the bank’s liquidity and prevents it from issuing new loans, thus freezing credit and economic activity in the community.

    The suppliers of Helga’s bar had granted her generous payment extensions and had invested their firms’ pension funds in the BOND securities. They find they are now faced with having to write off her bad debt and with losing over 90% of the presumed value of the bonds.

    Her wine supplier also claims bankruptcy, closing the doors on a family business that had endured for three generations, her beer supplier is taken over by a competitor, who immediately closes the local plant and lays off 150 workers. Fortunately though, the bank, the brokerage houses and their respective executives are saved and bailed out by a multibillion dollar no-strings attached cash infusion from the government.

    The funds required for this bailout are obtained by new taxes levied on employed, middle-class, non-drinkers who have never been in Helga’s bar."

    (c) ZeroHedgeFund.com
     
  2. daddiooo

    daddiooo TS Supporters TS Supporters

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    Wait a minute...this rings a bell.....oh yeah, congress, Barney Frank, Chris Dodd, Chuck Schumer, Charlie Rangel, Nancy Pelosi, Harry Reid, Maxine Waters, Barbara Boxer, Diane Feinstein and the housing scam. There was probably liquor involved in that too.


    This will help some of the simple simon mentalities understand a national scam when they see it.


    Good post Brian.
     
  3. Bisi

    Bisi TS Member

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    Sounds about right. 21stcentury high fiance.

    One sentence out of the above -

    "By providing her customers freedom from immediate payment demands, Helga gets no resistance when, at regular intervals, she substantially increases her prices for wine and beer,"

    Sounds just like what the colleges do. Since the majority of students are getting loans and don't have to pay em back till down the road, nobody complains about the costs.
     
  4. wayneo

    wayneo Active Member

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    OK. how do you want to fix it?

    Wayne
     
  5. tj303

    tj303 Member

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    "how do you want to fix it?"

    1) Don't make loans to people/businesses that can't reasonably be expected to repay the loans! 2)The government should not guarantee loans that are too risky for banks to underwrite! 3)No government loans for political purposes i.e. 'alternative energy'!
     
  6. halfmile

    halfmile Well-Known Member

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    Wayne, you can start by shutting down the Department of Education and reinstating the Glass-Steagall act. Repeal of this act brought on the whole mess we are in now.

    If you like I can send you an essay on the subject.

    HM
     
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