mangogrooveworkshop
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| posted on 6/3/09 at 09:58 PM |
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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 fired, due of course to his negativity) of the bank slowly 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 on the non-drinkers.
Finally, an explanation that can be understood!...
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Simon
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| posted on 6/3/09 at 10:54 PM |
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That clears it up nicely, thanks
ATB
Simon
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gazza285
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| posted on 7/3/09 at 12:04 AM |
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Pretend money earned by pretentious people for years, then the house of cards falls down and we all suffer. How can a company lose 75, 80, 90% of
it's worth in a day? It can't. It's either been overvalued by the traders for profit, or sold short by traders for profit.
It's actual value in terms of profitabilty and assets does not change, so why should it's value? The whole stock market is just pretending
things worth and it stinks. Thank God I've no savings, a tracker mortgage, and a secure(ish) job.
DO NOT PUT ON KNOB OR BOLLOCKS!
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