our economy explained!

[David Farber <dave () farber net>]

Begin forwarded message:

From: "George Margolin" <inventor () rentaninventor com>
Date: April 1, 2009 3:26:52 PM EDT
To: "'David Farber'" <dave () farber net>
Subject: FW: our economy explained!
Reply-To: <inventor () pobox com>


Dave – I have NEVER sent a broadcast email before.  But THIS one is  
clever, and sadly – probably accurate in explaining our financial  
meltdown.

And having been born in Detroit – and having worked my way through  
college in many of the auto plants  – it has ‘AHAA!” – written all  
over it.

IF you haven’t seen it I thought you’d enjoy it and do with it what  
you will.

Best regards from an appreciative recipient of your list.

Regards,
George Margolin
inventor () pobox com


Subject: our economy explained!


It all makes sense now,

Subject: Derivative markets, an understandable explanation

Heidi is the proprietor of a bar in Detroit . 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 about Heidi's drink now pay later marketing strategy
and as a result, increasing numbers of customers flood into Heidi's bar

and soon she has the largest sale volume for any bar in Detroit .

By providing her customers' freedom from immediate payment demands,
Heidi gets no resistance when she substantially increases her prices
for wine and beer, the most consumed beverages. Her sales volume
increases massively.

A young and dynamic vice-president 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 traders transform these customer loans into
DRINKBONDS, ALKIBONDS and PUKEBONDS.

These securities are then traded on security markets worldwide. Naive
investors don't really understand the securities being sold to them as
AAA secured bonds are really the debts of unemployed alcoholics.
Nevertheless, their prices continuously climb, and the securities
become the top-selling items for some of the nation's leading brokerage
houses.

One day, although the bond prices are still climbing, a risk manager at
the bank (subsequently fired due his negativity), decides that the time
has come to demand payment on the debts incurred by the drinkers at
Heidi's.  Heidi demands payment from her alcoholic patrons, but being
unemployed they cannot pay back their drinking debts. Therefore, Heidi
cannot fulfill her loan obligations and claims bankruptcy.

DRINKBOND and ALKIBOND drop in price by 90 %. PUKEBOND performs better,
stabilizing in price after dropping by 80 %. The decreased bond asset
value destroys the banks liquidity and prevents it from issuing new
loans.

The suppliers of Heidi's bar, having granted her generous payment
extensions and having invested in the securities are faced with writing
off her debt and losing over 80% on her bonds. Her wine supplier claims
bankruptcy, her beer supplier is taken over by a competitor, who
immediately closes the local plant and lays off 50 workers.

The bank and brokerage houses are saved by the Government following
dramatic round-the-clock negotiations by leaders from both political
parties. The funds required for this bailout are obtained by a tax
levied on employed middle-class non-drinkers.

Finally an explanation I understand .....


A Good Credit Score is 700 or Above. See yours in just 2 easy steps!




-------------------------------------------
Archives: https://www.listbox.com/member/archive/247/=now
RSS Feed: https://www.listbox.com/member/archive/rss/247/
Powered by Listbox: http://www.listbox.com