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Chat - Tuesday December 6, 2011; Do You Have Eagle Plans?
Topic Started: Dec 6 2011, 02:33 AM (564 Views)
jillers
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Eagle Guardian
Dummies guide to what went wrong in Europe.

(And in the USA housing/financial markets)



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 fulfil 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’ve never been in Helga’s bar.


Now do you understand?
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Artsy Mom
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Eagle Guardian
Karen I am keeping David in my prayers...good thing he was told not to drive until they understand what caused his seizure. Very cute Snoopy and Woodstock cartoon :D

Jill thanks for the recipe :)^ and I still don't understand :blink:  :lol: rofl

Those birds are so beautiful Ozzie. I loved that email with all the exotic ones!!!

Keeping :X: for NX :wub:

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Harpo516
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Eagle Guardian
Karen - I agree - one step at a time - my DB has seizures as a result of a car accident - they thought he was all well and then they appeared - very easily managed with meds .. hoping for good results
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