Current world finances explained so I can understand!
Results 1 to 2 of 2

Thread: Current world finances explained so I can understand!

  1. #1
    Registered User Array
    Join Date
    Jun 2008
    Just coming over the bridge
    2005 RC51

    Current world finances explained so I can understand!

    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 customer's 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 who collect enormous fees on their sales, pay extravagant bonuses to their sales force, who in turn purchase exotic sports cars and multi-million-dollar

    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 bar.

    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.

    Now I get it

  2. #2
    Thank You Vets Array jafkaf81's Avatar
    Join Date
    Aug 2007
    Canadian Murder Capital
    '07 triumph 675 (Trashed)
    Instant classic ......... nice find
    I can only surmise that the "2005" in your name is derived from your year of birth. You weren't born yesterday, but pretty damn close to it. - Howattzer to Phantom2005
    BCSB Ride Video links ---

Posting Permissions

  • You may not post new threads
  • You may not post replies
  • You may not post attachments
  • You may not edit your posts