Skip to comments.Don't Understand the Bail-out? Just Read This.
Posted on 02/27/2009 7:49:05 AM PST by freespirited
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 of the bank (subsequently fired, of course, due his negativity) decides that slowly 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.
Kind of makes you want to PUKE, doesn’t it?
Perfect. But don’t forget the part where the bank takes the bailout money and gives huge bonuses to the geniuses who created the bonds, because, hey, you don’t want talent like that to get away.
What we've seen lately is that folks were allowed to stay and drink far too long. Now we've got the hangover.
The story was fine, but this line “Word gets around and as a result increasing numbers of customers flood into Heidi’s bar.” should have read,
“The city government decides that they are concerned that the homeless cannot also get drinks put on their tab just as the regular customers are doing. They pressure Heidi into providing expensive drinks to the homeless as well as her regular paying customers.”
pretty good analogy
The bail out is easy: take from the producers and give to the dead beats.
Clearest explanation I have seen yet.
well said.. can I quote you in my management class?
Maybe the German version of the ACLU should sue to insure the rights of the homeless to participate. Illegals too.
What’s so hard to learn about the “bailout”?
-It’s a payback for all radical groups that gave these criminals money.
-Steal wealth and destroy this country and the people.
-Can’t beat us by force, then bankrupt us.
-Oppress the people, steal their spirits and take everything...then move on to the next country!
How about the part where the Government tells Heidi that she MUST make these loans to even the most destitute of the Alcoholics to ensure that everyone gets “their fair chance” to drink themselves silly!
It wouldn’t be fair of her to decide who should get the credit and who shouldn’t.
I can't understand why these bonds should be worth anything less than CARBONCREDITS.
Btw, great post.
Now you've kicked the sacred cow.
“well said.. can I quote you in my management class?”
You want to quote “bookmark”?...lol
Hat Tip: Theo Spark @ Last Of The Few
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