BS: Understanding Economics.

Subject: BS: Understanding Economics.
From: Rog Peek
Date: 15 Mar 09 - 02:35 PM

Since someone sent me this in an email, I am enlightened:

Sadly, this does make sense when looking at this financial meltdown
caused by so-called liberal policies.............

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
acoholics 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 of course fired due his negativity), 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.

There, simple isn't it!

Rog

Subject: RE: BS: Understanding Economics.
From: Bill D
Date: 15 Mar 09 - 04:28 PM

"...a tax levied on the non-drinkers."

...who then take up drinking to drown their troubles, thus saving the country.

Subject: RE: BS: Understanding Economics.
From: Don Firth
Date: 15 Mar 09 - 04:40 PM

Interesting, but simplistic, believe it or not!

Don Firth

Subject: RE: BS: Understanding Economics.
From: Amos
Date: 15 Mar 09 - 05:12 PM

Thanks, Rog. Puts the whole mess into perspective if a bit over simplified.


A

Subject: RE: BS: Understanding Economics.
From: JohnInKansas
Date: 15 Mar 09 - 05:40 PM

The only flaw in the story is the attributing of it all to being caused by so-called liberal policies.

ALL of the changes described happened, in the current meltdown, while the neo-cons were in complete control - at least according to what I saw while I watched it happen.

John

Subject: RE: BS: Understanding Economics.
From: Slag
Date: 15 Mar 09 - 07:42 PM

In the USA:

1913
1933
1964
1982

All but the last were liberal policies. The Reagan mpove was a simple matter, after the wealth was gone, of economics. It cost more to mint a copper penny than it was worth.

Subject: RE: BS: Understanding Economics.
From: Bobert
Date: 15 Mar 09 - 08:08 PM

Yeah, that about sums it up, Rog... But the reason that occured is because the folks who were supposed to be keepin' an eye on the hen houses were all foxes... In the real world this is the Securities and Exchange Commission whos employees became cheerleaders and buddies of the folks who were making the loans to Heidi...

B~

Subject: RE: BS: Understanding Economics.
From: Amos
Date: 15 Mar 09 - 08:25 PM

Well, it was a bit mor eoddball than that--these guys who were making rotten mortgages at a mad rate and rolling them into derivative packages were creating things the law had never anticipated and were doing things through the loophioles.

Subject: RE: BS: Understanding Economics.
From: Mark Ross
Date: 15 Mar 09 - 08:27 PM

A Hobos' View of Economics.

If you had a thousand dollars back in ought 7 and invested in AIG, today you would have 32 dollars and 15 cents.

If you had invested that money in Lehman Brothers, today you would have nothing.

But...if you had bought a thousand dollars worth of beer, drank it all, and recycled the cans and bottles, today you would have $234.77!



Mark Ross

Subject: RE: BS: Understanding Economics.
From: Slag
Date: 15 Mar 09 - 11:50 PM

I'll drink to that!

Subject: RE: BS: Understanding Economics.
From: Riginslinger
Date: 16 Mar 09 - 10:04 PM

"Puts the whole mess into perspective if a bit over simplified..."

               If you want to see "over simpified" personified, or perhaps an "over simpleton," you need to watch Timothy Geithner the next time he appears on television.