Welcome to the American Revolution II

Welcome to the American Revolution II
But when a long train of abuses and usurpations, pursuing invariably the same object evinces a design to reduce them under absolute despotism, it is their right, it is their duty, to throw off such government, and to provide new guards for their future security.
"We face a hostile ideology global in scope, atheistic in character, ruthless in purpose and insidious in method..." and warned about what he saw as unjustified government spending proposals and continued with a warning that "we must guard against the acquisition of unwarranted influence, whether sought or unsought, by the military-industrial complex... The potential for the disastrous rise of misplaced power exists and will persist... Only an alert and knowledgeable citizenry can compel the proper meshing of the huge industrial and military machinery of defense with our peaceful methods and goals, so that security and liberty may prosper together."Dwight D. Eisenhower

Wednesday, April 8, 2009

How Our Economy Got Messed Up

Linda is the proprietor of a bar in Hawaii. 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 Linda's bar.

Taking advantage of her customers' freedom from immediate payment constraints, Linda 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 Linda'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 (subsequently of course fired due to his negativity) of the bank decides that slowly the time has come to demand payment of the debts incurred by the drinkers at Linda's bar.

However they cannot pay back the debts.Linda 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 Linda'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 (and vested interests).

The funds required for this purpose are obtained by a tax levied on the non-drinkers.

by Babith Thomas

No comments:

Post a Comment