Now can you understand the current economic situation? A fable:- > > Christine is the proprietor of a local pub > > She realises that virtually all of her customers are unemployed alcoholics > > and, as such, can no longer afford to patronize her pub. To solve this > > problem, she comes up with a new marketing plan that allows her customers > > to drink now, but pay later. Christine keeps track, in a ledger, of the drinks consumed and of the > > customers' loans so they can keep on drinking. > > > > Word gets around about Christine's "drink now, pay later"marketing strategy > > And, as a result, increasing numbers of customers flood into Christine'sbar. > > Soon she has the largest sales volume for any bar. By providing her > > customers freedom from immediate payment demands, Christine gets no resistance > > when, at regular intervals, she substantially increases her prices forwine > > and beer, the most consumed beverages. > > > > Consequently, Christine's gross sales volume massively increases. > > > > A young and dynamic senior manager at the local bank recognises that these > > customer debts constitute valuable future assets and increases Christine'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 regional > > corporate headquarters, expert traders figure a way to make huge commissions > > and transform these customer loans into DRINK BONDS. These "securities" > > are then are bundled and traded on international securities markets. > > > > Naive investors don't really understand that the securities being sold to > > them as "AAA Secured Bonds" are really debts of unemployed alcoholics. > > Nevertheless, the bond prices continuously climb!!! 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 Christine's pub. > > > > He so informs Christine. Christine then demands payment from her alcoholic patrons > > but being unemployed alcoholics they cannot pay back their drinking debts. > > Since Christine cannot fulfil her loan obligations she is forced into > > bankruptcy. The pub closes and Christine's 11 employees lose their jobs. > > > > Overnight, DRINK BOND 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 inthe > > community. The suppliers of Christine's pub 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 is placed into 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/pound/euro no-strings > > attached cash infusion from the government. > > > > The funds required for this bailout are obtained by new taxes levied on > > employed, middle-class, moderate or non-drinkers....... who have never been in > > Christine's pub. > > > > > > Now do you understand? Now its all clear to me,,,,,,,,,,,,,,,,,,,,,,,,,,,,,I think ? BUT, Where the **** was Christine`s pub?
I enjoyed it! I'm currently at the end of a book called "too big to fail" which goes into the American crash and lehman brothers and how at one stage the honestly thought the whole thing was going to go up in smoke. Nobody had any money and they were all leveraged (in debt) up to their necks. When Lehman went bust, thousands of jobs were lost, investors, particularly the small investor (people with pensions etc) LOST EVERYTHING. Lehman's CEO at the time Dick Fuld, The Gorilla of Wall Street, as Fuld was known, steered Lehman deep into the business of subprime mortgages, bankrolling lenders across the country that were making convoluted loans to questionable borrowers. Lehman even made its own subprime loans. The firm took all those loans, whipped them into bonds and passed on to investors billions of dollars of what is now toxic debt. For all this wealth destruction, Fuld raked in nearly $500 million in compensation during his tenure as CEO, which ended when Lehman did. Hardly payment for success is it but what a reward for failure!!!!!! Now for me his £500 million dollars should be shared out among those "little people" who lost everything due to his and others total incompetence. You look at any firm that fails these days and look at what their directors are walking away with if a firm goes under, these people ALWAYS walk away with fortunes whilst others go unpaid. What get's done about it **** all!
Fuld has even transfered their 13.8 million dollar mansion into his wife's name as he fears he could lose it to a law suit by those he happily saw left with nothing. For me this guy should be languishing in prision and should be up there with Bin laden for crime against the west!
Tony,,,,Justice eventually hits everybody, too late for the small guy, but it will happen. no matter how big you are you will fall, as I said too late and too little for the small guy.
Brilliant read that. Thanks, it really explains what happened. Unfortunately without concerted international government action to reform the global financial systems there is nothing to prevent it happening again in 20-30 years when everyone has forgotten how we got here.
In my opinion, the capatalist system of rule and governance which has engulfed the global society is a recipe for disaster...It is solely designed to make the rich even richer at the expense of the masses, and in the long term will undoubtedly lead to conflict and revolt... PS...I'm not a communist by any means, but would just like to see the global wealth being shared in a fairer way.
I could not agree more. History tells us this and I always wonder why governments fail to learn from the past. There is significant evidence (disputed by some global economists - but they would wouldn't they!) that more equal societies with less gap between highest and lowest earners, have happier people, and are more socially inclusive, responsible and stable with lower crime levels. Have you read the book The Spirit Level by Richard Wilkinson and Kate Pickett? It is worth a look if you are interested in the subject.
The alternative way was communism and it still had people at the top with lots of money and a little dacha in the country. No matter how you distribute wealth it will always find its way into just a few pockets
