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Current Financial Crisis explained in simple terms


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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 because he has the promissory notes

of

Heidi's customers as collateral.

 

At the bank's corporate headquarters, expert bankers transform these

customer assets into DRINKBONDS, ALKBONDS and PUKEBONDS. These

securities

are then sold and 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 due his negativity), decided that the time

has

come to start demanding payment from Heidi for the debts incurred by the

drinkers at Heidi's bar.

 

Unfortunately Heidi's customers cannot pay back any of their debts to

Heidi.

 

Heidi cannot fulfill her loan obligations to the bank and claims

bankruptcy.

 

DRINKBOND and ALKBOND drop in price by 95 %. PUKEBOND performs better,

stabilizing in price after dropping by only 80%.

 

The suppliers of Heidi's bar, having granted her generous payment terms

and

also having invested in the securities are faced with a new and

desperate

situation. Her wine supplier claims bankruptcy and 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. They came

up

with a miraculous rescue plan that saved the bank.

 

The funds required for this massive rescue are obtained by levying a new

tax on all the non-drinkers.

 

Finally a simple explanation........................

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