[BITList] The Dummy's Guide to the US Economy!

[David Harvey]

But John, you missed the massive bonuses paid to the bank and brokerage
executives

Dave

On 16 November 2011 20:39, John Feltham <wantok at me.com> wrote:

>
> *Do You Wish To Understand The U.S.Economy..?? ... a great example*
>
>
> Mary is the proprietor of a bar in Dublin. She realizes that virtually
> all of her customers are unemployed alcoholics and, as such, can no
> longer afford to patronize her bar. To solve this problem, she comes up
> with a new marketing plan that allows her customers to drink now, but pay
> later. She keeps track of the drinks consumed on a ledger (thereby
> granting the customers loans).
> Word gets around about Mary's *"drink now, pay later"* marketing strategy
> and, as a result, increasing numbers of customers flood into Mary's bar. Soon
> she has the largest sales volume of any bar in Dublin.
>
> By providing her customers freedom from immediate payment demands, Mary
> gets no resistance when, at regular intervals, she substantially increases
> her prices for wine and beer, the most consumed beverages.
>
> Consequently, Mary's gross sales volume increases massively. A young and
> dynamic vice-president at the local bank recognizes that these customer
> debts constitute valuable future assets and increases Mary'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 corporate headquarters, expert traders figure a way to make
> huge commissions, and transform these customer loans into DRINKBONDS,
> ALKIBONDS and PUKEBONDS. These securities are then bundled and traded on
> international security markets. Naive investors don't really understand
> that the securities being sold to them as AAA secured bonds are really
> the debts of unemployed alcoholics. Nevertheless, the bond prices
> continuously climb, and the securities soon become the hottest-selling items
>  for some of the nation's leading brokerage houses.
>
> One day, even though the bond prices are still 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 Mary's bar. He so informs Mary.
>
> Mary then demands payment from her alcoholic patrons, but being
> unemployed alcoholics they cannot pay back their drinking debts. Since,
> Mary cannot fulfill her loan obligations she is forced into bankruptcy. The
> bar closes and the eleven employees lose their jobs.
>
> Overnight, DRINKBONDS, ALKIBONDS and PUKEBONDS drop in price by 90%. The
> collapsed bond asset value destroys the banks liquidity and prevents it
> from issuing new loans, thus freezing credit and economic activity in the
> community.
>
> he suppliers of Mary's bar had granted her generous payment extensions and
> had invested their firms' pension funds in the various 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
> claims 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 multi-billion euro no-strings
> attached cash infusion from their cronies in Government. The funds
> required for this bailout are obtained by new taxes levied on employed, middle-class,
> non-drinkers who have never been in Mary's bar.
>
>
> *Now, do you understand economics in 2010-11?*
>
>
>
>
>
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