The financial crisis explained in simple terms:
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Printed Date: 20/Apr/2025 at 8:26am
Topic: The financial crisis explained in simple terms:
Posted By: rider.royal
Subject: The financial crisis explained in simple terms:
Date Posted: 11/Mar/2009 at 10:21am
A mail from another forum I recd that is really mind blowing:
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 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 his negativity) of the bank decides
that slowly 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 fulfil 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 against the non-drinkers.
Finally an explanation I understand . . .
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Replies:
Posted By: rider.royal
Date Posted: 11/Mar/2009 at 10:24am
VATICAN HUMOR
After getting all of Pope Benedict's luggage loaded into the limo, (and
he doesn't travel light), the driver notices the Pope is still standing
on the curb.
"Excuse me, Your Holiness," says the driver, "Would you please take your seat so we can leave?"
"Well, to tell you the truth," says the Pope, "they never let me drive
at the Vatican when I was a cardinal, and I'd really like to drive
today."
"I'm sorry, Your Holiness, but I cannot let you do that. I'd lose my
job! What if something should happen?" protests the driver, wishing
he'd never gone to work that morning.
"Who's going to tell?" says the Pope with a smile?
Reluctantly, the driver gets in the back as the Pope climbs in behind
the wheel. The driver quickly regrets his decision when, after exiting
the airport, the Pontiff floors it, accelerating the limo to 205 kph.
(Remember, the Pope is German.)
"Please slow down, Your Holiness!" pleads the worried driver, but the Pope keeps the pedal to the metal until they hear sirens.
"Oh, dear God, I'm going to lose my license -- and my job!" moans the driver.
The Pope pulls over and rolls down the window as the cop approaches,
but the cop takes one look at him, goes back to his motorcycle, and
gets on the radio.
"I need to talk to the Chief," he says to the dispatcher.
The Chief gets on the radio and the cop tells him that he's stopped a limo going 205 kph.
"So bust him," says the Chief.
"I don't think we want to do that, he's really important," said the cop.
The Chief exclaimed," All the more reason!"
"No, I mean really important," said the cop with a bit of persistence.
The Chief then asked, "Who do you have there, the mayor?"
Cop: "Bigger."
Chief: " A senator?"
Cop: "Bigger."
Chief: "The Prime Minister?"
Cop: "Bigger."
Well," said the Chief, "Who is it?"
Cop: "I think it's God!"
The Chief is even more puzzled and curious, "What makes you think it's God?"
Cop: "His chauffeur is the Pope!"
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Posted By: rider.royal
Date Posted: 11/Mar/2009 at 10:25am
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Can I change the topic of a post?? If moderators don't mind, I just wanted it to change to Humour..
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Posted By: Hitesh Shah
Date Posted: 11/Mar/2009 at 10:53am
You may post http://www.theequitydesk.com/forum/forum_posts.asp?TID=866&PID=102239#102239 - here if you wish
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Posted By: mihirs55
Date Posted: 28/Apr/2009 at 4:38pm
Originally posted by rider.royal
A mail from another forum I recd that is really mind blowing:
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 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 his negativity) of the bank decides that slowly 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 fulfil 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 against the non-drinkers.
Finally an explanation I understand . . .
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Posted By: mihirs55
Date Posted: 28/Apr/2009 at 4:41pm
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A brilliant analogy to the sub-prime financial crisis.
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