DRINK

Just got this sent to me, its an explanation from a beer drinkers point of view of why the economy has gone to shit. Its a good read, and the pics on the bottom are even better.

True explanation of the derivative markets

At last, what we have all been waiting for, an understandable
explanation of derivative markets… and why we’re in this economic
pickle.

Heidi is a proprietor of a bar in Detroit. In order to increase
sales, she decides to allow her loyal customers – most of whom are
unemployed alcoholics – to drink now and pay later. She keeps track
of the drinks consumed on a ledger (thereby granting her customers
loans).

Word gets around about Heidi’s drink now pay later marketing strategy
and as a result, increasing numbers of customers flood into Heidi’s
bar and soon she has the largest sales volume of any bar in Detroit.
By providing her customers freedom from immediate payment demands,
Heidi gets no resistance when she substantially increases her prices
for beer and wine, the most consumed beverages, Her sales volume
increases massively.

A young and dynamic vice-president at the local bank recognizes these
customers debts as valuable assets and increases Heidi’s borrowing
limit. He sees no reason for undue concern since he has the debts of
these alcoholics as collateral, At the bank’s corporate
headquarters, expert traders transform these customer loans into
DRINKBONDS, ALKIBONDS and PUKEBONDS. These securities are then
traded on security markets worldwide. 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,
their prices continuously climb, and the securities become top-
selling items for some of the nation’s leading brokerage houses who
collect enormous fees on their sales, pay extravagant bonuses to
their sales force, who in turn, purchase exotic sports cars and multi-
million dollar condominiums.

One day, although the bond prices are still climbing, a risk manager
at the bank, (subsequently fired due to his negativity), decides the
time has come to demand payment on the debts incurred by the drinkers
at Heidi’s bar. Heidi demands payment from her alcoholic patrons,
but being unemployed they cannot pay back their drinking debts.
Therefore, Heidi cannot fulfill her loan obligations and claims
bankruptcy. DRINKBOND and ALKIBOND drop in price by 90%. PUKEBOND
performs better, stabilizing in price after dropping by 80%. The
decreased bond asset value destroys the banks liquidity and prevents
it from issuing new loans.

The suppliers of Heidi’s bar, having granted generous payment
extensions and having invested in the securities are faced with
writing off her debt and losing over 80% on her bonds. Her wine
supplier claims bankruptcy, her beer supplier is taken over by a
competitor, who immediately closes the local plant and lays off 50
workers. The bank and brokerage houses are saved by the Government
following dramatic round-the-clock negotiations by leaders from both
political parties. The funds required for this bailout are obtained
by a tax levied on employed middle-class non-drinkers.

And there you have it…

Australia