NFU Mutual Smallholding Insurance

Author Topic: What went wrong in Europe  (Read 1407 times)

tizaala

  • Joined Mar 2011
  • Dolau, Llandrindod Wells,Powys
What went wrong in Europe
« on: September 06, 2012, 07:38:37 am »
Subject: Dummies guide to what went wrong in Europe .
At last a simple explanation..... sent to me by email.....apologies for its length!!! but it does make the situation clear!!!!
>>
>> Helga is the proprietor of a bar .
>>
>> 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 .
>>
>> Helga keeps track of the drinks consumed on a ledger ( thereby
>> granting the customers' loans .)
>>
>> Word gets around about Helga's " drink now , pay later " marketing
>> strategy and , as a result , increasing numbers of customers flood into
>> Helga's bar .
>>
>> Soon she has the largest sales volume for any bar in town .
>>
>> By providing her customers freedom from immediate payment demands
>> Helga gets no resistance when , at regular intervals , she substantially
>> increases her prices for wine and beer - the most consumed beverages .
>>
>> Consequently , Helga's gross sales volumes and paper profits
>> increase massively .
>>
>> A young and dynamic vice-president at the local bank recognises that
>> these customer debts constitute valuable future assets and increases
>> Helga's borrowing limit .
>>
>> He sees no reason for any undue concern , since he has the debts of
>> the unemployed alcoholics as collateral .
>>
>> He is rewarded with a six figure bonus .
>>
>> At the bank's corporate headquarters , expert traders figure a way
>> to make huge commissions , and transform these customer loans into DRINK
>> BONDS .
>>
>> These " securities " are then bundled and traded on international
>> securities markets .
>>
>> Naive investors don't really understand that the securities being
>> sold to them as " AA Secured Bonds " are really 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 .
>>
>> The traders all receive a six figure bonus .
>>
>> 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 Helga's bar.
>>
>> He so informs Helga.
>>
>> Helga then demands payment from her alcoholic patrons but being
>> unemployed alcoholics , they cannot pay back their drinking debts .
>>
>> Since Helga cannot fulfil her loan obligations she is forced into
>> bankruptcy .
>>
>> The bar closes and Helga'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 in the community.
>>
>> The suppliers of Helga's bar had granted her generous payment
>> extensions and had invested their firms' pension funds in the DRINK 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 multibillion dollar
>> no-strings attached cash infusion from the government.
>>
>> They all receive a six figure bonus.
>>
>> The funds required for this bailout are obtained by new taxes levied
>> on employed , middle-class , non-drinkers who've never been in Helga's
>> bar.
>>
>> Now do you understand ?
Voss Electric Fence

Brucklay

  • Joined Apr 2010
  • Perthshire
    • Brucklay Pygmy Goats
    • Facebook
Re: What went wrong in Europe
« Reply #1 on: September 06, 2012, 09:12:28 am »
 :innocent: Thanks Tiz - even I can understand that
Pygmy Goats, Shetland Sheep, Zip & Indie the Border Collies, BeeBee the cat and a wreak of a building to renovate!!

Hermit

  • Joined Feb 2010
Re: What went wrong in Europe
« Reply #2 on: September 06, 2012, 09:47:05 am »
In other words get your priorities right with money right from the begining. Stop moaning about bankers and become one and stop wanting everything given,expecting other folk to pay and then being jealous of those that have.  If everyone took care of themselves and moved forward at their own pace/ income we would all be better off.
An excellent description and breakdown of the situation . Does not say where the unemployed went next to spend my hard earned tax money, they probably went to spend it on food for their family ::)

Mad Goatwoman of Madeley

  • Joined Sep 2011
  • Telford
Re: What went wrong in Europe
« Reply #3 on: September 06, 2012, 11:05:35 pm »
But will they learn from this?

Beewyched

  • Joined Feb 2011
  • South Wales
    • tunkeyherd.co.uk
Re: What went wrong in Europe
« Reply #4 on: September 07, 2012, 10:20:14 am »
Very clever  :thumbsup:  ...
Even I "get it" now  :eyelashes:
Tunkey Herd - registered Kune Kune & rare breed poultry - www.tunkeyherdkunekune.com

 

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