Ed's Blog

This story was sent to me by a good friend and client with the comment: "Self explanatory." Something Tea Partiers, Occupy Wall Streeters, and just about everybody else can relate to!

Thought you'd get a kick out of it. Neither he nor I can assign attribution to it, but would be glad to give proper credit. So, if any of you out there can send me proper attribution, I will post it!

Here goes- enjoy!

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 volume increases massively.

A young and dynamic vice-president at the local Wall Street bank
recognizes 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!!!
At the bank's corporate headquarters, expert traders figure a way to
make huge commissions, and transform these customer loans into
DRINKBONDS.

These "securities" then are bundled and traded on international
securities markets.

Naive investors don't really understand that the securities being sold
to them as "AA" "Secured Bonds" really are 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 still are 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, DRINKBOND 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 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.

The funds required for this bailout are obtained by new taxes levied on
employed, middle-class, non-drinkers who have never been in Helga's bar.