How U.S. Economy Got Messed Up

Ok, to explain this we will be using simple examples of everyday life.

Linda is the proprietor of a bar in Cork. 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 Linda’s bar.

Taking advantage of her customers’ freedom from immediate payment constraints, Linda increases her prices for wine and beer, the most-consumed beverages. Her sales volume increases massively. (This was mistake number one. She shouldn’t have given the alcohol on credit because it is always easier to default on payments than to actually pay them off.)

After some time, a young and dynamic customer service consultant at the local bank recognizes these customer debts as valuable future assets and increases Linda’s borrowing limit. He sees no reason for undue concern since he has the debts of the alcoholics as collateral. (This is mistake number two. By thinking that the business is doing good since a lot of merchandise is being sold, the credit limit was increased allowing Linda to spend even more without worrying about paying it off. Since she spent more money on alcohol, her customers wouldn’t be in a rush to pay their debt, knowing she has money to keep buying the product.)

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 to his negativity) of the bank decides that slowly the time has come to demand payment of the debts incurred by the drinkers at Linda’s bar. However they cannot pay back the debts. (What a surprise!)

Linda cannot fulfill 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 Linda’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 (and vested interests).

The funds required for this purpose are obtained by a tax levied on the non-drinkers.

Bottom Line: People who work hard for their income are the ones who end up paying for the mistakes of others AND the mistakes of the government. But then again, its not like the taxpayers money is being used for something good anyways.

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