Jack explains the financial crisis

Discussion in 'The Quarterdeck' started by chockhead819, Mar 13, 2009.

Welcome to the Navy Net aka Rum Ration

The UK's largest and busiest UNofficial RN website.

The heart of the site is the forum area, including:

  1. the financial crisis explained ......... ...

    Doris is the proprietor of a bar in Portsmouth. In order to increase sales, she decides to allow her loyal customers - most of whom are unemployed ex-matelots - 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 Doris's bar.

    Taking advantage of her customer's freedom from immediate payment constraints, Doris increases her prices for rum 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 Doris'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 BEERCHITS, ALKYBONDS 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 the time has come to demand payment of the debts incurred by the drinkers at Doris's bar.

    However they cannot pay back the debts.

    Doris cannot fulfil her loan obligations and claims bankruptcy.
    BEERCHITS and ALKYBOND drop in price by 95%. PUKEBOND performs better, stabilizing in price after dropping by 80%.

    The suppliers of Doris's bar, having granted her generous payment due dates and having invested in the securities are faced with a new situation. Her rum 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 on the non-drinkers
     
  2. Totally understand now! Thank You
     
  3. sgtpepperband

    sgtpepperband War Hero Moderator Book Reviewer

  4. I see the light at last :lol:
     
  5. I'll drink to that :drunken:
     

Share This Page