Dear Jim,
This is a pretty good explanation of the financial crisis.
CIGA Doug
"Heidi is the proprietor of a bar in Berlin Germany. 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 Heidi’s bar.
Taking advantage of her customers’ freedom from immediate payment constraints, Heidi increases her prices for wine 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 Heidi’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 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 the time has come to demand payment of the debts incurred by the drinkers at Heidi’s bar.
However they cannot pay back the debts.
Heidi 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 Heidi’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.
The funds required for this purpose are obtained by a tax levied on the non-drinkers.
Finally an explanation I understand…"
Dear Mr. Sinclair,
According to Martin Armstrong: "We may be in the midst of a "Waterfall Effect" that could undermine the very structure of Western Civilization. Historically, it has always been the debt crisis that destroys the greatest plans of men and dictators. This could be phase two of the collapse of Marxism. After phase one reshaped Russia and China, phase two may mean that it is the United States’ turn."
He goes on to state: "I cannot stress enough that the level of volatility that we are experiencing during this financial crisis is just well beyond even that experienced during the early stages of the Great Depression and is more akin to the collapse of Rome."
He concludes with the following: "We are on the edge where the way of life may be altered forever."
And now for the bad news…
Cheers,
Mahatma
Mahatma,
I wish it were not true, but the last many years, most certainly the last, has busted the West making them stone cold broke. Gold is the only answer. There is nothing else!
Armstrong, although certainly colorful life wise, is a genius – a word I rarely use. To not take heed will cost you greatly!
I strongly recommend that you and all readers of JSMineset see the interesting movie "W."
Jim
Martin Armstrong: Is It Time To Turn Out The Lights?
Posted: 03/11/2009 21:27:45
This Economic Depression is far more complex than meets the eye. I believe that the Investment Bankers, in their own greed, used the final days of the Bush Administration to try to grab as much as they could while there was an ex-Goldman Sachs boss in the driver seat.
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