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Pengumuman Economics 2011
Pengumuman Economics 2011
Economics 2011
Mary is the proprietor of a bar in Dublin . She realises that
virtually all of her customers are unemployed alcoholics and, as such,
can no longer afford to patronise her bar. To solve this problem, she
comes up with new marketing plan that allows her customers to drink
now, but pay later. She keeps track of the drinks consumed on a ledger
(thereby granting the customers loans).
Word gets around about Mary’s “drink now, pay later” marketing
strategy and, as a result, increasing numbers of customers flood into
Mary’s bar. Soon she has the largest sales volume for any bar in
Dublin .
By providing her customers’ freedom from immediate payment demands,
Mary gets no resistance when, at regular intervals, she substantially
increases her prices for wine and beer, the most consumed beverages.
Consequently, Mary’s gross sales volume increases massively. A young
and dynamic vice-president at the local bank recognises that these
customer debts constitute valuable future assets and increases Mary’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 and
Alkibonds.
These securities are then bundled and traded on international security
markets. Naïve investors don’t really understand that the securities
being sold to them as ‘AAA’ secured bonds are really the 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 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 Mary’s bar. He
so informs Mary. Mary then demands payment from her alcoholic patrons,
but being unemployed alcoholics they cannot pay back their drinking
debts. Since Mary cannot fulfil her loan obligations she is forced
into bankruptcy. The bar closes and the eleven employees lose their
jobs.
Overnight, Drinkbonds and Alkibonds drop in price 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 Mary’s bar had granted her generous
payment extensions and had invested their firms’ pension funds in the
various 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 multi-billion euro
no-strings-attached cash infusion from their cronies in government.
The funds required for this bailout are obtained by new taxes levied
on employed, middle-class, non-drinkers who have never been in Mary’s
bar.
Now, do you understand economics in 2011?”
virtually all of her customers are unemployed alcoholics and, as such,
can no longer afford to patronise her bar. To solve this problem, she
comes up with new marketing plan that allows her customers to drink
now, but pay later. She keeps track of the drinks consumed on a ledger
(thereby granting the customers loans).
Word gets around about Mary’s “drink now, pay later” marketing
strategy and, as a result, increasing numbers of customers flood into
Mary’s bar. Soon she has the largest sales volume for any bar in
Dublin .
By providing her customers’ freedom from immediate payment demands,
Mary gets no resistance when, at regular intervals, she substantially
increases her prices for wine and beer, the most consumed beverages.
Consequently, Mary’s gross sales volume increases massively. A young
and dynamic vice-president at the local bank recognises that these
customer debts constitute valuable future assets and increases Mary’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 and
Alkibonds.
These securities are then bundled and traded on international security
markets. Naïve investors don’t really understand that the securities
being sold to them as ‘AAA’ secured bonds are really the 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 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 Mary’s bar. He
so informs Mary. Mary then demands payment from her alcoholic patrons,
but being unemployed alcoholics they cannot pay back their drinking
debts. Since Mary cannot fulfil her loan obligations she is forced
into bankruptcy. The bar closes and the eleven employees lose their
jobs.
Overnight, Drinkbonds and Alkibonds drop in price 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 Mary’s bar had granted her generous
payment extensions and had invested their firms’ pension funds in the
various 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 multi-billion euro
no-strings-attached cash infusion from their cronies in government.
The funds required for this bailout are obtained by new taxes levied
on employed, middle-class, non-drinkers who have never been in Mary’s
bar.
Now, do you understand economics in 2011?”
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