Irish Economics Made Simple

Posted by Unknown On Tuesday, February 1, 2011 7 comments
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, ALKIBONDS and PUKEBONDS. These securities are then bundled and traded on international security markets. Naive investors don'treally 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 fulfill her loan obligations she is forced into bankruptcy. The bar closes and the eleven employees lose their jobs.

Overnight, DRINKBONDS, ALKIBONDS and PUKEBONDS drop in price by 90%.The collapsed bond asset value destroys the banks 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 Irish economics in 2011?

7 comments to Irish Economics Made Simple

  1. says:

    Cat-from-Sydney OMG! So funny yet tragic. ROTFLOL!!!! purrr....meow!

  1. says:

    LC Teh Why does it sound so familiar and so close to home?

  1. says:

    Chrono13 playing with money is playing with fire. if u dont mind can i repost this at my blog? i find this rather informative for one that is not really well-versed in finance.

  1. says:

    Unknown Dear Angelina

    LOL!! An so glad you enjoyed this one! :-) I did too! Take care and have a great week ahead! Stay in touch, dearie!!

    Salam

  1. says:

    Unknown Dear LC Teh

    Ahhh that is the reason why I posted it :-) and I am sure you know too ...

    Take care and here's wishing you and yours Gong Xi Fa Cai!

    Cheers

  1. says:

    Unknown Dear Chrono13 Dancing Mad

    Many thanks for reading my blog. By all means, please repost. Take care and have a blessed CNY!

    Gong Xi Fa Cai!

    Cheers

  1. says:

    Anonymous Ah same like the American sub prime lending which led to their housing collapse in 2009. Its all about greed and get rich quick mentality.

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