Recession Explained

THE CURRENT GLOBAL ECONOMIC CRISIS EXPLAINED
 
Adam is the proprietor of a fast food restaurant in New York. Sales are low and, in order to increase them, he comes up with a plan to allow his customers to eat now and pay later. He keeps track of the meals consumed on a ledger.  

Word gets around and as a result increasing numbers of customers flock to restaurant. The suppliers are delighted and are very willing to sell more and more raw materials for the meals he prepares. Adam shows them his ledger of receivables and they extend him credit.

A young and dynamic customer service consultant at the local bank recognizes these customer debts as valuable future assets and gives Adam a credit line and then increases Adams' borrowing limit.

Taking advantage of his customers' freedom from immediate payment constraints, Adam jacks up the prices of his Burgers and Shakes. Customers dont mind as they are not required to pay on the spot. Sales volume increases massively; Banks and suppliers lend more; Adam opens more outlets. He sees no reason for undue concern since he has the debts of the customers as collateral.

At the bank's corporate headquarters, expert bankers recognize Adams' customer loans as assets and transform these customer assets into BONDS. These negotiable instruments are given exotic names such as FISHNCHIPSBOND, DOUBLEBACONBOND, BEEFBURRITOBOND AND CHOCOLATESHAKEBOND. These securities are then listed on the Stock Exchange and traded on markets worldwide. No one really understands what the names mean and how the securities are guaranteed but, nevertheless, as their prices continuously climb, the securities become top-selling items.

One day, although the prices are still climbing, a credit risk manager of the bank decides that the time has come to demand payment of one of the debts incurred by Adam. Adam in turn asks his clients to pay up. One by one they refuse; the clients cannot pay back the debts. Adam refuses to serve them any more. The clients stop coming.

Adam is really screwed now. He cannot fulfill his loan obligations and therefore claims bankruptcy. All Bonds drop in price by between 80 to 95%.

The suppliers of Adam, having granted generous payment due dates and having invested in the securities are faced with similar problems. The meat supplier defaults on payment to the sheep and cattle supplier and claims bankruptcy. The Cheese supplier is taken over by a competitor; Adam lays off the cook and staff.. Bankruptcies soar, unemployment mushrooms.

The bank that lent the money in the first place is set to collapse. It is saved by the Government following dramatic round-the-clock consultations by leaders from the governing political parties with Adam commuting back and forth in his Executive jet and Mercedes 500SEL, brokering the deal.

The funds required to save the economic collapse are obtained by a tax levied on the citizens, most of whom do not eat Burgers or Shakes.
 
UNDERSTOOD?

• Recession Explained - for dummies
  • Makes you cry a little doesn't it? - sbMT

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insulting anyone who goes to synagogues.....and I quote:

 as the hypocrites do in the synagogues and on the streets

Without missing a beat she said "Well, just move the chair and place it over the ring...No fuss, no muss!"....  Cat

so, why would there be a raise in benefits if there is no inflation?