Hippy Stuff, Maybe Saving the World

Why People Are Occupying Wall Street and Everywhere

Abe WalkingBear
Abe WalkingBear

Understanding Derivatives :-)

Heidi is the proprietor of a bar in Detroit …

She realizes that virtually all of her customers are unemployed alcoholics and, as such, can no longer afford to patronize her bar.

To solve this problem, she comes up with a new marketing plan that allows her customers to drink now, but pay later.

Heidi keeps track of the drinks consumed on a ledger (thereby granting the customers loans).

Word gets around about Heidi’s “drink now, pay later” marketing strategy and, as a result, increasing numbers of customers flood into Heidi’s bar. Soon she has the largest sales volume for any bar in Detroit .

By providing her customers freedom from immediate payment demands, Heidi gets no resistance when, at regular intervals, she substantially increases her prices for wine and beer, the most consumed beverages.

Consequently, Heidi’s gross sales volume increases massively.

A young and dynamic vice-president at the local bank recognizes that these customer debts constitute valuable future assets and increases Heidi’s borrowing limit.

He sees no reason for any undue concern because 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.

These “securities” then are bundled and traded on international securities markets.

Naive investors don’t really understand that the securities being sold to them as “AAA Secured Bonds” really are 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 still are 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 Heidi’s bar. He so informs Heidi.

Heidi then demands payment from her alcoholic patrons. But, being unemployed alcoholics — they cannot pay back their drinking debts.

Since Heidi cannot fulfill her loan obligations she is forced into bankruptcy. The bar closes and Heidi’s 11 employees lose their jobs.

Overnight, DRINKBOND prices drop 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 Heidi’s bar had granted her generous payment extensions and had invested their firms’ pension funds in the 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 multibillion dollar no-strings attached cash infusion from the government. The bailout deal also calls for tax cuts for the top 1% and the bankers give themselves big bonuses.

The funds required for this bailout are obtained by new taxes levied on employed, middle-class, nondrinkers who have never been in Heidi’s bar.

Posted by Abe WalkingBear in LinkedIn Group, reposted here with permission.

The Occupy movement is being heatedly discussed in a topical group on LinkedIn.   In one discussion, a gentleman known as Abe WalkingBear tried to explain the absurdity of the current banking / economic system in America.

What’s written here about Heidi and her bar, the thinking goes, is why folks are Occupying Wall Street, and occupying everywhere else.  Worth a read.

Update:  Abe WalkingBear says he borrowed this piece from Aldo Carasco who is occupying DC, just FYI, in the interest of proper attribution.

New Green Economy

How FEMA Can Help You Build A Better House

Follow up post for Vermonters: In the wake of Tropical Storm Irene, many Vermonters are rushing to make significant repairs to their homes and businesses before winter sets in.  See our previous post about Irene with photos from one week after.

State and Federal Emergency Management Agency officials have one message: Take the time to make the next natural disaster less destructive by rebuilding “better and safer.”

“Our mitigation specialists are continuing to reach out to Vermonters as part of the long-term recovery,” said FEMA’s Federal Coordinating Officer, James N. Russo. “They can offer cost-effective ways to make your home or business ‘better and safer’ the next time flooding or some other disaster strikes.”

This is good to know for anyone in a disaster zone where FEMA might help.

In this case, the mitigation specialists are attending public events ranging from farmer’s markets to fall festivals offering residents information about rebuilding flood-damaged structures.

In addition to valuable information on how to reinforce structures against flooding and other hazards, they can provide information on the National Flood Insurance Program, which provides federally backed insurance against flood damage to residents of participating communities.

The specialists can also offer advice on mold and mildew cleanup, and how electrical systems, furnaces and other appliances can be protected from flooding.

Free publications on a variety of rebuilding and recovery topics are also available.

To download materials on a variety of topics about strengthening property, go to http://www.fema.gov/rebuild/recover/resources.shtm

To register for FEMA aid, please visit http://www.DisasterAssistance.gov. Call 800-621-FEMA (3362) or TTY at 800-462-7585. Users of Video Relay Service (VRS) may call 800-621-3362. The toll free phone numbers are staffed from 7 a.m. to 10 p.m. seven days a week until further notice. If needed, multilingual specialists are available. By Smartphone or tablet, use m.fema.gov. The registration deadline for disaster assistance is Nov. 15.  Fond and best wishes to all New Englanders who suffered.