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Discussion Starter #1
If you wanted to understand how it happened, read on….

Stavros is the proprietor of a bar in Greece. He realises that virtually
all of his customers are unemployed alcoholics and, as such, can no longer
afford to patronise his bar. To solve this problem, he comes up with new
marketing plan that allows his customers to drink now, but pay later. He
keeps track of the drinks consumed on a ledger (thereby granting the
customers loans).

Word gets around about Stavros's drink now, pay later marketing strategy
and, as a result, increasing numbers of customers flood into Stavros's
bar. Soon he has the largest sales volume for any bar in Greece. By
providing his customers freedom from immediate payment demands, Stavros
gets no resistance when, at regular intervals, he substantially increases
his prices for wine and beer, the most consumed beverages. Consequently,
Stavros'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 Stavros'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 Drinkabonds and Alkibonds. These
securities are then bundled and traded on international security markets.
Naïve investors don't really understand that the triple-A relating to the
bonds means All Alcoholics Anonymous and seem to think that it is some
coveted status symbol.

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 Stavros's bar.
He informs Stavros.

Stavros then demands payment from his alcoholic patrons, but being
unemployed alcoholics they cannot pay back their drinking debts. Since
Stavros cannot fulfil his loan obligations he is forced into bankruptcy.
The bar closes and the eleven workers 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 Stavros's bar had granted his generous payment extensions
and had invested their firm's pension funds in the various Bond
securities. They find they are now faced with having to write-off his bad
debt and with losing over 90% of the presumed value of the bonds. His wine
supplier also claims bankruptcy, closing the doors on a family business
that had endured for three generations, his beer supplier is taken over by
a competitor, who immediately closes the local plant and lays off 150

Fortunately though, the bank, 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 the EU. The funds
required for this bailout are obtained by new taxes levied on employed,
middle-class, non-drinkers who have never been to Greece, never mind drunk
in Stavros's bar for free.

Should know better
2,980 Posts
Pretty good explanation, and not far off either. How to understand the entire global debt crisis through a single Greek bar owner. I like it :thumbup:

3,522 Posts
Good stuff!

Gets us to the crash of 2008.

What now?

I've just started asking (two so far.....needs the right balance of alcohol and conversation) how they make money out of .....say, Greeces misfortunes.

Seems that you buy their bonds cheap and take a gamble that they'll go up....obvious enough.

The gamble?......That there will be a Bailout and the value of the bonds will increase.

In Greece's case there was, so up goes the value of the bonds.

Italy next then.....

Except....that in this case they need a couple of trillion (U.S. or Imperial?) to bail them out and it's unlikely apparently because in a few years they are due to refinance 13 trillion or so and it can't happen.

So if those traders that made money out of the Greek Bailout got excited and piled into Italian bonds fail to get a Bailout then the repercussions will even greater........will the banks need bailng again?

I claim no real knowledge of the above as I'm passing on what I think I'm hearing and if it's totally wrong I'm sure more informed opinion will appear shortly.

Think about it next time you're ranting about a few people in tents trying to find a new way to keep a protest alive and newsworthy (we know that's what you have to do or you don't exist).

And yes..I know it attracts the 'Soap Dodgers'...doesn't everything?

Seems you can camp outside our Parliament Ad Infinitum but don't do it outside the seat of our real Government.

Investment Banks.......F**K 'EM !!! (Well they've done to us....)

P.S. Don't worry how much a trillion is......normal people only ever use them to count bacteria.......:)
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