The story is really insightful:
Heidi is the proprietor of a bar in Berlin. In order to
increase sales, she decides to allow her loyal customers -
most of whom are unemployed alcoholics - to drink now but
pay later. She keeps track of the drinks consumed on a
ledger (thereby granting the customers loans).
Word gets around and as a result increasing numbers of
customers flood into Heidi's bar.
Taking advantage of her customers' freedom from
immediate payment constraints, Heidi increases her prices
for wine and beer, the most-consumed beverages. Her sales
volume increases massively.
Since she was buying more liquor , she got extended debt
period from her alcohol suppliers to bar . A young and
dynamic customer service consultant at the local bank
recognizes these customer debts as valuable future assets
and increases Heidi's borrowing limit.
He sees no reason for undue concern since he has the debts
of the alcoholics as collateral.
At the bank's corporate headquarters, expert bankers
transform these customer assets into bonds like
DRINKBONDS, ALKBONDS and PUKEBONDS. These securities are
then traded on markets worldwide. No one really understands
what these abbreviations mean and how the securities are
guaranteed. Nevertheless, as their prices continuously
climb, the securities become top-selling items.
So no one was complaining, Customer getting drink on debt,
Heidi getting drink on credit from supplier and paying it
with the money she get with the banker. Banker sold it off
to market as bond and these bonds were being purchased and
sold among investment bankers among themselves.
One day, although the prices are still climbing, a risk
manager (the spoil sport) of the bank decides that the time
has come to demand payment of the debts incurred by the
drinkers at Heidi's bar.
However they cannot pay back the debts.
Heidi cannot fulfill her loan obligations and claims
bankruptcy.
DRINKBOND and ALKBOND drop in price by 95 %. PUKEBOND
performs better, stabilizing in price after dropping by 80 %.
The suppliers of Heidi's bar, having granted her
generous payment due dates and having invested in the
securities are faced with a new situation. Her wine supplier
claims bankruptcy, her beer supplier is taken over by a
competitor.
The bank is saved by the Government following dramatic
round-the-clock consultations by leaders from the governing
political parties.
The funds required for this purpose are obtained by a tax
levied on the non-drinkers.
Cheers !!!
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