Sunday, February 13, 2011

Is All This News to You?

I'm not going to write much here. I'm just going to suggest that you watch both of these movies. This will be a confirmation to what you already know or a rude awakening to you about how money, meaning national currency, is created and events that are pending in our economies in the world. Since I am in America, both these movies focus on the USA economy, but the pending events are going to be felt on a global scale on the whole.

If you want to be prepared and protected, action must be taken beginning NOW. You cannot afford to do what you have done over the past decades. Watch the movies and begin to plan accordingly. 
I'll be posting what helpful tips that I can. 
Here are the two movies:

Here is a story that will give you an idea of what exactly happened in America during the last decades that caused the recent and pending catastrophic events: Heidi's Chicago Bar

Heidi is the proprietor of a bar in Chicago. 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 begins granting the customers' loans (which they cannot repay) and keeps track of the drinks consumed on a ledger. 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 Chicago.  
Heidi's suppliers are thrilled with her large orders for supplies. With her increased orders, they offer increased credit to Heidie. This credit is supported by the bankers who, as we all know, are in the business of making loans to stable businesses, and all the wineries, beer and liquor companies were long time, well established companies.

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.  Very soon other bars, not to be out done by Heidi's bar, duplicate her easy credit process. Sales skyrocket. Business is booming.

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, since he has the debts of the unemployed alcoholics as collateral.  Over lunch, he brags about his new credit support system to his associates who handle the other bars' accounts. Within the week, all wine, beer and liquor debts are accounted as bank assets. Again, credit is increased in order to increase the bank's asset base.

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 DRINKBONDS prices continuously climb, and these securities soon become the hottest-selling items for some of the nation's leading brokerage houses and are sold and bought world-wide.  

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. The same happens to the other bars who followed Heidi's system. 

Overnight, DRINKBONDS 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 DRINKBONDS 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 dollar, 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 Heidi's bar.

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