Tuesday, September 23, 2008

An Economic Fairytale.

Once upon a time, I was very immature and believed what MasterCard said on its commercials.
(phalanx of business suit clad marchers. singing:) "100,000 banks behind you!" as they paraded over a giant MasterCard. I got one and used that image to fluff up my ego until...

One day I had a medical crisis. Big bad reality slapped me with $3,000 of un-planned-for expense. Reality can be so MEAN!

I LOST my MasterCard when the bank realized I couldn't pay them back. I cried and cried.
So some wealthier friends and I invested in Real Estate, Junk Bonds and a drug to make a penis grow. We got REALLY, REALLY, REALLY rich!

Then one day the government told us owners of Real Estate that it wasn't fair to exclude poor people from home ownership. 

So, the NINJA loan was born. "No Income, No Job or Assets". All of us MBA-types knew this was C-R-A-Z-Y! But it is not politically correct to protest being "open minded" and or  "liberal". We didn't want to be called "meanies".

We had all these, well, "holy and righteous" loans. What to do, what to do...?

Then one of our business associates over at The Investment House of Sock It To 'Em
solved the problem. We repackaged all this, "New" stuff with the traditional "old" stuff and sold it as a revolutionary "New" low-risk loan swap. (Wow, now whoever came up with THAT earned their commission!)

Since the Firm of Sock It To 'Em was Huge, I mean H-u-g-E. They had to be trustworthy, right? Yeah. National and even FOREIGN banks gobbled up the new investment vehicle and the market went up and up.

But then The Big Bad Bitch of Reality forced a small bank to actually LOOK at the new loan-swaps they had purchased, to show off their latest profits. To their shock, they were insolvent!

Upon serious investigation, they realized that a 6:10 ratio of bad debt sat on their balance sheet. "I know SOME people did that, but ALL of them? 

What to do... what to do...?

When the other banks, brokers and the rest of the business world got wind of this, they got VERY, VERY scared because these loan swaps were EVERYWHERE and the markets started doing swan dives losing 10% and more of their total value A DAY.

What to do... What to do...?

Then a wonderful elderly gentleman quietly held up his hand and softly stated that he would buy up all those bad-old-investments and everything would be alright.

The markets rebounded for a few days, before people had time to consider...

Uncle Sam was already in Deep Shit debt. Several Trillion, (yeah, trillion, with a T) dollars in debt and this would move him up to something like a $15 trillion deficit per YEAR!

The IMF (International Monetary Fund) and The World Bank began to check up on 'ol Sammy boy...

See children, when the IMF and The World Bank "help" a country, they make mean-old financially sound decisions. (I refer you to the history to many countries in Africa, for a review of IMF reality). The business world is beginning to balk...

But wait, Uncle Sam says that there will be no accountability as to how the pot of money will be spent... Maybe the business World will accept this. They have friends who need help too.

Stay tuned for our next exciting episode:" The Day The IMF calls US Economic Voodoo a big pile of doodoo"

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