The European economy explained...

[Gnarly Gnu]

OK not so funny I'll admit due to the reality of it all:

 

.

 

Helga is the proprietor of a bar. 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. Helga keeps track of the drinks consumed on a ledger (thereby granting the customers’ loans). Word gets around about Helga’s “drink now, pay later” marketing strategy and, as a result, increasing numbers of customers flood into Helga’s bar. Soon she has the largest sales volume for any bar in town.

 

By providing her customers freedom from immediate payment demands, Helga gets no resistance when, at regular intervals, she substantially increases her prices for wine and beer, the most consumed beverages. Consequently, Helga’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 Helga’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 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 “AA” “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 Helga’s bar. He so informs Helga. Helga then demands payment from her alcoholic patrons, but being unemployed alcoholics they cannot pay back their drinking debts. Since Helga cannot fulfil her loan obligations she is forced into bankruptcy. The bar closes and Helga’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 Helga’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 funds required for this bailout are obtained by new taxes levied on employed, middle-class, non-drinkers who’ve never been in Helga’s bar.

 

Now do you understand?

 

 

[eightyknots]

OK not so funny I'll admit due to the reality of it all:.

Helga is the proprietor of a bar. 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. Helga keeps track of the drinks consumed on a ledger (thereby granting the customers’ loans). Word gets around about Helga’s “drink now, pay later” marketing strategy and, as a result, increasing numbers of customers flood into Helga’s bar. Soon she has the largest sales volume for any bar in town.

 

By providing her customers freedom from immediate payment demands, Helga gets no resistance when, at regular intervals, she substantially increases her prices for wine and beer, the most consumed beverages. Consequently, Helga’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 Helga’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 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 “AA” “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 Helga’s bar. He so informs Helga. Helga then demands payment from her alcoholic patrons, but being unemployed alcoholics they cannot pay back their drinking debts. Since Helga cannot fulfil her loan obligations she is forced into bankruptcy. The bar closes and Helga’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 Helga’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 funds required for this bailout are obtained by new taxes levied on employed, middle-class, non-drinkers who’ve never been in Helga’s bar.

 

Now do you understand?

It's all about liquid assets that suddenly become illiquid

 

 

[Yenn]

Does that mean they are frozen?

 

 

[eightyknots]

Does that mean they are frozen?

At the moment they appear to be frozen:

 

European cold snap toll tops 360

 

• From: AFP
   
   
  
• February 07, 201210:35AM
   
   
  

 

 

Europe frozen in bone chilling cold

 

 

Europe frozen in bone chilling cold

 

A cold snap across Europe left tens of thousands without running water, power and food. Deborah Gembara reports.

 

Reuters7 February 2012

 

 

A man sorts through the remains of his home in the village of Bisser in southern Bulgaria after a dam collapsed after heavy rain. Source: AP

 

 

The frozen fountain at the IOC Olympic Museum near the Lake Geneva in Lausanne, Switzerland. Source: AP

 

 

A man takes pictures of an ice-covered car on the waterside promenade at the Lake Geneva in Versoix, Switzerland. Source: AP

 

THE toll from Europe's winter weather edged past 360 Monday when snow- and rain-swollen rivers burst a Bulgarian dam and killed at least eight, while more homeless people perished on frigid city streets.

 

Four elderly people drowned in their homes in the southeastern Bulgarian village of Biser after a nearby dam wall broke, submerging the whole village under 2.5m of icy water, the interior ministry said.

 

Another four people died when their cars were swept from bridges into raging rivers in the same region.

 

"People are in panic," regional mayor Mihail Liskov said on national radio as a massive rescue effort was under way. "Ninety percent of the village is under water."

 

Two other dams were brimming with water and heavy rains triggered a landslide that derailed a train near the Turkish border. No injuries were reported.

 

Meanwhile, temperatures in Poland plunged to as low as minus 24 degrees, bringing another deadly night for the homeless.

 

As has been the case throughout the 10-day-old cold snap, transients have borne the brunt of the suffering, with frozen victims found in abandoned and unheated homes, fire escapes or makeshift shelters on Europe's streets.

 

In a bid to save lives, Poland's homeless shelters have dropped a ban on drunken individuals.

 

Monika Golebiewska, a Warsaw police officer whose beat is a daily patrol bringing food and clothing to the homeless in the city's hardscrabble Praga district, said she had been unrelentingly busy.

 

"New (fatal) cases are reported to us daily. Just today we got calls telling us about two new ones, one of someone who was living in a tent and another of someone in an abandoned train station," Golebiewska said. "I've got more and more people to feed, but just 40 portions of soup a day."

 

Overall, 107 people have died of hypothermia in Poland since winter hit in November. The current cold snap began at the end of January and across the continent, authorities have reported at least 364 weather-related deaths.

 

Elzbieta Sztabler, an official with the Caritas Poland aid group, said stocks of meals provided by the European Union's food programme were running low.

 

"We've been serving more meals than normal. We've run out of 2011's stocks and are keenly awaiting the aid for 2012, though this isn't coming until March," Sztabler said.

 

In neighbouring Lithuania, where the mercury has dipped to minus 31 degrees, the deaths of 12 more people over the weekend brought the cold snap's toll to 23.

 

Italian authorities continued clearing up after a rare snow storm blanketed Rome over the weekend and crews struggled to restore power to about 60,000 homes across the country, especially in the Tuscan cities of Siena and Arezzo.

 

Energy giant ENI began reducing gas supplies to industrial clients and switching from gas-fired to oil-fired power stations following a plunge in gas imports from Russia.

 

Italian energy giant ENI warned it may cut power supplies to corporate customers after shortfalls in gas imports from Russia, though EU officials said gas supplies were beginning to return to normal.

 

In Bosnia, residents of dozens of hamlets were trapped by continued heavy snowfall, mostly in the eastern region around Srebrenica and Sokolac.

 

"The snow has reached over 1.5m, it is still snowing and we have already been blocked for over a month," said Dzevad Muminovic, who lives in the tiny village of Krusev Do.

 

He added food was running out and about 40 people were trapped, including a baby and several elderly residents.

 

Elsewhere across Europe, authorities struggled to clear clogged roads and runways that left tens of thousands of travellers stranded over the weekend.

 

After cancelling half its flights yesterday, operators of London's Heathrow Airport, the world's busiest passenger hub, said its schedule was almost back to normal.

 

While parts of Britain were beginning to warm above freezing, other European nations remained in an icy grip, with the Czech town of Kvilda, recording a winter low of minus 39.4 degrees.

 

Switzerland also recorded year lows, dropping to minus 35.1 degress in the eastern Graubuenden canton.

 

The bitter cold has engulfed most of Europe and even crossed the Mediterranean into north Africa, where as many as 16 people were killed on Algeria's snow-slicked roads or in other weather-related accidents.

 

Rare snow also fell in southern Tunisia for the first time in some 40 years, media reported, with temperatures well below freezing in some areas and villages cut off.

 

In France, 39 of the country's 101 regions were on alert for deep cold as a new record for electricity consumption was predicted.

 

People in the Netherlands, however, were sharpening their skates in the hope that a legendary long-distance race on frozen canals may be held for the first time in 15 years, though organisers cautioned the ice was still too thin.

 

AFP

 

 

[dazza 38]

Great photos Eightyknots. That would be a chilling experience.That looks like a Suzuki Vitara in the bottom shot.