Financial Crisis explained in simple terms.‏

From My InBox:

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.

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 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.

One day, although the prices are still climbing, a risk manager
(subsequently of course fired due his negativity) of the bank decides that
slowly 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.

Last Fire Evacuation Drill .......

I am not able to verify if the following story is true but it's interesting to note. I can't say that it will work though as colleagues who are able to enter the building will not likely stop you from entering.

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From My InBox:

New tactic !!!!

STAY PUT NEXT TIME YOU HEAR THE ALARM!!!!!



In a large multinational company..............

A fire alarm rang at 4 PM in a large office when almost all employees were in office (approx 5000). As usual the entire office was evacuated within 3 mins & all employees gathered outside the office in the designated area waiting for further announcement.

The Security Officer in charge made the following announcement: "Dear employees - with sincere regret I have been asked to announce that for many of you it will be your last evacuation drill. Due to the recession the company is laying off almost 50% of its employees. So when this announcement finishes, I ask all of you to move back into the building and if your swipe card does not work then it means you have been laid off in which case you will not be allowed inside and all your belongings will be couriered to you by tomorrow.

The Company has used this innovative approach as we didn't want to fill up the email box with lay-off mails and good bye mails in thousands & also to avoid any fight inside the office and the consequent security issue for all staff.

Hope you have had a rewarding career with us and all the best ahead.

Please move back in & try your luck".

Letter from the Boss

From My InBox:

To All My Valued Employees,

There have been some rumblings around the office about the future of this company, and more specifically, your job. As you know, the economy has changed for the worse and presents many challenges. However, the good news is this: The economy doesn't pose a threat to your job. What does threaten your job however, is the changing political landscape in this country. However, let me tell you some little tidbits of fact which might help you decide what is in your best interests.

First, while it is easy to spew rhetoric that casts employers against employees, you have to understand that for every business owner there is a ‘Back Story’. This back story is often neglected and overshadowed by what you see and hear. Sure, you see me park my Mercedes outside. You've seen my home at last years Christmas party. I'm sure all these flashy icons of luxury conjure up some idealized thoughts about my life.

However, what you don't see is the BACK STORY:

I started this company 28 years ago. At that time, I lived in a 300 square foot studio apartment for 3 years. My entire living apartment was converted into an office so I could put forth 100% effort into building a company, which by the way, would eventually employ you.

My diet consisted of Ramen Pride noodles because every dollar I spent went back into this company. I drove a rusty Toyota Corolla with a defective transmission. I didn't have time to date. Often times, I stayed home on weekends, while my friends went out drinking and partying. In fact, I was married to my business -- hard work, discipline, and sacrifice.

Meanwhile, my friends got jobs. They worked 40 hours a week and made a modest $50K a year and spent every dime they earned. They drove flashy cars and lived in expensive homes and wore fancy designer clothes. Instead of hitting the Nordstrom's for the latest hot fashion item, I was trolling through the discount store extracting any clothing item that didn't look like it was birthed in the 70's. My friends refinanced their mortgages and lived a life of luxury. I, however, did not. I put my time, my money, and my life into a business with a vision that eventually, some day, I too, will be able to afford these luxuries my friends supposedly had.

So, while you physically arrive at the office at 9am, mentally check in at about noon, and then leave at 5pm, I don't. There is no ‘off’ button for me. When you leave the office, you are done and you have a weekend all to yourself. I unfortunately do not have the freedom. I eat, and breathe this company every minute of the day. There is no rest. There is no weekend. There is no happy hour. Every day this business is attached to my hip like a 1 year old special-needs child. You, of course, only see the fruits of that garden -- the nice house, the Mercedes, the vacations ..... You never realize the Back Story and the sacrifices I've made.

Now, the economy is falling apart and I, the guy that made all the right decisions and saved his money, have to bail-out all the people who didn't. The people that overspent their paychecks suddenly feel entitled to the same luxuries that I earned and sacrificed decades of my life for.

Yes, business ownership has its benefits but the price I've paid is steep and not without wounds.

Unfortunately, the cost of running this business, and employing you, is starting to eclipse the threshold of marginal benefit and let me tell you why:

I am being taxed to death and the government thinks I don't pay enough. I have State taxes. Federal taxes. Property taxes. Sales and Use taxes. Payroll taxes. Workers Compensation taxes. Unemployment taxes. Taxes on taxes. I have to hire a tax man to manage all these taxes and then guess what? I have to pay taxes for employing him. Government mandates and regulations and all the accounting that goes with it, now occupy most of my time. On Oct 15th, I wrote a check to the US Treasury for $288,000 for quarterly taxes. You know what my "stimulus" check was? Zero. Nada. Zilch.

The question I have is this: Who is stimulating the economy? Me, the guy who has provided 23 people good paying jobs and serves over 2,200,000 people per year with a flourishing business? Or, the single mother sitting at home pregnant with her fourth child waiting for her next welfare check? Obviously, government feels the latter is the economic stimulus of this country.

The fact is, if I deducted (Read: Stole) 50% of your paycheck you'd quit and you wouldn't work here. I mean, why should you? That's nuts. Who wants to get rewarded only 50% of their hard work? Well, I agree which is why your job is in jeopardy.

Here is what many of you don't understand ... to stimulate the economy you need to stimulate what runs the economy. Had suddenly government mandated to me that I didn't need to pay taxes, guess what? Instead of depositing that $288,000 into the Washington black-hole, I would have spent it, hired more employees, and generated substantial economic growth. My employees would have enjoyed the wealth of that tax cut in the form of promotions and better salaries. But you can forget it now.

When you have a comatose man on the verge of death, you don't defibrillate and shock his thumb thinking that will bring him back to life, do you? Or, do you defibrillate his heart? Business is at the heart of America and always has been. To restart it, you must stimulate it, not kill it. Suddenly, the power brokers in Washington believe the poor of America are the essential drivers of the American economic engine. Nothing could be further from the truth and this is the type of change you can keep.

So where am I going with all this?

It's quite simple.

If any new taxes are levied on me, or my company, my reaction will be swift and simple. I fire you. I fire your co-workers. You can then plead with the government to pay for your mortgage, your SUV, and your child's future. Frankly, it isn't my problem any more.

Then, I will close this company down, move to another country, and retire. You see, I'm done. I'm done with a country that penalizes the productive and gives to the unproductive. My motivation to work and to provide jobs will be destroyed, and with it, will be my citizenship.

So, if you lose your job, it won't be at the hands of the economy; it will be at the hands of a political hurricane that swept through this country, steamrolled the constitution, and will have changed its landscape forever. If that happens, you can find me sitting on a beach, retired, and with no employees to worry about.

Signed,

THE BOSS

Wiinners of Credit Crisis

My "Credit Crisis" presentations that started this blog did not win any prizes on SlideShare. In all there were 302 submissions and the winning entries can be read from the following article:

The Financial Crisis: A Historical Perspective wins the Credit Crisis contest!

Find time to check out the entries. You maybe able to make use of the information you can find there if not your own to join Marieke Schoenmaker in her quest to make the world a better place for those who are facing economic crisis at this time.

She shares her idea in this slideshow.

Be a Gamechanger!

View SlideShare presentation or Upload your own. (tags: collaboration co-creation)

A Modern Parable.

Is this how you are running your business?

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From My InBox:

A Japanese company ( Toyota ) and an American company (Ford Motors)
decided to have a canoe race on the Missouri River Both teams practiced
long and hard to reach their peak performance before the race.

On the big day, the Japanese won by a mile.

The Americans, very discouraged and depressed, decided to investigate the
reason for the crushing defeat. A management team made up of senior
management was formed to investigate and recommend appropriate action.

Their conclusion was the Japanese had 8 people rowing and 1 person
steering, while the American team had 7 people steering and 2 people
rowing.

Feeling a deeper study was in order; American management hired a consulting
company and paid them a large amount of money for a second opinion.

They advised, of course, that too many people were steering the boat, while
not enough people were rowing.

Not sure of how to utilize that information, but wanting to prevent
another loss to the Japanese, the rowing team's management structure was
totally reorganized to 4 steering supervisors, 2 area steering
superintendents and 1 assistant superintendent steering manager.

They also implemented a new performance system that would give the 2 people
rowing the boat greater incentive to work harder. It was called the
'Rowing Team Quality First Program,' with meetings, dinners and free pens
for the rowers. There was discussion of getting new paddles, canoes and
other equipment, extra vacation days for practices and bonuses. The
pension program was trimmed to 'equal the competition' and some of the
resultant savings were channeled into morale boosting programs and teamwork
posters.

The next year the Japanese won by two miles.

Humiliated, the American management laid-o ff one rower , halted
development of a new canoe, sold all t! he paddle as, and canceled all
capital investments for new equipment. The money saved was distributed to
the Senior Executives as bonuses.

The next year, try as he might, the lone designated rower was unable to
even finish the race (having no paddles,) so he was laid off for
unacceptable performance, all canoe equipment was sold and the next year's
racing team was out-sourced to India.

Sadly, the End.

Here's something else to think about: Ford has spent the last thirty years
moving all its factories out of the US , claiming they can't make money
paying American wages.

TOYOTA has spent the last thirty years building more than a dozen plants
inside the US The last quarter's results:

TOYOTA makes 4 billion in profits while Ford racked up 9 billion in losses.

Ford folks are still scratching their heads, and collecting bonuses...

IF THIS WEREN'T SO TRUE IT MIGHT BE FUNNY

Understanding the Current World Financial Situation

From My InBox:

A simple explanation for the present financial crisis - the Indian way.....

Once upon a time in a village in India , a man announced to the villagers that he would buy monkeys for *$10.*

The villagers seeing there were many monkeys around, went out to the forest and started catching them.

The man bought thousands at *$10*, but, as the supply started to diminish, the villagers stopped their efforts.

The man further announced that he would now buy at *$20.* This renewed the efforts of the villagers and they started catching monkeys again.

Soon the supply diminished even further and people started going back to their farms.

The offer rate increased to* $25 * and the supply of monkeys became so little that it was an effort to even see a monkey, let alone catch it!

The man now announced that he would buy monkeys at *$50*! However, since he had to go to the city on some business, his assistant would now act as buyer, on his behalf.

In the absence of the man, the assistant told the villagers:
'Look at all these monkeys in the big cage that the man has collected. I will sell them to you at *$35* and when he returns from the city, you can sell them back to him for *$50*.'

The villagers squeezed together their savings and bought all the monkeys.

Then they never saw the man or his assistant again, only monkeys everywhere!

* Welcome to WALL STREET...........*



The story is not complete, so I have added 2 episodes:

The real situation is actually more complicated. Had the transactions been confined to physical real monkeys, one could do a physical estimate and expose the con. The smart assistant (he went to Stanford) sold monkey futures to the villagers. Say he sold a contract for a future sale of 10 monkeys to be delivered in 2 weeks at $20 per monkey = $200. But there is no physical delivery in a future contract. Since the villagers expected the price to rise to $50, $20 is a real bargain. That $200 future monkey purchase contract would be worth $500 in 2 weeks. The assistant could sell any number of futures without reference to the actual population of monkeys. There was no need to sell real monkeys from the cage. When the con is exposed the villagers will be left with the original real monkeys and investors in futures with reams of paper.

And the assistant's brother-in-law was even smarter (he went to Harvard). He issued monkey bonds paying 5% pa (compared to the 1% pa from an old fashion bank). The money would be invested in another forest 100 miles away where there had been sightings of, on the average, 50 monkeys daily over the last 30 days. This information was passed on to a rating company. The young punks in the rating company then assumed that if there would be a daily harvest of 50 monkeys, then the expected income would amount to $912,500 (= 50 x 365 x $50). After deducting $100,000 for his profit, he would have $812,500 which could service total bonds of $16,250,000 at 5% pa.

Being a prudent person, the assistant's brother-in-law only expected to issue bonds of $11,000,000 in aggregate. Wow! That's very safe and the bond deserves a triple A rating subject to a fee. Of course, there has to be some risk. So there is a term in the monkey bond that made it worthless should a 'credit event' occur, 'credit event' being defined as anyone of the following: complete extinction of the monkey species, three monsoons in a row in India or DBS Bank becoming insolvent. Now any banker worth his MBA knows these would not happen. So off the banker went to sell $11,000,000 worth of bonds to retirees who were greedy enough to believe the banker's "It's very safe" story.

Of course, we now know that the assistant's brother-in-law disappeared along with the assistant, having pocketed $10,000,000 after deducting say, a million dollars to the banker.

Now the central bank says, "Caveat emptor, mate!"

How the bailout works...

Young Chuck moved to Texas and bought a Donkey from a farmer for $100. The farmer agreed to deliver the Donkey the next day.

The next day the farmer drove up and said, 'Sorry son, but I have some bad news, the donkey died.'

Chuck replied, 'Well, then just give me my money back.'

The farmer said, 'Can't do that. I went and spent it already.'

Chuck said, 'Ok, then, just bring me the dead donkey.'

The farmer asked, 'What ya gonna do with him?

Chuck said, 'I'm going to raffle him off.'

The farmer said, 'You can't raffle off a dead donkey!'

Chuck said, 'Sure I can Watch me. I just won't tell anybody he's dead.'

A month later, the farmer met up with Chuck and asked, 'What happened with that dead donkey?'

Chuck said, 'I raffled him off. I sold 500 tickets at two dollars a piece and made $998.'

The farmer said, 'Didn't anyone complain?'

Chuck said, 'Just the guy who won. So I gave him his two dollars back.'

Chuck now leads the US bank bailout team.