How the Irish bailout works.

[jonesg]

How the Irish bailout works - a financiers guide.!

It is a slow day in Belfast.

The rain is beating down and the streets are deserted.
Times are tough, everybody is in debt
and everybody lives on credit.

On this particular day a rich German tourist is driving through the town,
stops at the local hotel and lays a ?100 note on the desk,
telling the hotel owner he wants to inspect
the rooms upstairs in order to pick one to spend the night.
The owner gives him some keys and, as soon as the visitor has walked upstairs, the hotelier grabs the ?100 note and runs next door to pay his debt to the butcher.

The butcher takes the ?100 note and runs down the street
to repay his debt to the pig farmer.

The pig farmer takes the ?100
note and heads off to pay his bill at the supplier of feed and fuel.

The guy at the Farmers' Co-op takes the ?100 note and runs to pay his
drinks bill at the pub.

The publican slips the money along to the
local prostitute drinking at the bar, who has also been facing hard
times and has had to offer him "services" on credit.

The hooker then rushes to the hotel and pays off her room bill to the hotel owner with the ?100 note.

The hotel proprietor then places the ?100 note back on
the counter so the rich traveller will not suspect anything.

At that moment the traveller comes down the stairs, picks up the ?100 note,
states that the rooms are not satisfactory, pockets the money and leaves town.

No one produced anything.
No one earned anything.
However, the whole town is now out of debt and looking to the future
with a lot more optimism.

And that is how the EU bailout package works.

 

[tx1961whaler]

Re: How the Irish bailout works.

Faulty logic, if you look at it carefully.
At the end, the hooker owed the hotel guy 100.
The hotel guy put it in the till, and at that point everyone is out of debt.
The hotel guy then had to take the 100 out of the till and give back it to the tourist.
Everyone is out of debt except the hotel guy, since he did not have the money to begin with.
If the tourist had decided to stay and let the hotel guy keep the 100, then everyone in town would be out of debt.
Good analogy, though.

 

[Bondo]

Re: How the Irish bailout works.

Ayuh,...
Change that german tourist to a chinaman, 'n that pretty much covers the bailout in This country,....

 

[Bigprairie1]

Re: How the Irish bailout works.

Ayuh,...
Change that german tourist to a chinaman, 'n that pretty much covers the bailout in This country,....

..bingo. Unfortunate but you are right on with this Bond-o.
BP

 

[Brent S]

Re: How the Irish bailout works.

common tx1961whaler, how come you had to go and ruin a perfectly good story with facts!

You're right of course, but I still laughed

the more I think of it, the hotel guy never removed the money from his till to pay his debt. he used borrowed money from the customer, then repaid it.

so this does work unless I'm missing something.

 

[Kiwi Phil]

Re: How the Irish bailout works.

I just love little short stories like these.

Cheers
Phillip

PS
Mind you, I had to copy it real quick before the "you know what is likely to happen'' happened.

 

[mscher]

Re: How the Irish bailout works.

I just saw this same story elswhere, except the euro sign was instead, a dollar sign, referring to the U.S.

Go figure. The whole world's a mess.

 

[tx1961whaler]

Re: How the Irish bailout works.

common tx1961whaler, how come you had to go and ruin a perfectly good story with facts!

You're right of course, but I still laughed

the more I think of it, the hotel guy never removed the money from his till to pay his debt. he used borrowed money from the customer, then repaid it.

so this does work unless I'm missing something.

I think you're right, since the hotel guy is now out of debt with the butcher.
Except the hotelman really didn't end up with the 100 from the hooker that he was owed and he ended up with no more money than when he started.
Now if he shot the German and kept the 100, then all would be good.

 

[gonefishie]

Re: How the Irish bailout works.

Ayuh,...
Change that german tourist to a chinaman, 'n that pretty much covers the bailout in This country,....

Who would have think that a "chinaman" would be the one who's richer then an American and is bailing out an American. I guess the notion of American being more superior starting to die?

 

[mscher]

Re: How the Irish bailout works.

Who would have think that a "chinaman" would be the one who's richer then an American and is bailing out an American. I guess the notion of American being more superior starting to die?

There is a lot of jealousy from the U.S. towards China, IMO.

We liked them better when they were poor Communist Peasants, just waiting to kill us at any moment.

Now they are poising to beat us at our own game. That's sometimes hard to take a good honest look at.

 

[thefairlaneman]

Re: How the Irish bailout works.

So the question is do we learn to speak Chinese or Spanish?

 

[mscher]

Re: How the Irish bailout works.

So the question is do we learn to speak Chinese or Spanish?

In the era of global trade, either might not be a bad idea.

BTW, this was the exact same thing, said about the Japanese in the 1980's, when they were ready to take over the U.S. and then the rest of the world.

What ever happened to the Japanese? You don't hear much from them any more.

 

[jonesg]

Re: How the Irish bailout works.

hotelman really didn't end up with the 100 from the hooker that he was owed and he ended up with no more money than when he started.
:

Thats because the hotel's recievables balanced with the hotel's payables.

What they lacked was cash flow to clear debts away so they could move forward.

 

[Vlad D Impeller]

Re: How the Irish bailout works.

The $100 only paid on the interest, everyone is still in debt.

 

[roncoop75]

Re: How the Irish bailout works.

Publican... I learned a new word tonight! LOL

 

[Haut Medoc]

Re: How the Irish bailout works.

There is a lot of jealousy from the U.S. towards China, IMO.

We liked them better when they were poor Communist Peasants, just waiting to kill us at any moment.

Now they are poising to beat us at our own game. That's sometimes hard to take a good honest look at.

We are beating us at our own game by off-shoring proprietary manufacturing & information technology....(Thanks Bill Clinton)....
What they can't buy leagally, they pirate outright....

 

[Sean-Nos]

Re: How the Irish bailout works.

It's easier for us Irish to understand this one.

Mary's Bar :: A Parable of Ireland's Economic Woes
਀ഊ

਀ഊMary is the proprietor of a bar in Dublin. She realises that virtually all of her customers are unemployed alcoholics and, as such, can no longer afford to patronise her bar. To solve this problem, she comes up with new marketing plan that allows her customers to drink now, but pay later. She keeps track of the drinks consumed on a ledger (thereby granting the customers loans).

Word gets around about Mary?s "drink now, pay later" marketing strategy and, as a result, increasing numbers of customers flood into Mary?s bar. Soon she has the largest sales volume for any bar in Dublin.

By providing her customers' freedom from immediate payment demands, Mary gets no resistance when, at regular intervals, she substantially increases her prices for wine and beer, the most consumed beverages.

Consequently, Mary's gross sales volume increases massively. A young and dynamic vice-president at the local bank recognises that these customer debts constitute valuable future assets and increases Mary'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, ALKIBONDS and PUKEBONDS. These securities are then bundled and traded on international security markets. Naive investors don't really understand that the securities being sold to them as AAA secured bonds are really the 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 are still 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 Mary?s bar. He so informs Mary.

Mary then demands payment from her alcoholic patrons, but being unemployed alcoholics they cannot pay back their drinking debts. Since, Mary cannot fulfil her loan obligations she is forced into bankruptcy. The bar closes and the eleven employees lose their jobs.

Overnight, DRINKBONDS, ALKIBONDS and PUKEBONDS drop in price by 90%. The collapsed bond asset value destroys the banks liquidity and prevents it from issuing new loans, thus freezing credit and economic activity in the community.

The suppliers of Mary?s bar had granted her generous payment extensions and had invested their firms' pension funds in the various 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 multi-billion euro 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 Mary?s bar.

That's the state of European economics.
਀ഊ

 

[Vlad D Impeller]

Re: How the Irish bailout works.

Yup! The debt now belongs to everyone else, except the stumble-drunks.

 

[Kiwi Phil]

Re: How the Irish bailout works.

It's easier for us Irish to understand this one.

Mary's Bar :: A Parable of Ireland's Economic Woes etc etc
਀ഊ
That's the state of European economics.
਀ഊ

That certainly sum it up well.
But isn't that similar to the American Prime Market crash and the one that went on down here too?

Cheers
Phillip