Entry for April 29, 2009

The following info in Russian written by an anonymous author might have been hopping through many a site before it was emailed to me by my son. I liked this sarcastic piece and decided to translate it into English

CREDIT CRUNCH FOR DUMMIES

As a moonshiner, Old Klava is well known in our village. The moonshine she brews is as clean as a whistle.

Once Old Klava made up her mind to expand her business and to drive her long-standing enemy Old Masha out of the market. With this end in view Old Klava started selling the moonshine to its most loyal customers – the unemployed drunks – “on tick”, letting them pay for it later. The sales volumes sky-rocketed. Alkies from the whole neighbourhood rushed to Old Klava. She even put up prices for her brew. The drunks did not object: the payment could be effected later.

Naturally, Old Klava was not altogether dumb – ticking the moonshine away she demanded IOUs with the detailed info about the client: first and last name, passport number, payment date etc. A kind of mini-contract, you know.

As it happened, at that time Old Klava’s nephew was working in a bank. No sooner had he seen the pile of his aunt’s futures than he procured a credit for her – against those notes. Old Klava bought some more sugar as well as a coiled pipe for her hooch still. The pipe was new and nickel-plated.

The bank didn’t particularly hesitate giving the credit: it was well secured with the promissory notes. Should Old Klava fail to pay, the money will be collected from the drunks.

All of a sudden a brilliant idea struck somebody in the bank: what if they sort out the IOUs according to expiry dates and then issue bonds backed by these IOUs and off-load them onto foreigners. Aren’t we smart boys!

So said so done. The bank issued alko-bonds, blue-nose-bonds and no-home-bonds on the security of the notes and raised the foreign capital. The foreigners were pleased as pleased could be and started selling the bonds to one another. The prices were going upwards. Nobody understood much about it except that when the bank was giving a guarantee and the prices were growing, the game was worth the candle.

The jam in the doughnut was spoilt by Petrovich at the Department of Economics (later he was fired from the bank). I do not know what’s got into him, but he started raising a stink saying that the money should be collected from the drunks because the bonds were to be extinguished in a short while.

Needless to say the drunks had no money and Old Klava declared herself bankrupt. Most of all she was sorry she had to give away the coiled pipe (which was nickel-plated) for a mere nothing.

Even the shop that used to sell sugar to Old Klava went belly up due to the low sales

The stock prices for the no-home-bonds and blue-nose-bonds fell by 95%. The alko-bonds showed up a little better — falling only by 80%.

The village council had to urgently save the bank. As it goes in such cases, the bank was being saved at the expense of nondrinkers.

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