DERIVATIVES

This is an article I received in an email. It had no one to attribute it to, so here goes:

Heidi is the proprietor of a bar in Detroit. 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.

Heidi keeps track of the drinks consumed on a ledger (thereby granting the
customers loans).

Word gets around about Heidi's "drink now, pay later" marketing
strategy and, as a result, increasing numbers of customers flood into
Heidi's bar. Soon she has the largest sales volume for any bar in Detroit .
By providing her customers freedom from immediate payment demands, Heidi
gets no resistance when, at regular intervals, she substantially increases her
prices for wine and beer, the most consumed beverages.

Consequently, Heidi'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 Heidi's
borrowing limit.

He sees no reason for any undue concern because 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 "AAA 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 Heidi's bar. He so informs Heidi.

Heidi then demands payment from her alcoholic patrons. But, being
unemployed alcoholics -- they cannot pay back their drinking debts.

Since Heidi cannot fulfill her loan obligations she is forced into
bankruptcy.

The bar closes and Heidi'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 Heidi'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
cash infusion from the government.

The funds required for this bailout are obtained by new taxes levied on
employed, middle-class, nondrinkers who have never been in Heidi's bar.

Now do you understand derivatives?

WHAT IS BIG GOVERNMENT; BIG CORPORATIONS?

The Federal Government was never meant to grow as large as it has grown. The entitlement programs were not meant to happen. Some of the programs that have turned into entitlement programs were never meant to be that, i.e., Social Security and Medicare were meant to fund themselves, and they would have with the contributions of the employee and the employer going into the fund, and accruing interest, if the Federal Government had not "borrowed" the money and then not had the means to repay what they borrowed. As a result they must now "fund" Social Security and Medicare out of the General Fund. This was the fault of the legislators who allowed the "borrowing" (let's call it theft like it was) to happen.

We, the taxpayers have sat idly by for many years saying "They" wouldn't let that happen! Well, we are "they", and we did let that happen by not taking control of the legislators sooner.

Big government is a government that is ruled by greed. Legislators have let special interest groups convince them to put some lame "funding" into a bill, in return those special interest groups will give that particular legislator money to run again for a job he has turned out to be ill-suited to fill because he has caved in to the special interest groups! Did you follow that circular reasoning? Sorry, but that's what has happened.

There are certain government workers that are legitimate and should be funded by our tax money: For instance, the miliary and military support services, including the Veteran's Administration. Civilians who work for the military, and the like. But there should be oversight on all of that.

For instance, I once worked for Douglas Spacecenter in Huntington Beach, California. I earned more money than I'd earned up to that time! It was a made-up job to get more money from the government! It was also a union job, but California has always been a right-to-work state and one can opt out of paying union dues if one does not want to join the union. I made a lot of money, but I never had a desk. I never had a chair of my own. I never had a typewriter. I wrote one letter in the two months I was there! (I had to do it on my lunch hour when I could borrow from someone who had a desk, chair & typewriter.)

My job was padding for government costs. This was in the era when hammers cost $500. Toilet seats were as expensive. Screws for the space shuttle were billed to the government at $100 each. (I spent a lot of time there reading things since I didn't really have anything else to do.) I quit after two months because the job was not a real job.

How many other "government jobs" are there out there where people are sitting around doing nothing? Way too many! That's the "big government" I object to. People who don't earn their keep, and the American taxpayer is paying for them. In addition, government jobs used to be at a much lower pay rate. Now government jobs pay far more than the equivalent private sector job doing the same thing.

That's one of the reasons I am so anti-union as well. Back in the 60's I spoke to a union member who worked at International Harvester who bragged that he made $22 an hour leaning on a broom all day. At that time I earned about $4.75 per hour working very hard for 40 plus hours per week.

I don't think my Liberal friends like paying too much taxes, I don't think they like the idea of losing their freedoms, I don't think they like the idea of paying people not to do anything, I don't think they like the idea of our country turning into a Socialist/Communist country.

Now there's this "healthcare" nonsense. Here's what a healthcare bill should have done. It should have demanded more transparency from the suppliers of healthcare insurance, as well as to the suppliers of healthcare goods and services.

First you need to understand why healthcare is not within the reach of most people and corporations. In the 60's and 70's corporations offered healthcare insurance for their employees. It was fairly inexpensive and very often it was paid for entirely by the corporation, or the employee would pay a very small amount of money to insure himself and his whole family.

Then the medical industry, doctors, pharmaceuticals, hospitals, etc., saw all of the corporate insurance paying for everything, and they raised the cost of all of these products and services.

As a result of that, the corporations had to begin paying more to the insurance companies. The premiums paid by the worker went up quite a lot as well. (At one time I could have gotten insurance for myself that would have been more than I pay for my mortgage per month!!).

The insurance company executives saw all the money being raked in by the larger premiums being paid, and they began paying themselves outrageous yearly bonuses (I know about these because as a paralegal I once had a job doing due diligence on insurance companies, reading all of their files and writing reports on them...some insurance company executives in the late 90's were paying themselves bonuses of $20,000,000.00 per year!)

So the insurance went up and up, and the medical procedures and supplies went up and up. It was all fueled by greed. We, the taxpaying individuals have been the victims of this. We should stop behaving as victims and demand changes to all of these things.

Just as the government should not pay $1000 for a toilet seat, or $120 for a bolt, we should not be paying $120 for a pill. At the same time, do we want all of these things regulated? I don't know, but there should be some oversight on these things. There should be some reasoning that says, "hey, these things don't cost that much to make!"

Perhaps the health insurance companies should be transparent about their costs, and should be transparent about their executive bonuses? Perhaps government contractors should have more oversight over the things they provide to the government before they are paid for? Perhaps reason should prevail.

Greed has got to stop. If we don't do something about it now, it will automatically occur because it can only go so far before it collapses from it's own weight. If that's what we're waiting for we'd better be prepared to take care of ourselves, of our families. We should be prepared to live on the pennies we've been saving and hiding in the back of our closets. We should be prepared to grow our own food. We should be prepared to defend ourselves.