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Real Estate Values, Banks, Government and a Bar?

By
Real Estate Agent with RE/MAX Gold

A friend and client sent me an email this morning. It's simply the best example or statement of how our system of banking institutions and government have failed to serve us. Before you read the email here's two insightful qoutes from arguably the greatest Statesman ever. 

Thomas Jefferson said in 1802: “I believe that banking institutions are more dangerous to our liberties than standing armies. If the American people ever allow private banks to control the issue of their currency, first by inflation, then by deflation, the banks and corporations that will grow up around the banks will deprive the people of all property - until their children wake-up homeless on the continent their fathers conquered.”

“My reading of history convinces me that most bad government results from too much government.”  -- Thomas Jefferson 

Understanding Derivatives

 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 as "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 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 have never even been in Heidi's bar. 

Now do you understand? 

 

Historical statements worth remembering daily. 

“My reading of history convinces me that most bad government results from too much government.”  -- Thomas Jefferson 

Thomas Jefferson said in 1802: “I believe that banking institutions are more dangerous to our liberties than standing armies. If the American people ever allow private banks to control the issue of their currency, first by inflation, then by deflation, the banks and corporations that will grow up around the banks will deprive the people of all property - until their children wake-up homeless on the continent their fathers conquered.” 

“It is incumbent on every generation to pay its own debts as it goes. A principle which if acted on would save one-half the wars of the world.”-- Thomas Jefferson 

Before you discount what Thomas Jefferson said read what John F. Kennedy had to say about Jefferson. 

John F. Kennedy held a dinner in the white House for a group of the brightest minds in the nation at that time.

 He made this statement:  

"This is perhaps the assembly of the most intelligence ever to gather at one time in the White House with the exception of when Thomas Jefferson dined alone." John F. Kennedy

 Something To Consider Daily: 

“The democracy will cease to exist when you take away from those who are willing to work and give to those who would not.”  -- Thomas Jefferson 

“I predict future happiness for Americans if they can prevent the government from wasting the labors of the people under the pretense of taking care of them.”  -- Thomas Jefferson

 

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Terry Hughes

RE/MAX Gold

(707) 249-8688

http://www.SolanoHomefinder.com

http://www.TravisAFBhomes.com

http://www.TravisLoans.com

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