Economic crisis for dummies

Bankemployee: “Hello, poor person. Would you not rather live in that nice $250.000 house in the suburbs instead of that dump you live in now?”
Hello bankemployee. Of course I would, but I have no money.”
Bankemployee: That’s no problem. I can loan you the money. You will never really have to pay it back anyway, because the value of your house will keep on increasing, which means we can loan you even more money in the future to pay of the loan I am giving you today.”
Consumer: “That sounds just swell, I will take that loan.”

Bankemployee:“Hello bankboss. I just loaned someone $250.000 dollars for a house. So someone owns us $250.000.”
Bankboss: “Hello bankemployee. Well done. We will add that $250.000 to our balance so we will appear to be $250.000 richer. As a reward we will give you a nice 5% bonus.”
Bankemployee: “Wow, I’ve made another $12.500, I will spend all my bonuses on buying a big villa myself.”
Bankboss: “Live a long and happy life, my High Potential, yuppie protégé.”

Bankemployee: “Hello Bankboss, I need to pay for my villa, can I please have my bonus money? ”
Bankboss: “Hello Bankemployee, of course you can. Oops, we do not have enough cash, let’s ask for some of our loans back from poor consumers.”

Bankboss: “Hello client. Can we please have part of our money back we loaned you?”
Consumer: “Hello bankboss. I am sorry, but I have no money.”
Bankboss: “That is most unfortunate, we will have to sell your house.”

Bankboss: Hello bankemployee, our clients seem to be unable to pay for their loans. We need to seel their houses.”
Bankemployee: “Hello bankboss. It wasn’t my fault, I cannot help it that they have no money. But I still need to pay for my villa.”
Bankboss: “Don’t worry we don’t blame you. But please do not lend anyone else any more money.”
Bankemployee: “Okidoki”

Another consumer: “Hello bankemployee, can I loan some money to buy the house the bank is selling to pay for your villa?”
Bankemployee: “Hello another consumer. Unfortunately I cannot, I cannot lend anyone any more money, because we don’t have any.”
Another consumer: “Oh. I will just pay with the money I have then.”

Another consumer: “Hello bankboss, here is the money for the house I bought.”
Bankboss: “Hello another consumer. But that’s very little money, the house was worth a lot more.”
Another consumer: “Well, I don’t have anymore. Banks are selling so many houses everywhere, I could buy another house from another bank if you don;t wish to sell me yours.”
Bankboss: “Nononono, don’t be silly. We will take that money for the house.”

Bankboss: “Hello bankemployee. All the houses that we have been giving people loans for, are only worth 10% of what we have put on our balances.”
Bankemployee: “Hello bankboss. That’s not good news, can’t we lend money from other banks?”
Bankboss: “Unfortunately they all have the same problem.  We appear to be in deep shit.
Bankemployee: “So, how about paying me those bonuses?”
Bankboss:If no one is lending us any more money and we have financial obligations that are ten times greater than what we actually posses… There is only one thing we can do.”
Bankemployee: “What is that, bankboss?”
Bankboss: “We will ask the government for a couple of billions of dollars so the taxpayer can pay for the villa you’ve bought with the bonuses you got for creating money on paper that was never there in the first place.”
Bankemployee: “God Bless America. God Bless Capitalism.”


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