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A Primer: Understanding Derivatives

By Bob Unger

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

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, nondrinkers who have never been in Heidi's bar.

Now do you understand?


Instrumentality of Imperial Aggression Quote of the Day

From: bernhard1848@att.net

“[Idaho Senator William E.] Borah’s initial clashes with President
[Woodrow] Wilson were over the possibility of southward expansion.
Mexican democratic reformer Francisco Madero was overthrown and
assassinated by the caudillo Victoriano Huerta.  Wilson demanded that
Huerta hold democratic elections and absent himself from the running.

The President, averred Borah, had “announced a policy the inevitable
logic of which was war with Mexico.” Borah’s own ingrained nationalism
led him to understand how Mexicans could only resent such meddling:
Mexico must be left to work out its own salvation.

Wilson had denied that the United States was embarked on a policy of
continental domination, but “that is what we said while taking New
Mexico, California, Hawaii, Puerto Rico, and the Philippines.” If the
American flag “ever went up in Mexico it would never come down.”  Not
only that, he prophesied, the United States would not stop until it had
absorbed everything north of the Panama Canal.

As American troops intervened in Nicaragua, Haiti, and Santo Domingo,
and made good on the investments of New York banks, Borah lamented that
the Monroe Doctrine had become an “instrumentality of imperial
aggression.” In taking on the burden of empire, we would cast aside
forever the cultural homogeneity that was the bedrock of our republican
institutions. If we took foreign peoples under our wing, it would be
impermissible to treat them as subjects – and dangerous to admit them to
the Union.

The Mexicans, Borah observed, had no more idea of representative
government “than I have of the technical value of Beethoven’s music.”

(The Lion of Idaho, William E. Borah and the Progressives (excerpt),
Justin Raimondo, Chronicles Magazine, November 1998,


IndoctriNation--the movie--a review

From: cpprhd10@aol.com

There is a new documentary out there dealing with the public schools
that exposes them for the anti-Christ institutions they are and always
have been.

I did a review article on the movie, which I was impressed with. It can
be found at



The first panacea for a mismanaged nation is inflation of the currency;
the second is war. Both bring a temporary prosperity; both bring a
permanent ruin. But both are the refuge of political and economic

- Earnest Hemingway


Obama Asserts His Dictatorship
Sword At-The-Ready

Comparing Definitions of Freedom: The Source of Our Dilemma, Part 7
by Attorney Timothy Baldwin

Tennessee Joins TSA In Creating Random Check Points
by Pastor Chuck Baldwin

Green Rubbish
By Dr. A. H. Krieg
Freedom Watch

Suicide of America: Importing Endless Poverty
by Frosty Wooldridge

The Tea Party Nation's Sellout
Nelson Hultberg

First Amendment Last Stand Protest
by David McElroy

Senator Durbin’s Stealth Move against Supplements

NDI Supplement Guidance is Just a Bait-and-Switch—and Time Is Running
Out to Stop It!

BREAKING NEWS! CDC Has Just Recommended Routine HPV Vaccinations for

Tell Congress: Repeal the Light Bulb Ban!

Action Alert
Rep. Walsh Calls for Attorney General Holder to Resign
-- Where does your Congressman stand?

Happy Halloween


Ron Paul 2012 Podcast

Ron Paul Campaigns Meetup Groups

National Police Misconduct NewsFeed Daily Recap


The right to "petition" government in this
manner was secured by our Founding Fathers.
As Sam Adams famously wrote, "It does not
require a majority to prevail, but rather
an irate, tireless minority keen to set
brush fires in people's minds."  What the
limited-government movement needs are a
few good pyromaniacs.

If you want to contact Congress on any
issue, you can do so toll-free by calling
(800) 862-5530.
When the Capitol operator answers, simply
ask to be connected to a particular
congressman or senator.

October 28, 2011 in Current Affairs | Permalink