The smarter I get, the Less I know

September 2, 2011

Quantitative Easing

Filed under: 14730974 — paul8bee @ 7:43 am
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Quantitative Easing

Once upon a time, long , long ago. In a far off land, in a mythical valley that was ruled by supernatural beings known as “Fairy God Bankers” (the fed) , there lived creatures known as ‘Bankers’.

Now the Bankers were farmers, by nature. The bankers loved to farm and farming was their passion. These farmers managed large farms (banks) and milked ‘Cash Cows’. (people who borrow money)

The cash cows were were happy to give their milk (interest payments) to the farmer in exchange for a comfortable stall  to sleep  in, (house with furniture), and enough food to eat.

But one day a disease spread though the valley (greed). The farmers (financial industry) wanted the cows to produce more milk (money). The cows who did not produce more milk(fee’s and commissions) were sent to Hamburger Heaven (bankruptcy). Many of the cows(investors) became unhappy about this, so many of them left the farm (unloaded their debt) and swore they would never return to the valley(economy).

The farmers lost their income(money without working) which came from milking Cash Cows(people who pay for services that do nothing), and when the farmer(banker) went broke, he could no longer pay his bills.

The farmer by the law of the land, had to give a portion of his milk (fees charged to people who want to get rich) or , 39% (as a tax) to the fairy God Banker, who ruled the land, But now the Fairy God Banker was also unhappy because he was not getting any milk either (credit crisis).

So the Fairy God Banker thought he would step in and help.(printing  money/quantitative easing) He took an empty milk bucket, waved his magic wand (federal reserve)  over the bucket, and created a truck load of brand new cold fresh milk ( money ) and gave it to the banker (farmer). The farmer now could sell the milk(issue new loans) and pay the the “Fairy God Banker” his share in taxes.(by charging more fees and commissions)

Some of the farmers(Ceo’s and company head of staff) were so happy that they took a $400,000 vacation. But the truck load of milk(newly pressed money) would soon be all used up, So the farmer(investment person) had to start working again(thinking up new financial products) The farmer did not know how to get get the cows back into the barn, so that he could start milking them again..

The trouble was that the cows were afraid to come back into the barn.(investment world) The farmer they thought was cruel and thoughtless because he sent a lot of fellow cows to “hamburger heaven (bankruptcy)

So the farmer was forced to make the stalls(investments) even more comfortable than before (renegotiate loans at fair market value). And he had to make  the living conditions better (lower interest rates).  And he had to provide better food, so that the cows would enjoy being milked again (advertise, sell a better story to the public)

In the end the cows all came back into the barn and everyone lived happy ever after, except of course the poor cows that went to hamburger heaven. But in this fairy tale, those cows will all be reincarnated to come back in the next life as either bankers or cows or what ever you want.

That is all we have tonight children.

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