THE FINANCIAL CRISIS EXPLAINED IN SIMPLE TERMS

This is contributed by one of my Octopod offspring:

Heidi is the proprietor of a bar in Berlin. In order to increase sales, she decides to allow her loyal customers - most of whom are unemployed alcoholics - to drink now but pay later. She keeps track of the drinks consumed on a ledger (thereby granting the customers loans).

Word gets around and, as a result, increasing numbers of customers flood Into Heidi's bar. Taking advantage of her customers' freedom from immediate payment constraints, Heidi increases her prices for wine and beer, the most-consumed beverages. Her sales volume increases massively.

A young and dynamic customer service consultant at the local bank recognizes these customer debts as valuable future assets and increases Heidi's borrowing limit.

He sees no reason for undue concern since he has the debts of the alcoholics as collateral (and can purchase credit default insurance from a triple A-rated company like AiG).

At the bank's corporate headquarters, expert bankers transform these customer assets into DRINKBONDS, ALKBONDS and PUKEBONDS. These securities are then traded on markets worldwide. No one really understands what these abbreviations
mean and how the securities are guaranteed.

Nevertheless, as their prices continuously climb, the securities become top-selling items.

One day, although the prices are still climbing, a risk manager (subsequently fired due his negativity) of the bank decides that slowly the time has come to demand payment of the debts incurred by the drinkers at Heidi's bar.

However they cannot pay back the debts.

Heidi cannot fulfill her loan obligations and claims bankruptcy.

DRINKBOND and ALKBOND drop in price by 95%. PUKEBOND performs better, stabilizing in price after dropping by 80%.

The suppliers of Heidi's bar, having granted her generous payment due dates and having invested in the securities, are faced with a new situation.

Her wine supplier claims bankruptcy; her beer supplier is taken over by a competitor.

The bank is saved by the Government following dramatic round-the-clock consultations by leaders from the governing political parties.

The funds required for this purpose are obtained by a tax levied on non-drinkers.

My only caveat: All satires tend to over-simplify a complex situation. This one blames borrowers as if they were deadbeat drunks.  In fact, there were also cowboy lenders who sold sub-prime mortgages that, over time, doubled monthly payments to borrowers.

After the housing bubble burst, mortgaged properties entered a deflationary phase.  As borrowers lost equity in their homes, mortgage debt far exceeded the collateral value of the properties.  As borrowers lost jobs, they could no longer keep up the payments on their homes. All in all, a very sad situation.

So how deep does this crisis go?  The total market for credit default swaps (a form of insurance on these derivatives) is $55 trillion.   Not exactly chump change!

UPDATE: Our contributor, Brian Krenz, has posted a more accurate and detailed account of the credit crisis in the form of a short animatic video.  Have a look here.

About that mystery project I am working on, the tentatively tentacled title is: Broken Pensions - American Dreams Stolen.

Out of touch, off base and irrelevant

Well of course I'm a demented, deranged, hair-on-fire, crazy Liberal Kike, personally responsible for the economic debacle -- at least that's what some Rush Limbaugh supporters tell me and who am I to argue? I'm obviously "out of touch, off base, and irrelevant" in my displeasure with the Republicans -- just like a two thirds majority of America.

The Democrat, liberal, immigrant loving, freedom hating big spenders are taking the country straight to hell now that my fringe element minority of 65% has removed the thrifty, honest and morally upright Republican majority from control -- that is if the "terrorists" don't take over DesMoines and kill us all with flouride first.

Yes, that's right, Republicans stand for limited government, but not just yet, and markets so free they're lawless. They're all for the unlimited freedom to obey, for massive military spending without oversight, for massive transfers of wealth to offshore corporations -- without oversight; and so much do they believe in it, they are happy to listen to your phone calls, read your mail, intercept your e-mails and faxes and peek in your windows to make sure you're happy about it.

What are we going to do, now that they're gone? And how sad it is just when they were about to turn the Democrat sabotaged economy around with even more borrowing, spending and tax cuts for billionaires.

So anyway, when you read John Yoo's memo to Bush in Newsweek asserting that "First Amendment speech and press rights may also be subordinated to the overriding need to wage war successfully," you can be sure it's only the Jew-bastard Liberals lying through their long noses. Even so, unlimited power for the President is only another way of looking at limited government. Ask Rush to explain it to you.

Don't Rush me

Thinking back to the dear dead days of Father Coughlin and the childhood of right wing hate radio, it seems like neither active opposition nor the deliberate ignoring of their brand of theater is as effective as allowing their own success to put them outside the pale of justification for or acceptance of their propaganda. Coughlin whose bigotry and anti-Semitism trapped him when Hitler became an enemy, had his network taken away after he became an embarrassment to the Church and indeed to the country.

Nobody outside of the lunatic fringe can really, if they are honest, think Rush Limbaugh's bombast has been anything other than full support for all that's torpedoed America, from his apparent acceptance of torture, to his steadfast denial of the growing sickness of our economy; from denying the dishonest origins of the Iraq war to the dishonest, scabrous, sleazy and relentless attacks on those who opposed the outrages of the George Bush presidency. He has become identified with the vicious kind of campaign that helped sink the Palin/McCain candidacy by making Obama seem all the more a man of integrity. I don't think I'm being fatuously optimistic to think he may go down with the ship he helped sink.

"I think a lot of people like to hear what he’s saying but I think it’s also a little bit polarizing and confrontational"

said Ron Paul in an uncharacteristic understatement during a telephone interview with CNN's John Roberts this morning.

" I guess the Democrats think its to their advantage if he’s leading the charge.”

I would add that it's to the world's advantage, but that's just my opinion. If I were a Republican, even a more characteristic Republican than Paul, like Michael Steele for instance, who said on CNN Saturday:

“Rush Limbaugh, his whole thing is entertainment. Yes it’s incendiary, yes it’s ugly.”

I would have to agree that it sure as hell is and yes, his dirty, nasty, mean spirited and unencumbered by honesty rhetoric is just the kind of thing to associate him with the party people rightly associate with bringing down a prosperous economy, putting our country in danger and protecting crooks and tyrants in their quest to make a mockery of liberty and the institutions that protect it.

"some of us would like to see an approach that would emphasize personal liberties, civil liberties, looking at the drug war… It’s really the old Republican Party because even Limbaugh was a big supporter of Bush so he doesn’t have anything new either when it comes to bringing our troops home, not expanding the war in Afghanistan."

said Congressman Paul. Some of us of course have been saying that for a number of years -- Democrats to be specific -- and we do remember being called traitors for agreeing with what the "new" GOP now seems to be trying to be seen saying. We remember being called traitors, loonies, dementia sufferers, Marxists and a long list of epithets of unrestrained hyperbole by Limbaugh and his fellow polemicists.

Although as a habitual Democrat, I wouldn't mind seeing Limbaugh go down with his leaky, worm eaten ship of shame, it would be far better for us all if there really were a new Republican Party that really did believe a bit more along Libertarian lines and particularly if it were led by someone who is capable of maintaining a dialog rather than hiding larcenous demagoguery behind a smokescreen of war and pretended patriotism. So far no one but Mr. Paul comes to mind.

THOSE CRAZY CEPHALOPODS!

Curious goings on in California - could it be the reason for our own (O)CT(O)PUS' absence?

This innocent looking female octopus managed to open a valve above her tank allowing hundreds of gallons of sea water to overflow her tank and flooding the floor, probably doing a lot of damage at the Santa Monica Pier Aquarium. Perhaps this explains the mysterious absence of 8pus - no doubt one of his offspring now in need of rescue!

And I wished I had learned about this curious creature before adopting my now familiar Rocky moniker. This new species was found in the waters of Indonesia. It is a type of frogfish with a beige body, peach colored stripes and blue eyes leading to its scientific name Histiophryne Pyschedelica and it bounces around on the sea floor on feet like fins.

How cool is that? Just call me Psychedelica!

An End to the Iraq War in Sight

Obama's Iraq withdrawal speech today was excellent - his best speech in awhile. In case you missed it, here are the main points: an end to combat missions in Iraq by August 31, 2009 2010, and a 35,000-50,000 troop residual force that will be fully withdrawn by the end of 2011, as per our agreement with the Iraqi government. Obama was also clear about his intent to help our soldiers and their families - the biggest applause line from the soldiers at Camp Lejeune where he spoke was for Obama saying he will raise military salaries. And he sounded truly sincere in his praise of the Iraqi people.

One thing that really stood out to me about the speech was that Obama mentioned his commitment during the campaign to a 16-month withdrawal - and then highlighted that he was settling, after much consultation with the military commanders, on an 18-month withdrawal. Many on the left are disappointed in this, but I find it thrilling that he didn't try to cover up the two-month difference, he didn't try to hide the fact that his policy shifted slightly. Listen carefully to how he actually emphasizes 18, as if to draw increased attention to the alteration. This man isn't concerned with typical cover-your-butt politics, he wants to inform the American people to the greatest extent possible. He wants to help, he wants to teach, he wants to be an effective Commander in Chief. He is honest.

The video is below. It is a must watch. Take a good look - this is the sort of leadership our military has needed for many, many years.

Bets on whether or not the Democratic Party will come to be the party of national security?

Visit msnbc.com for Breaking News, World News, and News about the Economy

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This post originally appeared on The Political Panorama.

Typical

"Now isn't that typical"

-The Church Lady-

There are always stories in the local paper that make me rant and rave philosophical. At first glance these two stories seem to have little in common, but they do because of the different reactions people have to them -- which illustrates my point.

The first story is about an undocumented Guatemalan man who worked for a local gardening service. The truck he was riding in was hit head on by a drunk driver and Luis Jimenez suffered severe and irreversible brain trauma. Having no money, no local family and no insurance the local hospital took him in and over a period of a few years, his bills climbed into the millions. After three years, the hospital was granted a court order allowing them to charter a Medivac jet to send him home to his family, but the bill of course stayed here and will eventually be covered by increased insurance costs to all of us. End of story? No, his family has charged the hospital with kidnapping and is suing for damages.

The second story about a local homeless man caught swiping M&M's, T shirts and other items from a convenience store. He has a history of drug and public intoxication arrests, but he claims that he's entitled to all the M&Ms he can steal -- because he served in Iraq.

So what do these stories have to do with each other? Nothing really, but my reason for comparing them is that while people who write to newspapers use the first to howl and scream about illegal aliens and how this is typical of all of them, nobody uses the second to tell us that all Iraq veterans should be deported.

What makes something "typical" of a group? Usually our prejudices, our hidden fears and our dishonesty. Aren't we typical!

ANNOUNCEMENT FROM OCTOPUS

Your faithful 8pus will be away for two to three weeks. Please do not think I am abandoning, ignoring, or neglecting you. I will be working as a co-contributor on a story, a very big story, with Lindsay (from Majikthise) that will receive national attention once we finish it. We can’t tell you what it is, of course, until the project is done. But I promise you this: It will debut here.

Meanwhile, have fun, play nicely, and see you when I return.

Say it ain't so, Bobby

We can see that Bobby Jindal likes to talk as though his audience were all preschoolers and wear ties he borrowed from Bozo the Clown, but did Bobby Jindal make up a story? Seems like it.

Tuesday night's speech to congress had the man who would be president calling himself a hero, insisting that boats be allowed to rescue people of New Orleans stranded on rooftops; standing firm when some nasty ol' gummint bureaucrat was telling the sheriff that boats without proof of insurance would have to stay home. Only problem is, says Talking Points Memo -- he wasn't in the sheriff's office -- he may not even have been in New Orleans and the sheriff didn't know about the policy until weeks later.

Seems his only course of action may be to insist, like Sarah Palin, that she really did say "thanks but no thanks" and really did sell the state jet on eBay when she didn't and blame it all on the Liberal Media. Good luck to the both of them.

A NEW GENERATION OF HOPE!

Stories like this one are what we should be seeing on the nightly news instead of which celeb is gaining weight, losing weight, doing drugs, going to rehab, etc, etc.

When I read about kids like 12 year old Max Wallack I want to stand up and cheer for a new generation that gives me hope for the future.

Max is one of those “gifted” kids who will probably never make a winning touchdown but he will most certainly make a name for himself just the same. In fact, he's already well on his way. Max won a contest by creating the shelter pictured here out of trash; namely wire, plastic and packing peanuts. He won $10,000 and a Dell computer but modest Max isn’t too impressed with himself. “I don’t really care about the money. I care about helping people.”

And his ambition began at an early age. “When I was six,” Max said, “I won an invention contest that included a trip to Chicago. While there, I saw homeless people living on streets, and beneath highways and underpasses. I felt very sorry for these people, and ever since then, felt that my goal and obligation was to find a way to help them. My invention improves the living conditions for homeless people, refugees, or disaster victims by giving them easy-to-assemble shelter.”

So, here’s to Max and all those in his generation looking to make the world a better place. While their elders are talking these issues to death, our children are making us look like fools and I for one am thankful that they are!

CHEERS!

Let them eat Lobster

I just don't know any more and perhaps soon enough I just won't care. I got cornered by a woman at my club last night who went on and on about her money being wasted in earmarks for tattoo removal. This seems to be the red herring this week and the fishy smell of course is emanating from Fox, with people ( and I use the term loosely) like Michelle Malkin working overtime to make the most of it.

Apparently some money will go to a program to remove gang tattoos in California. Some will go for the Lobster fishing industry in Maine -- I don't need to repeat the litany, just turn on Fox or read any of the Ditto sites that repeat it ad nauseam, but we're hearing far less about billions to companies that use it for executive pay and bonuses; jets and yachts than we are about millions to entities that spend money on the poor and disadvantaged or on industries that employ Americans. All around her, of course are bankrupt businesses, foreclosed houses and homeless people. Perhaps one of them works for a dermatologist who removes tattoos. Perhaps there's someone who works in maintaining the 20,000 or so acres of parkland in this county -- land that attracts more in tourism than we spend making it pretty.

Certainly some of them in this coastal village are commercial fishermen whose boats are being foreclosed on, which is affecting the sales of gasoline and services which is forcing marinas to close and people in boatyards and grocery stores and tackle shops to be laid off. Saving an industry that employs Americans is at least a bridge to somewhere and criticism from people who have represented and supported the greatest orgy of non-productive pork barrel spending is almost as disgusting -- well, as Michelle Malkin.

It's easy to call any budget a series of "earmarks" and it beats me to think about how one allocates funds without allocating funds, unless you follow the Bush/Paulson "don't ask because we won't tell, you liberal bastard" model. One thing is for sure; some Maine fisherman is more likely to be salting cod with whatever comes his way from this package than salting money away in the Caymans or buying German cars or yachts made in Taiwan and Hong Kong.

The whole idea of economic stimulus is to produce liquidity and improve the velocity of money so that maybe fewer people will lose their homes and jobs and businesses. The sudden parsimony of people who said nothing as tens of trillions of debt piled up, as money disappeared into the bowels of offshore corporations like Halliburton, was disbursed in pizza boxes to Iraqi war profiteers and corrupt politicians, should be embarrassing. Being a Republican however, is never to feel embarrassment, guilt or remorse, but to look for the solace of being told it's the doing of the "liberals."

As I said, I'm almost to the point of not caring any more. If we really are a nation of people hypocritically obsessed with the motes in other people's eyes, or stimulus packages, to the point where they would gladly see the end of the United States as a world power, we deserve what we get.