The Stock Market Crash…Would You Like An Umbrella With That?

How did we get into this economic mess? Not being financially savvy, I try and think of the markets, banks and government in terms that I can understand, as a big, global and dysfunctional family, one with a drinking problem. In this case, the liquor of choice is money. Imagine it this way…a few years back when cousin Alan Greenspan (think of him as an enabler) headed the Fed, he started lowering interest rates that banks could borrow the money they loan to each other and ultimately to us.

Now remember that the money is booze. What happened was that Greenspan was essentially getting his relatives, the banks and mortgage lenders, drunk on money. Those guys, once they were really oiled up, started passing out blue light money at well drink prices to little guys who weren’t in the family, never stopping to see if we, the little budding alcoholics at the bottom of the ladder, were drinking responsibly or not. See, by that time they were just as drunk as we were, they weren’t thinking clearly and the liquor was easy to get..

So, while the little guy was staggering around buying houses, cars and boats, then drinking up the value in them in the form of equity loans, the rich guys were careening around in Jaguars and Benz’s, knocking down any warning signs and roadblocks in their way. Everybody was happy and stoned on money.

But here’s the catch (there’s always a catch)- some drunken lenders, thinking they were being clever, said to the little guys, ‘Look, we’ll give you these drinks really cheap now, but later on, you’ll have to pay full price for them. We’ll call it Adjustable Rate Mortgages, or ARMS. How bad is that? We all have arms and they’re very good things. Anyway, don’t worry, you can always sell your bottle to someone else if you want, and for more money.” The little guys, looking at the Moet-Chandon houses the lenders were waving in front of them, said, “Shure, shure, jush giff me the bottle.”

The problem was, when it came time to pay up, the little guys realized that they’d drunk everything in the bottle and an empty bottle, no matter how good the label looked, wasn’t worth all that much. They only thing they could do was give the empty bottle back, admit they were broke and stagger away, feeling really sick.

Usually, a bunch of little guys losing their houses never bothered rich people before, so why have things gotten so bad? Because during the middle of the festivities the rich guys had realized they didn’t have enough booze to give to all the poor drunks who wanted it and had started borrowing bottles from their other rich cousins to give away cheap, without really keeping good records of it all. It seemed like a good idea at the time.

About a year ago the rich guys finally sobered up enough to realize they’d made a really bad deal and stopped giving away any more booze to poor people who couldn’t afford to pay for it. And when all their rich cousins sobered up too, they started asking each other for their liquor back, but in their alcoholic haze, no one knew exactly who had what or how many empty bottles they were responsible for that had rolled under the bed or into the bushes or got smashed against the wall. It was, in short, a helluva of party.

So now it’s this Spring and Summer. Over the past year or so, most of the little guys have sobered up and are trying to get through their fiscal hangovers. The rich guys, having had more booze than us in the wine cellar, took a little longer and are in that morning after, bleary eyed and jittery stage, trying to remember just what happened. They’re at the point where they’re staring at numbers scribbled on cocktail napkins and wondering if their wives are going to pick up the phone when some chick named Bunny calls or why they have a note that says, ‘That biker guy, Snake, the one you got thrown out of the bar, says he’s coming to your house tomorrow and beat the snot out of you’. In short, they’re laying low and hiding out. Suddenly even sober and responsible people can’t borrow money and the Stock Markets are crashing.

Something else happened too during the party- a bunch of really greedy cousins who were the black sheep’s of the family and called themselves ‘The Short Sellers’, had been crashing the parties, but no one had noticed them in their drunken stupors. After all, they looked like family. These Short Sellers had figured out a way to get a lot of booze for themselves by manipulating the price of liquor in their favor. They owned the liquor while the cousins just owned the bottles. This is actually what’s been causing the rich cousins to finally start asking for their stocks of liquor back from each other, to cover what the Short Sellers were doing, but by this time it’s too late. Everybody’s drunk it all and there are only empty bottles lying around.

What’s a spoiled rich nephew to do? With shaking fingers, they dialed their uncle, Sam. ‘Can you help us?’ After all, Uncle Sam had helped before, back in the Savings and Loan scandal of the Eighties. He’s always been an indulgent guy, letting his rich relatives do pretty much whatever they wanted to do. The problem here was that Sam isn’t made of money and he’d been spending what he had like a drunken sailor on his own fling, the war in Iraq.

Still, he did what he could. He helped some nephews, but not others. The thing is, now no one knows if Sam is gonna help them or not, maybe he will, maybe he won’t, and until they figure out that one they’re sure not gonna loan each other any money. To make matters worse, the aunts, Congress and Senate, have found out what happened and are complaining (even though they were happy to shut their eyes and ignore the smell of booze on their rich nephew’s breaths when they brought them flowers at election time) which might slow things down even more.

Which brings us to this morning. It seems Sam called all his global brothers, the central banks of other countries, and they’re all gonna chip in a little something to get the kids back on their feet to get the booze flowing again, albeit at a higher price. Will it be enough? Who knows. What then is the moral of the story? Why, drink responsibly, of course. Oh, and don’t mess with a guy named Snake.