Thursday, February 25, 2010

Credit Crisis Rescue Package: if you still don't understand what they are talking about in the news


You have two cows, and you write down on a piece of paper that the cows are worth $100 each.

You notice the cows are on fire. Your paper still says $100.
Fortunately, mark to market has been suspended so you don't have to pay attention to the fire.

Your cows are dead from fire. Your paper still says $100.
Fortunately, mark to market has been suspended so you don't have to pay attention to the dead cows.

You notice that you aren't getting as much milk as expected, so you adjust the model and mark the cows down to $98. You are confident, however, that the dislocated stream of milk revenue will quickly revert to expectations.

You need to borrow some money so you ask investors for a loan against the cows. The investors tell you the cows are dead, and you already owe them $200 dollars you borrowed to buy them in the first place. You show them the paper that says the cows are worth $98 each.

They light your paper on fire. You ask the government to buy the dead cows at $98 each.

The government holds meetings all weekend and finally comes up with a plan to inject $45 dollars into your cattle ranch. In exchange, the government gets a right to milk generated from the cows at some point in the future. It expects you'll buy a new cow with the $45.

You have two dead cows, $45 and $200 in debt to your investors. You have no plans to buy new cows, so you take the $45 as a bonus.

Lesson In Banking 101

This article was first published in the British humour magazine "Punch Magazine" on April 3, 1957: But still VERY pertinent to Banking practices today. It a clear demonstration that in 50 years, we have neither improved not got any smarter.

Q: What are banks for?
A: To make money.

Q: For the customers?
A: For the banks.

Q: Why doesn't bank advertising mention this?
A: It would not be in good taste. But it is mentioned by implication in references to reserves of
$249,000,000,000 or thereabouts. That is the money they have made.

Q: Out of the customers?
A: I suppose so.

Q: They also mention Assets of $500,000,000,000 or thereabouts. Have they made that too?
A: Not exactly. That is the money they use to make money.

Q: I see. And they keep it in a safe somewhere?
A: Not at all. They lend it to customers.

Q: Then they haven't got it?
A: No.

Q: Then how is it Assets?
A: They maintain that it would be if they got it back.

Q: But they must have some money in a safe somewhere?
A: Yes, usually $500,000,000,000 or thereabouts. This is called Liabilities.

Q: But if they've got it, how can they be liable for it?
A: Because it isn't theirs.

Q: Then why do they have it?
A: It has been lent to them by customers.

Q: You mean customers lend banks money?
A: In effect. They put money into their accounts, so it is really lent to the banks.

Q: And what do the banks do with it?
A: Lend it to other customers.

Q: But you said that money they lent to other people was Assets?
A: Yes.

Q: Then Assets and Liabilities must be the same thing?
A: You can't really say that.

Q: But you've just said it! If I put $100 into my account the bank is liable to have to pay it back,
so it's Liabilities. But they go and lend it to someone else and he is liable to have to pay it back,
so it's Assets. It's the same $100 isn't it?
A: Yes, but....

Q: Then it cancels out. It means, doesn't it, that banks haven't really any money at all?
A: Theoretically......

Q: Never mind theoretically! And if they haven't any money, where do they get their Reserves of
$249,000,000,000 or thereabouts??
A: I told you. That is the money they have made.

Q: How?
A: Well, when they lend your $100 to someone they charge him interest.

Q: How much?
A: It depends on the Bank Rate. Say five and a-half percent. That's their profit.

Q: Why isn't it my profit? Isn't it my money?
A: It's the theory of banking practice that.........

Q: When I lend them my $100 why don't I charge them interest?
A: You do.

Q: You don't say. How much?
A: It depends on the Bank Rate. Say a half percent.

Q: Grasping of me, rather?
A: But that's only if you're not going to draw the money out again.

Q: But of course I'm going to draw the money out again! If I hadn't wanted to draw it out again I
could have buried it in the garden!
A: They wouldn't like you to draw it out again.

Q: Why not? If I keep it there you say it's a Liability. Wouldn't they be glad if I reduced their
Liabilities by removing it?
A: No. Because if you remove it they can't lend it to anyone else.

Q: But if I wanted to remove it they'd have to let me?
A: Certainly.

Q: But suppose they've already lent it to another customer?
A: Then they'll let you have some other customers money.

Q: But suppose he wants his too....and they've already let me have it?
A: You're being purposely obtuse.

Q: I think I'm being acute. What if everyone wanted their money all at once?
A: It's the theory of banking practice that they never would.

Q: So what banks bank on, is not having to meet their commitments?

Quotes from the honest guru

If insects were to disappear tomorrow, all life on earth would perish. If man were to disappear tomorrow, within a generation life on earth would flourish.


Is Teenage Pregnancy a Life Choice


The claim, now heard in UK social services, that teenage pregnancy and dropping from school are merely alternative life choices, and must not be frowned upon by society can be categorized as nothing but BS.  Not all life choices are equal. Every society must decide which life choices are acceptable and which are not.

Claiming that all life choices are equal takes away from the concept of progress. Can anyone claim that our society is not preferred to the 9th Century UK, pre-Magna Carta, pre-human rights? Is a serial killer life choice acceptable? Without a a moral compass, with definition of the desirable, acceptable, punishable there is no society only chaos. Chaos, in turn, limits life choices to survival. So, while teen-age mothers need support, let's agree that education as desirable in our society, and anything that stops it as not.

Wednesday, February 24, 2010

Medicine for sadness

"The best thing for being sad," replied Merlyn, beginning to puff and blow, "is to learn something. That is the only thing that never fails. You may grow old and trembling in your anatomies, you may lie awake at night listening to the disorder of your veins, you may miss your only love, you may see the world about you devastated by evil lunatics, or know your honor trampled in the sewers of baser minds. There is only one thing for it then - to learn. Learn why the world wags and what wags it. That is the only thing which the mind can never exhaust, never alienate, never be threatened by, never fear or distrust, and never dream of regretting. Learning is the thing for you."

T.H. White
The Once and Future King

British Rail and Economic Rationalism

It has taken some time, but at last, our train masters have conceived an ingenious way to cut cost, while simultaneously improve their performance statistics and make commuter’s trip even more miserable. Three trains with one stone. Not too bad for people who get huge bonuses for failing at their job.

How do they do it?

The Bedford to Moorgate trains, a morning service only, take commuters from Bedford, Luton, Harpenden and St Albans to the City. However, as a ticket to Moorgate costs as much as a ticket to Farringdon, the masters have decided to stop the Moorgate service altogether, and let everyone used the London Bridge train instead, changing at Farringdon to the underground.

This will force commuters to the City to experience the joys of the London underground. In addition, paying the additional underground fare, will add to consumer spending, increase our GDP, and help the economy at times of hardship.

Moreover, while not operating this service, the train company will still get the same number of commuters paying the same amount of money. Genius isn’t it?

Anyway, these days, nobody likes the City bunch. Let them all suffer. Why not?

Tuesday, February 23, 2010

A question from the honest guru

If you fail to fail, are you a failure or a success?

RBS reveals biggest loss in UK history

Following the loss, RBS management has agreed to reduce (not eliminate, God forbids) their performance bonuses, and instead increase their base salary, claiming they will not be able to attract talent otherwise.

Indeed, if it’s talent that was needed to lose such sums, wouldn’t it be a prudent business decision to attract the less talented?

And let’s get serious. Bankers are not as hot as they once were. Do we really feel that if we didn’t increase their salaries they will resign, and take, for instance, teaching jobs instead? If banks don’t understand the current economic reality of supply and demand they are in the wrong job, and we’d better get rid of them altogether.

On the other hand, if we give them, why shouldn’t they take? After all, this is one of the only things they do understand.

Eggs and the extinction of the human race

Until recently eggs were raising our cholesterol to dangerous levels and should have been eliminated from our diet. But not any more. Research has shown that eggs are good for our health, and will remain so until a future research will prove the opposite.

I just wonder how generations of my ancestors managed to survive without knowing how to have a good diet, live properly, healthily and correctly. According to another research, we should have been extinct by now.

So until the final extinction, or  until it becomes unhealthy again, I am going to have Spanish Omelette for my dinner. Bon Apeptit.

Monday, February 22, 2010

Post-Capitalism is ...

A system in which reward is not shared by the risk takers, and where the biggest players demand to be rewarded for making products that no one needs or wants to buy.

Sunday, February 21, 2010

Brown vs. Titian by ranfuchs @ 21/02/2010 – 15:17:54

Brown: "'Titian reached the age of 90, finished the last of his 100 great paintings, and said: ‘I’m finally learning how to paint.’ That is where we are’"

And to this all I can say is that I have not yet seen Mr. Brown's 99 masterpieces. So why doesn’t he go home and leave us alone until he's 90?

About brothels, banks and governments

The Mustang Ranch brothel, also known as the Mustang Bridge Ranch or Valley of the Dolls, was Nevada's first licensed brothel. In 1990 the U.S Federal Government seized it for tax evasion and, as required by law, tried to run it. They failed and it closed.
I only hope governments are doing a better job at running the banks they own than at running brothels.

Saturday, February 20, 2010

Gaza, the Israeli invasion, and some soul searching

I'm not going to delve into the complexity of the Middle East, and the futility of the solutions offered by the mass-media-informed citizens of the world, who believe they have a deep secret knowledge of the way to solve the problem between the two sworn enemies. Most believe that the an Israeli withdrawal from the territories will solve all problems.

Well, those deep thinkers seem to forget that  Israel did withdraw from Gaza a couple of years ago, and the world  celebrated the birth of HK of the Middle East. It did not happen, and the launching of missiles into Israeli cities has only intensified since then.

Other believe that Israel opening of the boarder would not solve all problems. Again they forget that whenever Israel tried it, suicide bombers from Gaza blew themselves up in Israeli cities. They also forget that Gaza has a border with Egypt. Egyptian, worried about the spread of terrorism, close their border, as well.

Anyone who claims that Israel should let missile fall on its land, and suicide bombers explode in its cities, is a hypocrite, what would you have done if bombers would explode in a regular basis in your own city, if rockets landed in your streets? Would you demand your government to deal with it? Would you demand kill on of theirs whenever one of ours is killed? Or would you demand your government to do everything in its power to make your life safe?

I am most perplexed about the heated emotions here in England. Why weren't there any demonstrations in the weeks leading to the Israel attack, when Hamas had fired dozens of missiles into Israel and Israel made it clear that it would respond if the firing continued. Why didn’t the English demonstrate to stop the attacks on Israel then, not to protect Israel but merely to stop the unavoidable?

And why didn’t we see demonstrations against Shiites killing Sunnis (and vice versa) in Iraq, against the war against PKK in Turkey, against the genocide in Darfur; against Hamas killing the Fattah supporters in Gaza, against Iraq’s invasion of Kuwait, Iraq-Iran War, the massacre in Algeria, Russia in Chechnya, the war in old Yugoslavia, and many others. There were no demonstrations in London, regardless of the death toll, even when it was a clear genocide.

Is it possible that under the intellectual and liberal veils, some good old anti-Semitism is raising its head? Why are you more emotional about Gaza than about  the PKK or Sri Lanka? Are you the product of the mass media brain washing, or maybe you are not the liberal you want to believe you are?


Mr. Rondean had been awarded £62,500 for sexual discrimination. ‘It was not the money that was important,’ he said. ‘It was justice that I wanted’.

On the same day Elain Hess, whose husband Stuart died after being addicted to cigarettes was awarded £5.6m. ‘It wasn’t about the money’ she insisted. ‘I just really hope this can help ….’

Give me a break. If it’s not about the money, give it to charity. If it is, enjoy it and shut up

Quotes From The Honest Guru

Few have caused more harm
than a self-righteous or an ignorant


It is disappointing that Obama, whose election motto was CHANGE, is taking economic advice from the very same economists whose policies led us here.

CHANGE Mr. Obama, starts with getting rid of that which has been proven not to work. So why don’t you get rid of those who until less than six month ago refused to see where their policies were leading, and employ those few and far between who understood. As for the rest of the economist, let them join the ever growing unemployment cycle. They may learn something.

Brown vs. Einstein

Gordon Brown said, in a meeting of self-proclaimed world leaders, that unless the trend was reversed there was a risk that it would imperil the process of globalisation, damaging prosperity around the world for years to come.

Einstein said that we can't solve problems by using the same kind of thinking we used when we created them.

Is it just possible that globalisation is the problem?
Whenever you are frustrated with your job and your boss, remember, it can get worse:

Friday, February 19, 2010

Quotes From The Honest Guru

If you ever believe what you are told in the media remember that:

The chances of anything coming from Mars,
are a million to one he said. 
But still they come.
 Jeff Wayne

Tuesday, February 16, 2010

The tragedy of relationships

The tragedy of any relationship starts the moment you have lost your ability to make each other happy, yet maintained the ability to inflict pain and make each other miserable.

Once you are there, there is no way back. Step down.

Monday, February 15, 2010


RBS, rescued with £20 billion of UK tax payer’s money, throws £1 million Christmas party – a modest amount according to his CEO Stephen Hester.

I am glad that for Mr. Hester £1 million is pittance. However, this is enough to feed 3,000 African children for one year, provide half a million vaccination for malaria – the greatest killer of all diseases, or build schools in 50 villages.

But why go far? Many of ours schools here would be delighted to get only a few thousands dollars each to help with maintenance and acquire basic equipment so desperately needed.

So Mr Hester, as small as £1m might seem to you, it’s not your money that you’re spending this time. It is my money. And it’s me and a few thousands of my neighbours that pay your £1.2m a year salary (before bonuses).

If it were up to me, I would have saved few thousand children and not the bank. It wasn’t my choice. The money was taken from me by the sword of the taxman. So don’t tell me it’s a small amount. If it is, I want it back.

The Claws

One afternoon, when I was leisurely drinking my tea, I suddenly felt that my cup was fighting to evade my grip. Closer examination, however, revealed that it wasn’t my cup at all; it was my hands, having been terrorized by a pair of claws that that had arrived to replace them, that were trying to escape. 

“Not again!” I thought, and decided that this time I was going to file a complaint. 

My spoon gave a busy signal first, and then gave no dial tone, and I realized that a visit in person would be necessary, so I dived in. Fortunately enough, I could easily reach the cube of sugar, which was still lying at the bottom. The complaints department, on the other hand, seemed to have moved and I couldn’t find it anywhere. 

A little blue fish approached me and asked for the way to the technical department. But having missed my tea, I felt hungry and swallowed it. This seemed to somewhat upset his big brother, who appeared from behind the corner, and ignoring my unsavory flavor, gulped me at once. 

I knew I was heading in the right direction when I saw a Complaints Department sign shimmering from the back of his throat, and I started tracing the arrows on the floor. 

Down the spiraling stairs I went, and up the dark corridors, until I found myself facing a locked door, who rudely refused to let me in. I was about to retrace my steps, when my claws, eager to prove themselves useful, scratched their way through the unfriendly door to the other side, where I was attacked by champagne corks, balloons and a group of women who insisted on kissing me all over. 

“Surprise!” they called, blowing the trumpets.

“Welcome to the accounting department,” said an accountant-looking woman. “You are the first person to have joined us since the freeze in human resource,” she said, and with a sweep of her arm cleared a space for herself on a big mahogany desk and set on it opened legged.

“We are your family now,” she continued, pulling me towards her, with her eyes glowing. “So make sure your report is on my desk by seven tonight.”

“But I’m only looking for the complaints department,” I said faintly.

“The complaints department?” she shrieked loudly, attracting all eyes in my direction, making me wish I’d never uttered the words. “He wants the complaints department!

“We are not good enough for him here. Let’s show him what we do to people who are after the complaints department!” she cried and kicked me straight through the wall into a small room, where I crash-landed over a machine, whose jammed cogs started to heat up to my touch, while humming cheerfully to themselves. 

“Thanks for the lift,” said the small slimy blue fish, jumping out of my mouth. “Keep the change,” he continued, handing me a dime. 

I wanted him to stay and introduce me to the machine, which seemed too shy to make my acquaintance. But he vanished in the crowed. 

As conversation seemed impossible under the circumstances, I started staring the walls, hoping to find my way out. One brick after the other I tapped, until I found what I was after. 

“Exit,” said the brick, and smiled temptingly.

“Could you please open up for me?” I asked. But she kept quiet, and only her widening smile indicated she’d heard me. I tapped her again, and she opened straight away, and I could see half a dozen sulking people sniffing roses in disgust. 

“No more complaints!” they shouted when they saw me. “Can’t you see we’re closed now? Take a rose and go away.” 

But as I noticed that the roses formed the words ‘Complaints Department’ I decided to pursue the issue for which I’d come. 

“When will you open again?” I asked.

“Tomorrow, It’s always tomorrow,” came the reply.

“It’s only a small issue.” I insisted. “Look, I was having my cup of tea, when all of a sudden my hands decided to escape, and left me with these,” I said, making my claws visible.

“A very nice pair of claws… osprey’s I should say. They look just fine to me.”

“But I don't want them. I want my hands back!”

“You think that you’ve got a problem, don’t you?” they grumbled. “Look at these roses, for instance. They don’t even smell. And they are all fresh. Do you really think that we can keep listening to your complaints under such conditions?”

“But…” I said, feeling embarrassed to have been so selfish.

“Listen mate, one more word from you and you’re the manager here. Then, all your complaints will be dealt with by our internal affair department,, where they’ll be given a special clearing priority, just over there,” he said pointing to the dust bin in the corner. 

“But …” I said again.

“That’s done it. “Starting now, you’re the manager. And if you don’t want us all to be going on a strike, you’d better do something about these roses straight away,” they said, and pushed me into a manager’s soft-leathered chair. 

As a manager my claws turned up to be of great value, so I decided to keep them, and withdrew my complaint altogether. And this was the beginning of my professional life.

Sunday, February 14, 2010

The Island of boom and bust by ranfuchs @ 14/02/2010 – 12:41:06

This is a short (and hopefully simple) illustration of what's happening in our economy. In case you are curious. It was the type of game we used to play, when I was first introduced to the concept of money and international trade.

Once there was a little island, it had a piece of land, and two pieces of 1 dollar coins.

Three people were living on the island. A was the land owner, while B and C had 1 dollar each. One day B decided to purchase the land from A for his 1 dollar. So, now A and C own 1 dollar each while B owned a piece of land that is worth 1 dollar. The net asset of the country now is 3 dollars.

Now C thought that since there is only one piece of land for three people, its value must definitely go up. So, he borrowed 1 dollar from A, and together with his own 1 dollar, he bought the and from B for 2 dollars. Now A has a loan to C of 1 dollar, so his net asset is 1 dollar. B sold his land and got 2 dollars, so his net asset is 2 dollars. C owned the piece of land worth 2 dollars but with his 1 dollar debt to A, his net value is 1 dollar. Thus, the net asset of the Island is 4 dollars.

A saw that the land he once owned has risen in value. He regretted having sold it. Luckily, he has a 1 dollar loan to C. He then borrowed 2 dollars from B and acquired the land back from C for 3 dollars. The payment is by 2 dollars cash (which he borrowed) and cancellation of the 1 dollar loan to C. As a result, A now owned a piece of land that is worth 3 dollars. But since he owed B 2 dollars, his net asset is 1 dollar. B loaned 2 dollars to A. So his net asset is 2 dollars. C now has the 2 coins. His net asset is also 2 dollars. Therefore the net asset of the Island is 5 dollars.

A bubble is building up.

B saw that the value of land kept rising. He also wanted to own the land. So he bought the land from A for 4 dollars. The payment is by borrowing 2 dollars from C, and cancellation of his 2 dollars loan to A. As a result, A has got his debt cleared and he got the 2 coins. His net asset is 2 dollars. B owned a piece of land that is worth 4 dollars, but since he has a debt of 2 dollars with C, his net Asset is 2 dollars. C loaned 2 dollars to B, so his net asset is 2 dollars.

Now the net asset of the Island is 6 dollars, even though the Island still has only one piece of land and 2 1 dollar coins. Yet, everybody had made money and everybody felt happy and prosperous.

One day an evil thought came to C's mind. 'Hey, what if the land price stop going up, how could B repay my loan? There is only 2 dollars in circulation, and, I think after all the land that B owns is worth at most only 1 dollar, and no more.' Coincidently, the same thought crossed A's mind, so nobody wanted to buy land anymore.

So now A owns the 2 dollar coins, his net asset is 2 dollars. B owed C 2 dollars and the land he owned which he thought worth 4 dollars is now 1 dollar. So his net asset is only 1 dollar. C has a loan of 2 dollars to B. But it is a bad debt, although his net asset is still 2 dollars.

The net asset of the country is 3 dollars again.

So, who has stolen the 3 dollars from the country? Of course, before the bubble burst B's land was worth 4 dollars, and the net asset of the country was 6 dollars.

B's net asset is still 2 dollars, and he has no choice but to declare bankruptcy. C as to relinquish his 2 dollars bad debt to B, but in return he acquired the land which is worth 1 dollar now.

A owns the 2 coins; his net asset is 2 dollars. B is bankrupt; he lost everything and his net asset is 0 dollar. C got no choice but end up with a land worth only 1 dollar. The net asset of the country = 3 dollars.

So we are back to where we started with redistribution of wealth. A is the winner, B is the loser, C has now the land but now money.

This Island is closed economy whereby there was no other country and hence no foreign debt. If foreign debt was involved, everyone could have ended up a loser.


“Shame of the Banks that are profiteering from the rate cut by axing their best deals.” said a newspaper headline.

And I say, shame on those who while using our money to bail banks out, did not take the opportunity to force banks to become socially responsible organisations.

Because, until someone changes the rules of the game, banks will play the only game they know --  profiteering is the name of their game.

Quotes from the honest guru

If you sometimes feel a little useless, offended or depressed …always remember that you were once the fastest and most victorious little sperm out of millions.

Saturday, February 13, 2010

Friday, February 12, 2010

Once upon a city

A city
Once so grand
Glorified past

Just another city
Like any other.

Wednesday, February 10, 2010

Having a bad day?

Always look on the bright side of life

Tuesday, February 9, 2010

Please don’t send me eCards anymore

I love to know you think of me
I love to know you care.
I’m happy when you chat with me
In Messenger or mail.
But please don’t send me eCards anymore.

I love to hear about your deeds
I always want to know.
An SMS brighten my day
Even if just Hello.
But please don’t send me eCards anymore

Cause when I get eCard from you
I wasn’t on your mind.
You have a mailing list, I know
And URL you found.


Send me single line to say
That you are fine and care.
But please,
Yes Please
I mean it
Don’t send me eCards anymore.

Friday, February 5, 2010

Quotes From The Honest Guru

Some people are so well organized and planned

I am glad I’m not one of them

Wednesday, February 3, 2010

The Night Market

When night falls and day-stalls fade away, the night crowd appears and the place is reborn into second life. The smoke rising from torches and open-fires smears the electric lights into aromatic illuminated haze. The hungry crowd get trapped, on their way to reaching the food, by night magicians and story tellers, who, to the sound of drums and other instruments, tell their stories and show their magic.

The night is also the time when women come to life. Some with their families, others as beggars with toddlers trained to cry at will, whenever a tourist comes near. Young women emerge to find love, hiding from preying eyes in the safety of the crowd.

Imagine away the electric lights, and you’d find yourself back at time when the forefather of these very story tellers were telling the very same stories; time when the ancestors of the food hawkers were making the very same food in the very same way. As this place has attracted locals and tourist alike, and made them leave their money behind for generations.

The call of muezzin is sounded from a nearby minaret. The crowed kneel on their knees to pray. Boys are pilfering from the food stalls, just as they have done for a thousand years.

Monday, February 1, 2010

Zen sotry

Did you hear about the Zen Master who goes
up to the hot dog vendor and says, "Make me
one with everything"?