Tag Archives: bailout

The Economic Problem Explained by Heidi’s Bar

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 DRINKBONDS.

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 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?

Action Steps

Get A Business Coach! If you already have a business with more than 10 employees, Hire A Consultant who is  able to work with you part of the time on-site.

Would you like to be in the next group of very successful companies and entrepreneurs?

Contact me now.

Steve Pohlit

Steve Pohlit

Business Development Consulting
Executive Coach

Social Media Services
New Digital Media, Inc.

Connect With Steve On:

Twitter

Facebook

Linked in

727-587-7871

Email

About: Steve Pohlit CPA,MBA has been the CFO and COO of  major domestic and international companies.  Steve has extensive business ownership experience having purchased and started off line and on line businesses.

Steve offers his  build business profits expertise to companies and entrepreneurs with business coaching and business consulting.  His  focus is on building business  profits and net asset value at above average rates.  Steve incorporates health and wellness plus relationship guidance in his work as they are at the foundation of achieving all goals.

All articles published by Steve unless specifically restricted may be freely published with this resource information.

Google Buzz

Gangster Government

I hope you understand this is not an Republican vs. Democrat issue. This is our government playing a role where it doesn’t belong and when it does the consequences we experience.

Sharing with all my readers the energy of peace, happiness and abundance

Steve Pohlit, Expert Business Consulting

Email Me, Steve Pohlit to schedule A No Obligation Consultation On Building Your Business Profits.Need more customers? Let’s discuss how to use cutting edge Social Media Marketing in the revenue building cycle of your business to drive your profits sky high. If  your company is not growing revenue and profits,  if your company is not cash flow positive Click Here for more information about Turnaround Consulting Services for Business In Crisis

Follow Me and I Follow You http://Twitter.com/BuildProfits

FREE Report:
How To Increase Business Profits by 30% or More in 90 Days or Less

Connect with me on Facebook Click Here

BONUS

Did you watch the entire video?

You didn’t ?  I honor your love for accepting all in this country as is and the direction it is moving.

You did? How cool is that? Did you notice the song at the end of the video. Here is a video of that song. Click Here

DOUBLE  BONUS

Did you notice the information on the organziation who published this video?  It is from The Kick Them All Out initiative and I am now a card carrying member. Decide how you feel about it and Listen To Your Heart. There are 761 people who have paid attention and pledged to vote so all incumbants are fired.

Google Buzz

Failed Financial Bailout and The Responsibility of Business Owners and Executives

You already know the failure of the $700 billion bailout bill triggered a 777 point drop on the DOW.  CNN reports that the markets lost  $1.3 trillion dollars of value in one day.  I didn’t double check their math.  Let’s just say it was a big decline.

There will be plenty of advice on this situation.  Unnamed top consultants cited in Forbes today already advised: “cut costs and grab the low hanging fruit”.  Thank you for that clear direction.  There will be  a lot more of similarly “valuable” advice in the coming weeks and months.

This is not a “what happened ” report or “who should take the blame” report. This is simply a Wake Up Call To Say – Stop Living A Life of Illusions!  Accept responsibility for your business.  Do the following today. In fact, implement these right now:

  • Take focused action to grow profits and sales every day.  Do not blame outside factors.  Every business works in the same marketplace. Define the five “A” areas of your business that drive profitable sales and spend 80% of your time on those.   That is four out of five days.
  • Treat your support network with respect and help them grow faster than your business since your business will follow the growth of your skills.  Your support network should be selected based on your personal weaknesses not your strengths.  Don’t go for clones.
  • Optimize all your assets including, people, receivables, inventory, fixed assets. Each one of these assets replace cash.  You need cash to grow.
  • Evaluate, decide then act.  You don’t need a two year study to enter a new market or even a new country. You can test it beginning now.  This is the “bias for action mindset”.
  • Treat all the same as you would like to be treated.  When someone does not treat you well ask yourself what you are doing to attract that behavior.  Yes that is exactly what I meant to write.

Each of these areas takes work to implement.  If you need help, Email Me (Steve Pohlit)  or call me at 727-587-7871

Consider This:

Some members of Congress  stood ground and said “it is not the government’s job”   or ” I am in favor of a solution, but this plan is not good for America.”  I don’t know their personal situation, but most likely some of them have personal money in mutual funds and stocks that got clobbered today by their vote.  How would you vote if you know your net worth would tank by your no vote?  Would you be able to vote your belief.  Actually I respect all who voted their belief system regardless of the vote.

Politically there are big issues on the agenda and people are lining up for what the government should do on a number of social issues.  The bigger question is whether the government should be involved in any of these social issues in the first place. It seems  to me our country was founded on the principle of independence – life, liberty and the pursuit of happiness. I don’t recall anything that says that if we pursue happiness and experience unhappiness,  the government should bail us out.

If you don’t remember Enron, Google it.  Out of Enron came Sarbanes-Oxley.  That was the legislation designed to prevent another Enron.  I can show you Power Point slide where I pointed out that this was useless legislation. There already were laws for corporate governance in place. I was one of the few in the accounting and legal professions arguing against it.  It passed and the cost has exceeded the bailout that failed today.  That cost was paid for by consumers where the price of products and services had to absorb the cost of implementing Sarbanes-Oxley.  History teaches us a lot if we pay attention.  When I work with business consulting clients  I help them implement what I know to work from experience as adapted for the the individual differences of the client.  It works when the client pays attention and acts as guided.

Sarbanes-Oxley was designed to prevent a bailout from even having to be considered.  It didn’t and government legislation will never prevent transactions with little or no economic substance.  But we continue to live in an illusion that government can solve all of these issues.  It can’t and nor should it, because that is not the intention for our government.  ” We The People” are responsible.

Sending all my readers the energy of wellness, peace and abundance

Steve Pohlit,  www.StevePohlit.com

Network with me on Facebook: LinkedIn: Follow me on Twitter

Steve is the President of International Business Consulting Resources. His firm specializes in guiding companies to rapid increases in revenue and profits with a sustainable growth rate. Don’t miss my FREE Report: How To Make More Money With Your Business Now and Long Term I am building my practice and welcome new client inquiries. Call me for a fee consultation at 727-587-7871

Google Buzz