Kidde 1276 Smoke Alarm Beeping

Introduction

Pepe is a hard worker who lives in a peaceful village. It has a modest salary with leading a simple life, but harbors dreams of prosperity. Want to mount a bar to improve their economic situation. Estimated the time to start getting some economic return to the bar: six months to put together, and another six to get up and running at top, full of customers.

Having no money to mount the bar earlier this year it sells to its neighbors thousand ballots. These papers cost a hundred euros, and will entitle the buyer to receive 110 euros at the end of the year. Pepe believes that after a year the bar will generate the profits necessary to give the buyer $ 110 each ballot: the hundred dollars that it cost, plus ten other gift to cooperate economically in the realization of his dream. Pepe

thus obtained funding to mount bar, 100,000 euros in cash from the sale of the ballots, while buyers get 10 euros ballot by ballot profit after one year: a good tip without doing anything.

Other neighbors take example of the idea of \u200b\u200bPepe, and also put on sale its own ballots to finance their projects.

The town is full of ballots, and finally enabled a place where citizens come together to exchange, buy or sell all of these ballots. This creates the basis of a market ballots. Since the ballots are constantly changed hands at the end of the year will be paid the agreed amount to the bearer of them, which need not necessarily be the original purchaser.

- I'm in a bind and need money. Six months ago I bought this ballot Pepe for 100 euros, and within six months will give 110 euros to whom it was delivered. You sell it for 105 euros, 5 euros of profit for me, I get right now, and another 5 for you, who gather in six months.

- Deal. Do you know that Luis has released 2,000 ballots to 100 euros each and promises to deliver 125 euros per ticket after one year?

- What is to be mounted?

- An ice cream shop in the North Pole.

- This business will be a ruin. I do not ever buy these ballots, I doubt it's capable of returning a single euro of money provided by its sale.

- Well, I think that has some chance of success. However, since business is inherently risky, I will say that I buy them only if they offered me 150 euros after a year. If not, life is sought.

- Wise decision is yours.

When you call local stock market, and the ballots can call the bonds or debentures. We may also call loans. The 110 euros to pay Pepe after one year are the bond's face value.

The mayor has decided to join the bandwagon of funding ballot, aims to raise money to repair the fountain in the Plaza Mayor, renewing the streetlights from the promenade and reconstructing the shrine of the patron saint of the village. The City brings to market their own ballots, which we call Public Debt.

addition, some people have the idea to sell tacos in the market composed of many ballots. These tacos are composed of papers associated with various businesses, for example, ten papers Pepe, another ten of Louis, and many more from other entrepreneurs. The purpose of these blocks is to minimize the risk of getting lost in the same bag papers business with great potential for success, such as Pepe, along with business papers with little chance success, such as Luis.

These tacos are collateralized debt obligations, collateralized debt obligations of English, or Anglo-Saxon by its acronym, CDO. And basically nothing more than a way to plug the shit hiding under the carpet. Both

tacos as the ballots can be purchased from several people, each of which will end the year a share of participation in buying them. Some wealthy citizens of our wonderful people decide to pool their savings and deliver them to buyers, sellers experts for handling ballots and they take out a good performance at the end of the year.

These experts are the investment banks.

The Credit Default Swaps

Because some ballots are sold by people who pretend to ride risky business, with little chance of success, some people offered to purchase insurance ballots.

- Hey! I have finally bought the papers of Louis, who agreed to pay you 150 euros at the end of the year, what if I sell insurance to those ballots?

- What are you talking about?

- Very easy. You pay me $ 5 every month, and if it is announced that Luis has gone to ruin with his ice cream shop and is unable to deliver at the end of the year the money it promised, I will give 150 euros for each ticket to give me yours. Just what he had to repay.

- Terrific idea! So I feel much safer. And, indeed, the idea of \u200b\u200bstarting an ice cream shop at the North Pole is extremely risky. Do you think they liked the polar Eskimos of strawberry?

- I do not know. People say they are rare. Maybe raspberry with ham make them some grace.

insurance
A call for papers the debt default insurance, the English Credit Default Swaps or CDS by its acronym Anglo.

Some insurance only covered the loss in value of the ballots.

How can lose value a ballot? Easy. If half of your ice cream Luis fails because the Eskimos do not like ice cream cart selling ice cream and ice cream cap. With the money you borrow, you pay to the holders of their ballots a part of what initially had agreed to pay each. For example, 50 euros. The insurer will then pay you 100 euros for each ballot Luis that you have: the difference between the 150 euros that Louis had to give at the end of the year 50 euros and you really can take for each. Obviously, you still have in your possession the ballots. Since Luis will give you 50 euros for each insurer and another 100 eventually get, somehow, the 150 euros you expected.

This is what is called cash settlement. Physical settlement occurs when you get the face value of the ballots, which had to collect at the end of the year, just giving them to the insurer.

At one point, someone comes up with a stupid idea: not necessary to have an insurance ballots ballots. That is, you can purchase insurance partner Luis the ballots but have not bought or have not one of them at home. Will pay monthly insurance premiums, and if half of the year Luis bankruptcy with his ice cream, you just have to worry about buying Luis ballots and hand in the stock who sold you the insurance. The insurer will pay you then what Luis had to pay if it had been able to fulfill their obligations: 150 euros per ballot if it applies to physical settlement.

A contract of insurance without having ballots are called Short CDS, the CDS naked English.

As you are seeing, these papers are sure to be quite flexible. Moreover, the quotas pay for such insurance may be not fixed but variable, and given to many speculations that right now are irrelevant.

And all this appears in the village a menda dedicated to putting note the different ballots. This menda studies the development of each of the businesses undertaken through funding by ballot, and if business is booming high note to put a ballot associated with that business. Instead, put a low score on the ballots of the business that they go wrong. Somehow, this note reflects the possibility of receiving money from the ballot at the end of the year. The Kid does not usually have trouble hitting the note of the papers associated with a particular business, but often fail when it comes to putting an overall mark ballots for tacos. And is that too many businesses of different types stuck in the same boat.

These are the rating agencies, which sometimes are wrong without meaning to, and others, without wanting wanting.

notes that makes this menda serve, among other things, to decide how much to pay insurance fee for each hired ballots. Obviously, the insurance papers associated with risky businesses have a larger share than others. They also serve to determine whether to order more or less money at the end of the year for a ticket sale. It is not the same to buy a ticket Idiot Luis, who just announced his proposed business was a bad note for obvious reasons, be bought from Pepe, the man who knows the safest business people, set up a bar.

The seeds of the debacle

With ballots insurance and sale of blocks of ballots, in our country is beginning to produce a dangerous phenomenon: people buying happily associated with business papers dangerous, with very low probability of success. Others buy blocks of ballots without really knowing what they have inside. They do it because they think they have your back covered whatever happens. Those who were once investors cautious, now show a great responsibility in the purchase of ballots. The big problem is that some of those investors are irresponsible bankers of the people, not those with investment banks and work with wealthy citizens, but bankers life that keep money from those small investors who put their trust in them .

After a while, in the village comes to an absurd situation. They have hired many insurance, most of them discovered that if they were going to ruin before the year all businesses that want to sell papers finance, insurance would pay much more money in compensation than the total value Ballots are in the eight sold.

The situation turns out to be a tad tricky, as insurers do not really have money to pay such compensation.

And sure ballots that have not been regulated by the Department of Economics at City Hall. So insurers are engaged in selling insurance without a safe or a fraction of the money they would have to pay to its customers in the event that, for example, ice-cream was adrift Louis.

This funny situation occurs due to the deregulation of financial markets.

ENDNOTES: It is estimated that 80% of the CDS contract are exposed. Many of the CDS contracts are used to speculate on short-term insurance fees (spreads). In late 2007, had CDS contracts worth 62.2 billion dollars (a trillion is a million million). This amount then was higher than the GDP of the entire planet. Currently, the amount must walk about 30 billion dollars. In March this year, German Chancellor Angela Merkel said of the CSD revealed: "These CDs are equivalent to buying fire insurance for the neighbor's house and then set fire to win with this money."

heartless and plots of arson to enrich ruining an entire people discuss another time