Back in the 1880s there was a little cowtown on the Red River that sported five bars, four churches, a bank, and a schoolhouse. The great cattle drives that had supported the town had become a rapidly dwindling stream and along with the cattle drives, the money they had brought to the little town was also drying up. As a result, the saloons were doing a poor business compared to what they had done a few years back. One saloon owner, Sam, realized that most of his customers had become drunks during the boom-town days. They were now out of work and unable to support their habit.
Sam, an enterprising sort of gent, came up with a “drink now, pay later plan.” He simply started allowing his customers to run up a tab, thereby issuing loans to his customers. This resulted in an ever-increasing number of patrons for Sam’s Saloon as more out-of-work drunks learned about and participated in “Sam’s Plan” and Sam soon had a thriving business operation. After a few weeks no one minded when Sam raised the price on beer, whisky, and tailor-made cigarettes. They knew their credit was always good down at Sam’s Place, so who cared about the cost of a glass of beer? Needless to say, Sam’s gross sales volume increased and this caught the attention of Big Jim, the president of the local bank.
Big Jim had been to an Ivy League college back east and also had a considerable amount of experience handling derivative market funds on Wall Street. Jim, you see, was much smarter than most of the western bankers. It was this training that allowed him to recognize that Sam’s customer debts actually constituted valuable future assets, so he doubled Sam’s credit limit and encouraged Sam to expand his business to take care of his ever increasing number of customers. After all, any debt Sam might incur was totally backed by the notes of numerous unemployed drunks.
Big Jim’s experience as a Wall Street trader also allowed him to transform these customer loans into beer bonds, tailor-made bonds, and whisky bonds. At this point Big Jim bundled up and traded the bonds on the international security markets where investors didn’t really understand that the securities being sold to them as Triple A secured bonds were really the debts of unemployed drunks. Big Jim’s securities soon became one of the hottest selling items for some of the nation’s major brokerage houses.
What seemed to be the biggest economic success story of the year took a shot below the belt line when a risk manager at Big Jim’s bank decided it was time to call in some of Sam’s notes. Sam was not able to come up with the money because all his patrons were still out-of-work drunks and couldn’t pay their bar tabs. When, Sam couldn’t fulfill his loan obligations he was forced into bankruptcy. Sam had to close his bar and his 12 employees lost their jobs as a result. At this point, the wheels start falling off the beer wagon.
Beer bonds, wine bonds, and whisky bonds fell 90 percent almost overnight. The collapsed bond value destroyed the liquidity of not only Big Jim’s bank, but of the entire chain and prevented the issuing of new loans, thus freezing credit and economic activity in the community as well as in that of several other nearby towns.
Several of the suppliers of Sam’s bar had granted generous payment extensions to Sam and had invested considerable amounts of their firm’s pension funds in the several securities. With Sam’s bankruptcy, his suppliers were faced with having to write off Sam’s bad debt and lost over 90 percent of the presumed value of the bonds.
Sam’s beer supplier also claimed bankruptcy, closed his doors and let go 16 beer wagon drivers.
His whisky supplier’s business was liquidated and picked up by a competitor, who immediately closed the local distillery and fired 130 workers.
The tailor-made cigarette business also went up in smoke.
Luckily however, the bank, the Wall Street brokerage houses and all their respective Ivy League boys were saved. They rode to Washington, D.C. on their jackasses and explained to Congress that the entire economy of the nation could collapse if they were allowed to go under. They were therefore bailed out by a trillion-dollar, no-strings-attached cash infusion from the government. Half the funds required for this bailout were obtained by new taxes levied on middle-class producing nondrinkers because the out-of-work drunks still had no money. The other half of the money was simply printed with the understanding that it would be paid off by the children of middle-class producing nondrinkers. Is this a great country, or what?
Como Siempré, Jinx
Stop by Git A Rope Trading Company, 408 W. Main St. in Payson and get your copy of the “Pleasant Valley War” by Jinx Pyle. Git A Rope carries other books by Jinx Pyle and Jayne Peace Pyle and a varied selection of Southwestern gift items. Stop by! Phone 474-0011.