Thursday, 21 January 2010

chocolate buttons (or dancing with the moonlit knight)

I was going to write this post about chocolate.

Continuing my occasional obsession with Cadburys.

I wanted to write about the strange economics of leveraged buy-outs. I even started to draw a diagram on a sheet of paper. One with banks gambling with savings.

I wanted to illustrate that if they gained money, then they got a commission. But also that if they lost money they still got a commission.

roulette-wheel_hrIf they lost lots of money, then the government asked the tax payers to top up the bank again.

I'd even found a roulette wheel graphic.

And then I wanted to show that the same bank could start gambling again. In a no limits way it could lend whatever and wherever it liked.

And get some more commission.

So it could lend to another country. Maybe to an organisation that wanted to buy part of the bank's own country.

Maybe to cheese company to buy, say, a chocolate firm. So the cheese company buying the chocolate company doesn't need to use so much of its own money.

The bank doesn't mind; it gets its commission on its overseas loan and if the deal is risky then the government is a safety net.

My diagram might have got a bit complicated by now. Because if the chocolate company gets bought and rationalised, then there's a few less taxpayers to top things up.

Luckily this won't happen. The politicians have said so.

Mr Brown said yesterday that "We will do everything we can to make sure that jobs and investment are maintained in Britain."

So I've decided to eat some chocolate instead of drawing my diagram.

Nothing to worry about.

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