Perfectly simple, really.
Helen is the proprietor of a pub in Liverpool . She realizes that virtually all of her customers are unemployed alcoholics and, as such, can no longer afford to patronize her pub. To solve this problem, she comes up with a new marketing plan that allows her customers to drink now, but pay later. She keeps track of the drinks consumed in a ledger (thereby granting the customers loans).
Word gets around about Helen's "drink now, pay later" marketing strategy and, as a result, increasing numbers of customers flood into Helen's pub. Soon she has the largest sales volume for any pub in Liverpool .
By providing her customers freedom from immediate payment demands, Helen gets no resistance when, at regular intervals, she substantially increases her prices for beer and lager, the most consumed beverages. Consequently, Helen's gross sales volume increases massively.
A young and dynamic bank manager at the local bank recognizes that these customer debts constitute valuable future assets, and increases Helen's borrowing limit. He sees no reason for any undue concern, since he has the debts of the unemployed alcoholics as collateral.
At the bank's headquarters, expert traders transform these customer loans into ALKIBONDS and PUKEBONDS. These securities are then bundled and traded on the international security markets. Naive investors don't really understand that the securities being sold to them as AAA secured bonds are really the 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 are still 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 Helen's pub. He so informs Helen.
Helen then demands payment from her alcoholic patrons, but, being unemployed alcoholics, they cannot pay back their drinking debts. Since Helen cannot fulfill her loan obligations, she is forced into bankruptcy. The pub closes and the eleven bar staff lose their jobs.
Overnight, ALKIBONDS and PUKEBONDS drop in price by 90%. The collapsed bond asset value destroys the banks liquidity and prevents it from issuing new loans, thus freezing credit and economic activity in the community.
The suppliers of Helen's pub had granted her generous payment extensions and had invested their firms' pension funds in the various BOND securities. They find they are now faced with not only having to write off her bad debt, but also with losing over 90% of the presumed value of the bonds. Her beer supplier claims bankruptcy, closing the doors on a family business that had endured for three generations and her lager 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 multi-billion pound, no-strings attached cash infusion from their cronies in Government. The funds required for this bailout are obtained by new taxes levied on employed, middle-class, non-drinkers who have never been in Helen's pub.