The Fenserin Gazette
April 9, 2017
The events of the past few weeks have shook the world. President Eamonn Dhomnuil called the crisis "the worst we've seen in decades," and long known family brand names like Auhgenmobles and Ghargo Industries have disappeared forever. How did the largest two day crash in the history erupt so suddenly? Why didn't anyone see this coming? The Fenserin Gazette's Argin Haughlonn reports:
Banks like Mecradese have been providing low-interest loans to metals companies for many years, due to the predictability of the companies’ sales. However, in 1983, banks began to increase the available capital to these companies for a number of reasons. First, a boom in local manufacturing increased the desirability of these metals investments. Even the long-time state owned steel manufacturer, Stefrin, began acquiring resource sites. New international protections of foreign assets, like those contained in the Northern Promethean Trade Union increased the value of foreign resource assets, including those for metals. The result was a rush on metal resource caches around the world.
In 1995, Alythas began to implement the first stages of the Humanity Act, increasing taxes on corporations to pay for the first throngs of universal basic income. The government viewed this as largely allowed by increasing automation of manufacturing, which freed up capital that was reappropriated through taxes. In order to continue funding this, the government saw increased manufacturing as necessary. As such, through the Humanity Act, among other things, the government backed loans to organizations purchasing metals resources by providing government funds as collateral up to a low percentage. This successfully increased the capital available to Alys manufacturing and resource extraction organizations.
These loans were originally easy to provide, and now they were backed by the government. Alys banks created a new financial instrument, known as Resource Management Securities (RSM). These RSMs originally allowed for investors to purchase options on loans that would expire at the end of the year; if they exercised these options, they would receive a part of the interest paid for the following year. As these were not actually buying the loans, the result was a dynamic financial instrument with little impact. However, in 2003, banks began placing these loans together with other loans, all of which were supposedly partially backed by the government through the Humanity Act, and thus relatively safe. These packages were sold through the stock market, allowing people to essentially bet that these loans would succeed.
Selling these RSM’s became so valuable that banks began to look for opportunities to give these loans. They verified riskier and riskier loans to continue to provide for the RSM market. By 2007, so many of these loans were given, and they were given at such a low interest rate, that nearly all the resource sites were bought up. In fact, these sites began switching hands multiple times, so that the banks would have the chance to hand out multiple loans over a single site. Similarly, many “prospective” sites were purchased with these loans. These “prospective site loans” were clearly not as valuable as the other RSM’s on the market, but they were sold as if they were; the result was that Low-Support RSM’s were sold at the same price and under the same guise as normal RSM’s.
As these prospective sites were mined, and the results came back that they were empty, companies began to default on these loans. Supposedly valuable RSM’s became worthless, and the stock market crashed on March 2, 2017. Because of the manufacturing sector’s connection with resource extraction, the market hit them as well as the banks. The result, over the past two weeks, has been chaos. Stefrin, the state-run steel company, engaged in a round of resource site purchases, as has other government agencies. President Dhomnuil has engaged in high-round negotiations for the purchase of several high profile resource management corporations as well as manufacturers spanning from automobiles to refrigerators to furniture.
As the full effects of the RSM Crisis continue to show themselves, people across the world are fearing for their jobs…
