From: Mark Graffis

How to Explain Enron to Your Children:

Feudalism – You have two cows. Your lord takes some of the milk.

Fascism – You have two cows. The government takes both, hires you to take

care of them, and sells you the milk.

Communism – You have two cows. Your neighbors help take care of them and you

share the milk.

Totalitarianism – You have two cows. The government takes them both and

denies they ever existed and drafts you into the army. Milk is banned.

Capitalism – You have two cows. You sell one and buy a bull. Your herd

multiplies, and the economy grows. You sell them and retire on the income.

Enron Venture Capitalism – You have two cows. You sell three of them to your

publicly listed company, using letters of credit opened by your

brother-in-law at the bank, then execute a debt/equity swap with an

associated general offer so that you get all four cows back, with a tax

exemption for five cows. The milk rights of the six cows are transferred via

an intermediary to a Cayman Island company secretly owned by the majority

shareholder who sells the rights to all seven cows back to your listed

company. The annual report says the company owns eight cows, with an option

on one more.

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