Enron, a brief history and how the company imploded.

Abstract

Son, your ego is writing checks your body cant cash. (Paramount, 1986) The famous words of full admiral T.J. Cassidy in the high-flying action thriller Top Gun (Paramount, 1986) describe what occurred with Enron. Enron was a giant corporation ( many say the largest energy company in the world), who depended on outside credit rating sources to finance its daily operations. In turn its credit-worthiness depended on its performance as reflected in the Enrons make out prices. When the price of Enrons shares collapsed, so did its credit rating. Consequently cash credit to the company became either prohibitively expensive or unlimited unavailable. Without ready infusions of cash, Enron became unable to meet its earlier credit obligations. This dispirit Enrons stock even deeper, which in turn let to the modernise ahead decline in already low share prices. being unable to pay its creditors, with no forthcoming offers of merger from its competitors, and with no foreseeable rescue attempt by the government, Enron was forced into bankruptcy. In the purely abstract form, merely for illustrative purposes, we can equation Enrons debacle with an imaginary individual whose life or at least lifestyle depended much on borrowing - lets say, it became dependent on loans from credit beak companies. Without sufficient income to repay pastime on these loans, this hypothetical individual is forced to apply for bare-assed credit cards, with which he is paying off his creditors.



At some point, when the individuals credit rating worsens and he or she is no longitudinal able to get more financing from the credit card issuers, the finale becomes inevitable, and usually it is the bankruptcy. We can also compare Enrons misfortune to a pyramid scheme. In the classic pyramid scheme, fraudsters (here Enrons executives, explanation firms, corporate lawyers and their clique in the government) have to keep their victims happy...

I vox populi this was a very good essay. I liked your comparison of Enron to pyramid schemes and to a market bubble. Congratulations!

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