As well as being one this 20th century’s most influential recording artists, David Bowie, it seems is also influential in the world of economics. Now’s the time I should think of some great Bowie pun, but I can’t. It’s 3pm and I’m jet lagged.
Bowie is an early adopter and always seems to be involved at the forefront of the most important trends from glam rock, rock, pop, dance, ambient, electronic and looking like a middle aged woman:
So it seems Bowie came up with an ingenious ruse to get his hands on some ready cash in the mid 90’s. Arguably his most creatively bankrupt period. He should have been spending more time making great music rather than dodgy investments. Bowie sold his projected royalties in the form of Bowie Bonds. He sold the rights to his future royalties to shareholders up front instead of waiting for them to accrue over the course of the years. This gave him access to a large up front sum and it gave his investors a ready flow of cash from his royalties.
Everyone prospered that was until the banks cottoned on to this clever scheme and started selling on the mortgages they had loaned to their customers in a similar fashion. By buying up a mortgage an investor would receive the mortgage repayments over the course of the payment period. The scheme works perfectly if there is a return on the original investment. In Bowie’s case, the payment from royalties would continue indefinitely however the banks were selling on mortgages they had loaned to people who couldn’t afford the repayments. When the mortgages payers defaulted those who had bought up these bad loans lost billions and that little thing called the credit crunch began.
There’s a recession, a lack of liquidity in the market, people are losing their jobs and companies are going into administration. But we still have Bowie, and if doesn’t cheer you up, you must be dead inside.
