HI Anuj, This story is interesting but surely it has a catch.. read on..
In your story, everybody paid their debts so financial situation improved for all. Had people not defaulted on their mortgages, financial crisis would not have occurred in first place. The E100 note came from an outsider. That is like countries other than US, financing US banks etc which is not at all likely. This role is played by US govt when it is providing a stimulus-package to financial institutions. It is not easy for US govt to fund and bail-out the economy because even US government derives money from country's economy and economy is bad. If they print too much of it, the value of currency will depreciate. Another point is that payment of past debts does not result in profit to the creditor/lendor/seller. It only improves his cash position. However, the payment of past debt do save creditors from incurring losses of bad debts. Seller has to assume that his money will be paid else no sale will happen and profit wil be generated when sale takes place. Government has to provide financial support in two ways.. 1. Ensure that banks which hold public deposits do not fail as they have PUBLICS' DEPOSITS. These deposits have the potential to boost economy when depositors withdraw and spend the money. (FINANCIAL INSTITUTIONS) 2. Ensure that consumers retain enough money in their hands so that they can think of spending more than their basic necessities. In my view, just meeting basic necessities is like living in a jungle where economy cant even be said to exist. This will include levies on public in form of taxes, cess, tolls, duties, price of goods and services etc..(PUBLIC ADMINISTRATION POLICIES) 3. Infuse cash in economy using selective measures like giving retirement benefits to people above certain age. This will create new jobs, increase spending power and boost to the markets. > On Wed, May 6, 2009 at 12:53 PM, !!**...@nuj anand...@---**!! < > [email protected]> wrote: > >> Money ! >> >> It is August. In a small town on the South Coast of France, holiday season >> is in full swing, but it is raining so there is not too much >> business happening. Everyone is heavily in debt. Luckily, a rich Russian >> tourist arrives in the foyer of the small local hotel. He asks >> for a room and puts a Euro100 note on the reception counter, takes a key >> and goes to inspect the room located up the stairs on the third floor. >> >> The hotel owner takes the banknote in hurry and rushes to his meat >> supplier to whom he owes E100. >> >> The butcher takes the money and races to his wholesale supplier to pay his >> debt. >> >> The wholesaler rushes to the farmer to pay E100 for pigs he purchased >> some time ago. >> >> The farmer triumphantly gives the E100 note to a local prostitute who gave >> him her services on credit. >> >> The prostitute goes quickly to the hotel, as she owed the hotel for her >> hourly room use to entertain clients. >> >> At that moment, the rich Russian is coming down to reception and informs >> the hotel owner that the proposed room is unsatisfactory and takes his E100 >> back and departs. >> >> There was no profit or income. But everyone no longer has any debt and the >> small town people look optimistically towards their future. >> >> *COULD THIS BE THE SOLUTION TO THE Global Financial Crisis? Or, is there >> a catch here? >> >> >> *"Sweetness and humility, are the essence of virtue and goodness." >> >> -- >> Regards, >> >> Anuj Anandwala >> Analyst I Investment Research >> >> Parag Parikh Financial Advisory Services Ltd. >> Tel: 022 2284 6555 >> URL: www.ppfas.com >> >> >> >> -- cheers!! bharatgoyal --~--~---------~--~----~------------~-------~--~----~ You received this message because you are subscribed to the Google Groups ""GLOBAL SPECULATORS"" group. To post to this group, send email to [email protected] To unsubscribe from this group, send email to [email protected] For more options, visit this group at http://groups.google.com/group/globalspeculators?hl=en -~----------~----~----~----~------~----~------~--~---
