Brilliant Economics

It is the month of May, on the shores of the Black Sea. It is raining, and the little town looks totally deserted. It is tough times, everybody is in debt, and everybody lives on credit.

Suddenly, a rich tourist comes to town. He enters the only hotel, lays a 100 Euro note on the reception counter, and goes to inspect the rooms
upstairs in order to choose one. The hotel proprietor takes the 100 Euro note and runs to pay his debt to the butcher.

The butcher takes the 100 Euro note, and runs to pay his debt to the chicken grower.

The chicken grower takes the 100 Euro note, and runs to pay his debt to the supplier of his feed and fuel.

The supplier of feed and fuel takes the 100 Euro note and runs to pay
his debt to the town's prostitute that in these hard times, gave her "services"
on credit.

The hooker runs to the hotel, and pays off her debt with the 100 Euro note to the hotel proprietor to pay for the rooms that she rented when she brought her clients there.

The hotel proprietor then lays the 100 Euro note back on the counter so that the rich tourist will not suspect anything.

At that moment, the tourist comes down after inspecting the rooms, and
takes his 100 Euro note, after saying that he did not like any of the
rooms, and leaves town.

No one earned anything. However, the whole town is now without debt, and
looks to the future with a lot of optimism.....

And that, ladies and gentlemen, is how the United States is doing business
today...

 

knr

--
If God brings you to it, He will bring you through it.
Happy moments, praise God.
Difficult moments, seek God.
Quiet moments, worship God.
Painful moments, trust God.

  Every moment, thank God

Economics

Interesting logic to ponder over!


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Japanese save a lot. They do not spend much. Also, Japan exports far more than it imports. Has an annual trade surplus of over 100 billions.
Yet Japanese economy is considered weak, even collapsing.
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Americans spend a lot, save little. Also US import more than it exports. Has an annual trade deficit of over $400 billion. Yet, the American economy is considered strong and trusted to get stronger.
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But where do Americans get money to spend from?
They borrow from Japan, China and even India.
Virtually others save for the US to spend. Global savings are mostly invested in US, in dollars.
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India itself keeps its foreign currency assets of over $50 billions in US securities.
China has sunk over $160 billion in US securities.
Japan�s stakes in US securities is in trillions.
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Result:
The US has taken over $5 trillion from the world.
So, as the world saves for the US - It�s The Americans who spend freely.
Today, to keep the US consumption going, that is for the US economy to work, other countries have to remit $180 billion every quarter, which is $2 billion a day, to the US!
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A Chinese economist asked a neat question.
Who has invested more, US in China, or China in US?
The US has invested in China less than half of what China has invested in US.
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The same is the case with India.
We have invested in US over $50 billion.
But the US has invested less than $20 billion in India.
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Why the world is after US?
The secret lies in the American spending, that they hardly save.
In fact they use their credit cards to spend their future income.
That the US spends is what makes it attractive to export to the US.
So US imports more than what it exports year after year.
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The result:
The world is dependent on US consumption for its growth.
By its deepening culture of consumption, the US has habituated the world to feed on US consumption.
But as the US needs money to finance its consumption, the world provides the money.
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It's like a shopkeeper providing the money to a customer so that the customer keeps buying from the shop.
If the customer will not buy, the shop won't have business, unless the shopkeeper funds him.
The US is like the lucky customer.
And the world is like the helpless shopkeeper financier.
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Who is America 's biggest shopkeeper financier?
Japan of course.
Yet it's Japan which is regarded as weak. Modern economists complain that Japanese do not spend, so they do not grow.
To force the Japanese to spend, the Japanese government exerted itself, reduced the savings rates, even charged the savers. Even then the Japanese did not spend (habits don't change, even with taxes, do they?).

Their traditional postal savings alone is over $1.2 trillions, about three times the Indian GDP.
Thus, savings, far from being the strength of Japan , has become its pain.
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Hence, what is the lesson?
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That is, a nation cannot grow unless the people spend, not save. Not just spend, but borrow and spend.
Dr. Jagdish Bhagwati, the famous Indian-born economist in the US , told Manmohan Singh that Indians wastefully save.
Ask them to spend, on imported cars and, seriously, even on cosmetics!
This will put India on a growth curve.
This is one of the reason for MNC's coming down to India , seeing the consumer spending.
'Saving is sin, and spending is virtue.'
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But before you follow practice this Neo Economics, get some fools to save so that you can borrow from them and spend !!!

knr
--
If God brings you to it, He will bring you through it.
Happy moments, praise God.
Difficult moments, seek God.
Quiet moments, worship God.
Painful moments, trust God.

  Every moment, thank God