Hey , how are you doing ?
Hope everything s alright .Hope you haven't been fired or rather to use the politically correct term , be a victim of excessive downsizing being carried out by the major multinationals today .Well , its doubtful , that your any of these , in fact , the people who are actually being affected by this crisis , whose life its changing don't seem to be speaking too much , they re just content with , holding their heads and lamenting at god , or if your an atheist , lamenting at the global meltdown .But i am an eternal optimist , nothing really gets me down for too long .
And for a change to anything you would be actually reading in the papers for a few days , this meltdown is actually a blessing in disguise . Why ???
No , i am no sadist , who loves to see people killing themselves , and neither do i glean pleasure from the pain that is being caused to others , no truly i do not , only my words are caustic , my intent is far from that .
Think of the global meltdown as being given a new lease on life , think of it , as being given a new lump of clay , think of it as a start , not as an end .
Yes agreed , companies are losing millions and millions of dollars every day , all over the world , people have lost their means of lively hood , but , to those , who have not grasped the essential facts of economics right , money is like energy in physics , it can neither be created , nor can it be destroyed , it can only be changed from one form to another . Money in this world is constant ,
there is a deficit of funds , it doesn't mean that the money has gone for a trip to outer space , it only means that people are not exchanging money like they did . Every one profits only if , money passes hands , the more business there is , the more "money " that's is being made , the better it is for the general good . How ever if money doesn't flow , if it just stops , then basically , there is hoarding of cash , people don't buy goods , or services , they would like to keep their money safe with them in the bank vaults , but who actually gains from all this ?
Let me tell you this , if you don't push that money around , nobody is going to lose except for you . The value of the money in the bank locker would actually end up decreasing , it wont increase , and even though the "volume" of money in your possession remains constant , there would be a steady decline in the "value" of the money .
So , if this were to be simplified , when you hoard , then you don't gain , you lose.
to be continued........
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5 comments:
Awesome! well written, the only doubt I hv is abt that money hoarding... we'll talk it over... I hv my own perceptions... On the whole 9/10
Thank you shobhit
but , if money were not to exchange hands , it would not grow , thats why , the fianance minister has to make comments , "that the banks are not closing down" because , in case that does happen , and the banks have to liquidate , then people would not invest in them , so basically the economy comes down.
And we all lose a hell of a lot of money
ohkie honey... lot of big words...sarcasm... n non-pretty concept which evryone seems to worried about... i dunno much but the basic problem i think is the so called constant money we have changin to unuseable forms.. i do think u would noe.. but jst incase u dont... read up on how exactly the banks have been collaspin( the sub prime borrowers concept) so at the moment conservin money i guess is not a bad option..
yah ,
i know its the subprime loan crisis,
but .
banks have given large loans to people , with no proper collateral , which is exactly why they re facing a problem.
but the point is that, india cannot be affected , because everyone has a cousion of black money , so basically , your not soo hard hit .
read swaminomics , great guy
Pretty neat I must say. When I was your age I didnt have even half of the grasp you have shown on economics. What you describe here is essentially the theory of the lubrication from liquidity. Now, liquidity may be part of the solution for sustaininable economics, agreed. But investors need confidence of some reasonable rate of return which is not happening anywhere (neither stocks, nor property). Even interbank lending is facing crunch because banks are wary of each others exposures to the CDS (Credit Default Swaps) which caused the whole mess in the first place. The world is today facing a complete lack of confidence in the financial markets and its not that this will improve in a day or month. Going forward I think some serious regulatory reforms are required in the US with curbs on derivatives trading. Once there is a stable regulatory system in place and once global consolidation levels the playing field once again, then the liquidity cycle can bring some hope to the world. Until then I for one would not advise any new investments in stocks or real estate.
And I agree that there is always an opportunity in any turmoil and we should see this as an opportunity for reforms. Thankfully the Indian banks are far less exposed to the global credit default swaps and hence the banks at least are safe. But Industrial growth rate (at 1.3 percent for the last quarter) is a disturbing trend. Yes we still have a 7.5% or so anticipated GDP growth rate, but its still a decline from 9% levels.
Oh, a fundamental error I observed in your essay is that "money is constant and just changes form." Well thats not technically true really (unless you want to create your definition of money). Money can be created and destroyed. The measure of money is related (simply speaking) to the perceived value of all goods and services produced as well as those invested in markets, long term deposits, large liquid funds etc.
At the moment, though, I am just hoping that in the medium term the markets improve (which i think they will).......but not without a lot of trouble along the way.
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