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Tuesday, May 12, 2009

Global financial crunch

(From the Net)

Financial Melt down has caused a great concern world over. Sometimes solutions may be easy, provided we understand the finance & financing. The following story from a small town explains it well.Read on …… 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 €100 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 € 100 banknote in hurry and rushes to his meat supplier to whom he owes €100. The butcher takes the money and races to his wholesale supplier to pay his debt. The wholesaler rushes to the farmer to pay €100 for pigs he purchased some time ago. The farmer triumphantly gives the €100 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 €100 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?

5 comments:

  1. Simple.
    Very simple.
    The first bloke, does not consume anything with his money. It is like your money in the bank's current account. It finances a lot of other people's economic activity without creating anything for you. The fact that the current account can and does finance other economic activity is what we call velocity of money.

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  2. Padmini HI.
    Sorry I can't reply to you in the e-mail account. I am unable to log in right now...
    I did get your mail with attachment and your posting in Puranas is fantastic. That is set up to post Monday, tomorrow.
    Enjoy and feel free to delete this if required..
    Regards,
    Jennifer Kumar

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  3. Hi aunty
    thanks for visiting my blog! I know u write for eve's touch though I doubt we have ever met. the next time I see u anywhere I will come n say hi to u for sure!

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  4. what an amusing, interesting post!

    ReplyDelete