I read the news that the US senators and government officials fight over the plan to raise the debt ceiling with amusement. To me this is acting at the highest level. They probably deserved the “best actor award”. It reminded me of a show I watched in China. My China cousin who wanted to setup a retail shop, had a meeting with a landlord. In this meeting, which I witnessed, the landlord’s sons and relatives were urging the decision maker that “someone had a better price”, etc…it was like they do not want to rent it out to my cousin. I find it strange because the shop was sitting there empty collecting dust. Why would they not rent it out? Eventually after some serious quarrels or acting, they decided to rent it out to my cousin. It was almost as if the landlord were doing us a favour by renting the shop to us. And my cousins are the so called buyers. What a show!
The US officials bickering with the debt ceiling plan is also a show. It was scripted and directed by someone. In this play, they have already decided to increase the debt ceiling. It is just that they wanted to show the world, how serious they wanted to reduce the deficit so they debt holders will continue to buy their debt. What a show to sell! Anyway, it was a good show for the US debt holders like Japan and China.
Monday, July 25, 2011
A simple world
Assume in this world there are only two persons. Mr rich and Mr Poor live happily in this world. One day Mr Poor needs money badly and borrow $1 from Mr Rich. The asset of loan $1 is with Mr Rich. Mr Poor is in debt of $1. The only way Mr poor can pay off the debt is when he works for Mr Rich and Get paid $1. Then they are equal in economic standing. Only when Mr Rich buy something from Mr Poor, does Mr Poor has a chance to be richer than Mr Rich. The USA reminded me of Mr poor and Mr rich is China. The existing economic standing of both man will change when Mr poor decide not to honour the debt or change the medium of transaction i.e. money. The game changes when the above happens. It is interesting because this is what may happen in the next 1-2 years. Mr rich also remind me of government and Mr poor is the average guy.
Assume in this world there are ten persons. 5 of them are saver and 5 of them are spenders. They each have $1 at first. Then the spenders spend their $1 and they are left with nothing. The savers got their money and they got $10. One of the good spender decide to borrow $1 to pay for wife medical bill. He promised to pay it back with his job income. True enough, after some time, he paid back the $1 to the spender. Another bad spender borrow $1 but did not pay back the $1 to the saver. He claimed he lost his job and has no money. This only impact the particular saver. But if the US is to claim he has no money to pay back the loan, then the creditworthiness of the nation will be in doubt and the value of the dollar will plummet. The whole world will be impacted because this bad spender has borrowed from too many people.
Assume in this world there are ten persons. 5 of them are saver and 5 of them are spenders. They each have $1 at first. Then the spenders spend their $1 and they are left with nothing. The savers got their money and they got $10. One of the good spender decide to borrow $1 to pay for wife medical bill. He promised to pay it back with his job income. True enough, after some time, he paid back the $1 to the spender. Another bad spender borrow $1 but did not pay back the $1 to the saver. He claimed he lost his job and has no money. This only impact the particular saver. But if the US is to claim he has no money to pay back the loan, then the creditworthiness of the nation will be in doubt and the value of the dollar will plummet. The whole world will be impacted because this bad spender has borrowed from too many people.
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