Economic Slowdown Simplified !

:- A simple story to explain Current Economic problem !!
Neatly sums up the situation today.

(Courtsey my friend Harish Kutty)

Once there was a little island country. The land of this country was the tiny island itself. The total money in circulation was 2 dollars as there were only two pieces of 1 dollar coins circulating around.

1) There were 3 citizens living on this island country. A owned the land B and C each owned 1 dollar.


2) B decided to purchase the land from A for 1 dollar. So, now A and C own 1 dollar each while B owned a piece of land that is worth 1 dollar. *The net asset of the country now = 3 dollars.


3) Now C thought that since there is only one piece of land in the country, and land is non producible asset, its value must definitely go up. So, he borrowed 1 dollar from A, and together with his own 1 dollar, he bought the land from B for 2 dollars.

*A has a loan to C of 1 dollar, so his net asset is 1 dollar.
*B sold his land and got 2 dollars, so his net asset is 2 dollars.
*C owned the piece of land worth 2 dollars but with his 1 dollar debt to A, his net residual asset is 1 dollar.
* Thus, the net asset of the country = 4 dollars.


4)A saw that the land he once owned has risen in value. He regretted having sold it. Luckily, he has a 1 dollar loan to C. He then borrowed 2 dollars from B and acquired the land back from C for 3 dollars. The payment is by 2 dollars cash (which he borrowed) and cancellation of the 1 dollar loan to C. As a result, A now owned a piece of land that is worth 3 dollars. But since he owed B 2 dollars, his net asset is 1 dollar.

* B loaned 2 dollars to A. So his net asset is 2 dollars.
* C now has the 2 coins. His net asset is also 2 dollars.
* The net asset of the country = 5 dollars. A bubble is building up.


5) B saw that the value of land kept rising. He also wanted to own the land. So he bought the land from A for 4 dollars. The payment is by borrowing 2 dollars from C, and cancellation of his 2 dollars loan to A.

* As a result, A has got his debt cleared and he got the 2 coins. His net asset is 2 dollars.
* B owned a piece of land that is worth 4 dollars, but since he has a debt of 2 dollars with C, his net Asset is 2 dollars.
* C loaned 2 dollars to B, so his net asset is 2 dollars.
The net asset of the country = 6 dollars; even though, the country has only one piece of land and 2 Dollars in circulation.


6) Everybody has made money and everybody felt happy and prosperous.


7) One day an evil wind blew, and an evil thought came to C's mind. "Hey, what if the land price stop going up, how could B repay my loan. There is only 2 dollars in circulation, and, I think after all the land that B owns is worth at most only 1 dollar, and no more."


8) A also thought the same way.


9) Nobody wanted to buy land anymore.


* So, in the end, A owns the 2 dollar coins, his net asset is 2 dollars.
* B owed C 2 dollars and the land he owned which he thought worth 4 dollars is now 1 dollar. So his net asset is only 1 dollar.
* C has a loan of 2 dollars to B. But it is a bad debt. Although his net asset is still 2 dollars, his Heart is palpitating.
* The net asset of the country = 3 dollars again.


10) So, who has stolen the 3 dollars from the country? Of course, before the bubble burst B thought his land was worth 4 dollars. Actually, right before the collapse, the net asset of the country was 6 dollars on paper. B's net asset is still 2 dollars, his heart is palpitating.


11) B had no choice but to declare bankruptcy. C has to relinquish his 2 dollars bad debt to B, but in return he acquired the land which is worth 1 dollar now.

* A owns the 2 coins; his net asset is 2 dollars.
* B is bankrupt; his net asset is 0 dollar. (He lost everything)
* C got no choice but end up with a land worth only 1 dollar
* The net asset of the country = 3 dollars.


************ **End of the story; BUT ************ ********* ******


There is however a redistribution of wealth. A is the winner, B is the loser,
C is lucky that he is spared. A few points worth noting -


1. When a bubble is building up, the debt of individuals to one another in a country is also building up.


2. This story of the island is a closed system whereby there is no other country and hence no foreign debt.


3. The worth of the asset can only be calculated using the island's own currency. Hence, there is no net loss.


4. An over-damped system is assumed when the bubble burst, meaning the land's value did not go down to below 1 dollar.


5. When the bubble burst, the fellow with cash is the winner. The fellows having the land or extending loan to others are the losers. The asset could shrink or in worst case, they go bankrupt.


6.If there is another citizen D either holding a dollar or another piece of land but refrains from taking part in the game, he will neither win nor lose. But he will see the value of his money or land goes up and down like a see saw.


7. When the bubble was in the growing phase, everybody made money.


8. If you are smart and know that you are living in a growing bubble, it is worthwhile to borrow money (like A) and take part in the game. But you must know when you should change everything back to cash.


9. As in the case of land, the above phenomenon applies to stocks as well.


10.The actual worth of land or stocks depends largely on psychology (or speculation)

(Courtsey my friend Harish Kutty)

Happy Vacations !!!

Procrastination - Art or Science

Till some time ago, I always felt Travel Agency is the second most busy occupation (after Stock Brokers) for it require time bound, quick, prompt action & communication both with customers and suppliers. Being intermediary for a product or service is tough business but travel agency and stock broking in particular always keeps you on the toes (or rather on the phone). Then I came across “Mr Pappu” of our famous “Pappu Travels” from Bhatinda who like state employees was awarding himself extra leisure time by faking his busyness.

It is not uncommon for human fatigue and slackness to creep in, in such a high intensity, interactive and time bound business environment. Lack of motivation and repetition of tasks sometimes plague such environments with a phenomenon called “Procrastination”.

Procrastination is a big word to describe a type of behavior which is characterized by deferment of actions or tasks to a later time. It’s basically doing C’s and D’s in the figure 1e in order to avoid A1 or A2. It’s a habit we develop in the belief that it will protect us from unpleasant situations, and give us a temporary sense of relief. Procrastination is to travel trade what AIDS and Hepatitis is to our society – the silent killers. It specializes in “Fake Busyness”, which emphasis slowness over showiness, avoidance and delay over actions and downplaying situations and tasks over time bound deadlines. The cleverest and most prolific procrastinators like Mr Pappu are nerdy superstars for they play games which involve high skills of avoidance, deference and delays. His case is not exceptional for its picaresque twist. Every travel agency employee has a favorite way to practice procrastination; the frontline staff who besides handling customer calls, creeps in with some personal chit chats and love talk, the back office staff who’s a specialist in internet porn, though he may look a champu by look and feel.

It will take more than a clampdown on malingering to achieve lower procrastination. More fundamental changes are required in the basic structure, work culture and thinking process of the entire team including higher and middle level management. The big test will come this winter, when the commission clouds will bid adieu and the staff will have more and more free time at the disposal in a sluggish and weakening travel spends.

As we leave these “unpleasant tasks” unattended we often force them from Category 3 (Very Important/ Not Urgent) to Category 1 (Very Important/ Very Urgent) and this is where we are caught napping. In such a case a task which we have been procrastinating about snowballs into a major task with some very unpleasing recuperation.

Prioritizing is a habit which needs to be cultivated at the ground level and following the priority matrix every tasks needs to be handled with its merit. It’s the same as a batsman playing every ball to its merit regardless of reputation of the bowler.

The best way to handle procrastination is by using Nike’s “Just Do It” tagline. Do them first and handle them early in the day, lest they should hang like a sword over your head the whole day. Set deadlines for such tasks and don’t wait for the right mood (for it will never come). You won’t handle it when you are having a PMS and when you are overjoyed you definitely won’t like to handle such unpleasant tasks.

A Word of Caution – For you may successfully prioritize the tasks that are important and urgent and demands your attention (A1, A2, A3); always check that “C” is not your Boss’. (Ironically “C” is also the most popular “helping verb” used in North Indian lingo?)