September 13, 2019 Friday
Bedtime Story
Money Multiplication
The other conclusions of the 1972 report
titled “The Limits to Growth” were as follows:
Given business as usual, i.e., no change to
historical growth trends, the limits to growth on earth would become evident by
2072, leading to sudden and uncontrollable decline in both population and
industrial capacity.
Global industrial output per capita would
reach a peak in around 2008 followed by a rapid decline.
Global food per capita would reach a peak
by about 2020, followed by a rapid decline.
Global services per capita would reach its
peak by about 2020 followed by rapid decline.
Global population would reach its peak in
2030 followed by a rapid decline.
While the report has its fare share of
critics (the economists beings its greatest vilifies as expected) since the
predictions to some extent have not been exactly accurate.
Yet increasingly and off late its
conclusions are being seen as wise reminder why we apes need to mend our ways
and veer away from the path of “business as usual”.
The compounding and geometrical progression
– much like for the grains of wheat on the chessboard and water lilies on the
pond - works for money going through fractional-reservation system in banking
series and thus becomes a powerful tool for money multiplication.
But there are drawbacks to credit creation
particularly through the fractional-reservation system as the banks end up
lending out far more than they keep in as reserves hoping that it’s a perfect
world where loans will be repaid with interest and profit will be made.
When a bank creates credit, even though it
is creating money, it is also creating a situation when it owes money to
itself.
If it issues too much of bad credit,
meaning too many bad loans on which the debtors have defaulted and have
therefore become irrecoverable, then the banks risk of becoming insolvent or going
bankrupt.
In Indian scenario this is a common
occurrence with the state banks (the news of non-performing assets in state
banks is a recurrent theme) with huge loans often get defaulted.
Many a times the credit takers have not
merely defaulted due to business failures but systematically siphoned off the
loaned money through a series of shell accounts to diffuse the movement of
money being traced to the original source.
Bank loan frauds have truly come of age in
the last decade with Hindu businessmen finding it the best way to attain
wealth; any other meritocratic way is just too much of consistent hard work and
ruthless discipline that lacks the glamour we Hindus lust for.
After all, what is the point of attaining
wealth if one has to keep working hard for it, isn’t it?
Two sensational cases of bank frauds that
have caught the media headlines recently in India are the Punjab National Bank
Scam and the Sterling Biotech Limited and Sandesara Group Scam.
Stay tuned to the voice of an
average story storytelling chimpanzee or login at http://panarrans.blogspot.com
Good night Mon Ami and my fellow cousin ape.
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Another great educator and a teacher that I am aware of is
Professor Subhashish Chattopadhyay in Bangalore, India.
While I narrate stories, Professor Subhashish an electronic
engineer and a former professor at BARC, does and teaches real mathematics and
physics.
He started the participation of Indian students at the
International Physics Olympiad.
Do visit him here:
All his books can be downloaded for free through this link:
For edutainment and English education of your children, I
recommend this large collection of Halloween Songs for Kids:
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