Penned and Pinned

It is a pinned article, author's  credit: unknown creative email author & MM

 

THE CURRENT ECONOMIC CRISIS EXPLAINED - IDLI, VADA & SAMBAR

Appakkaaran is the proprietor of a  Idli, Vada and Sambar  Shop (a rice cake & lentils fried cake dish) in Chennai. Sales are low and, in order to increase them, he comes up with a plan to allow his customers to eat now and pay later. He keeps track of the meals consumed on a ledger.

Word gets around and as a result increasing numbers of customers flock to Appakkaaran’s shop. Appakkaaran’s suppliers are delighted and are very willing to sell more and more raw materials for the meals he prepares. Appakkaaran shows them his ledger of receivables and they extend him credit.

A young and dynamic customer service consultant at the local bank recognizes these customer debts as valuable future assets and gives Appakkaaran a credit line and then increases Appakkaaran’s borrowing limit.

Taking advantage of his customers’ freedom from immediate payment constraints, Appakkaaran jacks up the prices of his Idli, Vada & Sambar. Customers don’t mind as they are not required to pay on the spot. Sales volume increases massively; Banks and suppliers lend more; Appakkaaran opens more outlets. He sees no reason for undue concern since he has the debts of the customers as collateral.

These securities are then listed on the Stock Exchange and traded on markets worldwide. No one really understands what the names mean and how the securities are guaranteed but, nevertheless, as their prices continuously climb, the securities become top-selling items.

One day, although the prices are still climbing, a credit risk manager of the bank decides that the time has come to demand payment of one of the debts incurred by Appakkaaran. Appakkaaran in turn asks his clients to pay up. One by one they refuse; the clients cannot pay back the debts. Appakkaaran refuses to serve them any more. The clients stop coming.

Appakkaaran is really in deep trouble now. He cannot fulfill his loan obligations and therefore claims bankruptcy. All Bonds drop in price by between 80 to 95%.

The suppliers of Appakkaaran, having granted generous payment due dates and having invested in the securities are faced with similar problems. The rice & lentil supplier defaults on payment to the wholesale supplier and claims bankruptcy. The spice supplier is taken over by a competitor; Appakkaaran lays off the cook and staff. Bankruptcies soar, unemployment mushrooms.

The bank that lent the money in the first place is set to collapse. It is saved by the Government following dramatic round-the-clock consultations by leaders from the governing political parties with Appakkaaran commuting back and forth in his Executive jet and Mercedes 500SEL, brokering the deal.

The funds required to save the economic collapse are obtained by a tax levied on the citizens, most of whom do not eat Idli or Vada.

That’s the reason……………………

P.S: Aaappakaaram vachuttaanya Aappu!!!! --- Appakkaaran messed up myaaaaaaaan!!!!!!!!