Oh Gosh!! I just don't know why these Accounts Graduates do so much of show off. And in the name of heaven why they keep reading this picture less, pink paper. What is their apart from some economic jargon that describes how poor this economy is performing. I think even Rohit Sharma performed better than this economy in last couple of years.
Feeling disgusted about reading the financial indicators of the economy, Goofy, was waiting for his friend CA Maroo, who also happened to be his neighbor. He was convinced that he is having some very brilliant ideas that can help economy recover faster. However, he was not sure why no one else ever thought of such a simple but effective solution.
CA Maroo:- Ah! Good Morning friend! What's up!
Goofy:- Why you are so late. Anyways, please sit and listen to me I have a brilliant idea.
CA Maroo:- Brilliant idea, that to from you? Strange but bring it on.
Goofy:- That was cheap. But I am not arrogant as you are , So, Here you go. But before that First Reply to this question:-
If I double your present salary, what will you do?
CA Maroo:- That will solve almost all my financial problem for once.
Goofy:- Exactly my thought.
CA Maroo:- Ah! You didn't listen to me completely. Once not forever. I know where this discussion in going.
Goofy:- Don't be a sadist. Listen to me
CA Maroo:- Carry on! Sorry for disturbing.
Goofy:- I was going through an article Economy Screwed up in a english daily and I came to know that economy is not working well. Our current account deficit is not good. Our manufacturing sector and real estate is also not performing well. Debts is increasing at a very fast pace. Mirror of economy stock market is also not doing good either So basically on a macro level we all are screwed up. So let's not be selfish, let's think about all and request our government to print as many currency as it can and give it to the general public.
CA Maroo:- I never expected this level of intelligence from you.
Goofy:- I am humbled. At last somebody acknowledged my super intelligence.
CA Maroo:- That was sarcastic comment. Come back on earth now.
Goofy:- Someone is green with envy. But it's okay I will listen to you.
CA Maroo:- Let’s suppose the Government decides to increase the money supply. It started printing the currency at a rate faster than Gayle hits sixes.And through Aadhar linked bank accounts or some other means it started depositing this extra money in general public's account, And since you are such a nice and sincere citizen of our country government transferred hefty sum of money into your account, what you do with money.
Goofy:- Ah! I know what I will do with it. I will buy Ferrari F430, 43088 CC engine. I love that beast.
CA Maroo:- You are so very predictable.BTW you will not be the only one to do that. Every one will run to buy one for them.This presents a problem for dealers. Do they keep their prices the same and not have enough Cars to sell to everyone who wants one, or do they raise their prices? The obvious decision would be to raise their prices. If Dealers (along with everyone else) decides to raise their prices right away, we would have massive inflation, and our money is now devalued. Since we’re trying to argue this won’t happen, we’ll suppose that Dealers don’t increase the price of Cars. For the price of Cars to hold steady, the supply of Cars will have to meet this added demand. If there are shortages, certainly the price will rise, as consumers who are denied a Car will offer to pay a price well in excess of what Dealers were formerly charging.
If we print more money, prices will rise such that we’re no better off than we were before. This situation is called Hyper-inflation.
Goofy:- Ah! Don't be a paranoid. How can more money create problem. Money is a solution.
CA Maroo:- There is a classic example to prove my point.After World War 1, Germany was facing a sinking economy and forced to pay massive debts as reparations of war, the government started printing money as fast as they could to meet these demands. Paper mills and printing presses were LITERALLY running as fast as they could night and day. Over a period of six months or so, the value of the German mark dropped 3.7 MILLION times! What you could once buy for a mark now cost four million marks. People literally lugged around suitcases full of money to pay bills.
Goofy:- It's history dude. It cannot happen now. Now fundamentals of all economy are so strong that this cannot happen in present day. It's just not possible.
CA Maroo:- See basically economy works on demand supply theory and it holds good in almost all situation. Have you heard of country called Zimbabwe?
Goofy:- Oh yes, of course. When I was a kid it was the only country against whom Indian cricket team was invincible. So you see I have sympathy for this
CA Maroo:- After listening to me you will sympathize more with this African country. The Robert Mugabe Government went on printing money to fund its war expenses. This led to hyperinflation. And In November 2008, inflation stood at 100000%. People are dying out of hunger though they have loads of money.
Goofy:-Oh Devil! Excess of everything is bad, proved again. I must admit that was an eye opener. I believe that no corrupt government should even try doing this in our country. Thanks for explaining it wonderfully. After all commerce graduates are smart peoples as i always believed (No pun intended) :P