While studying economics at graduate level, we all had studied how money begets money. That is, how credit creates more credit and money flows in the market; a way by which a single rupee can create ten rupee.
No, I am not going to explain that simple yet difficult theory again. But yet the implications of the theory are what we have felt and are still feeling for the last two years. Credit created credit, and more innovative solutions were found to give more credit. But when derivatives with underlying credit collapsed as creditors defaulted on their credit, the world economy simply fell like house of (credit) cards. Repercussions were felt by almost everyone.
All these events give us a new insight of what a modern man does. Quoted by US politician Earl Wilson, it is important to dwell upon his quote.
“The modern man drives a mortgaged car over a bond-financed highway on credit-card gas.”
© Tarun Mitra