Thursday, December 31, 2009

Best economy in the world: United States of America

Looking at the title you should be taking me as a crazy guy of some sort. Don’t come to quick opinion on anyone. That’s the fundamental rule of wise people. Getting back to the topic of the best economy the biggest economies in the world are the Asian economy and the American economy. Today the Asian economies are spearheaded by China and India. But the point to understand here is that these economies are dependent on exports to the Americas and Europe. If you remove the exports part from the lexicon of these two nations there is nothing much to boast about the economy and its growth. The simple reason in these two nations is that people tend to save a lot and are too stingy on the spending front. One cannot find fault with this system because both were poor countries or under developed economies a few decades ago. At present they can boast themselves as developing economies and nothing more.
Let’s see what’s happening in the Americas and its economies. The economic structure is such that if you have $1 in your hand banks provide credit of $30 through credit cards. When you have got so much money at your disposal you have a tendency to spend on electronics, luxuries, travel and tourism, eating out etc. Each dollar spent on these activities infuse so much of money in the economy that the $1 you have in hand is more than a $1000 up the ladders of the economy. To explain this fact in simple terms, with the $1 you had in hand and the credit of $30 you have spent $31 dollars say on eating out. The fast food joint would at least get 30 like minded people as you and the collective bill goes out to $930. There is a secret here the fast food joint makes a profit of $465 (or 50% as profit). If the owner of the fast food joint shows a profit of $465 the banker would lend 30 times or $13950 to run the joint. He in turn would spend a part of the money elsewhere and this is how the economy in the Americas runs. Americans are brave as far as spending is concerned and there is a simple reason behind this. America is a land of equal opportunities for everyone and this helps the people of America. Surplus and deficit are two sides of the same coin and if you flip a coin either of the two must show up. The last one and half years was a phase when everyone was tossing and flipping the coin but the deficit side alone was showing up and theory of probability says that there is always reversal of sides after frequent tossing up. Just wait with bated breath for the coin to land on the surplus side. Salute to the Americas and its economy!

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