Skip to main content

Economics Simplified




Ram wants to start a business.  He needs ₹1 million.  Desh Bank is a new bank where Shyam has deposited ₹1 million on completion of a recent contract of his. The bank is ready to give Ram a loan and transfers ₹1 million to his account.  Ram gives the contract for his new building for his proposed business to Shyam who demands ₹1 million for the job.  Ram gives Shyam a cheque for ₹1 million.  Shyam deposits the cheque in the bank.  How much money does Shyam have in his account now?  Answer: ₹2 million.  How much money is there actually in the bank?  Answer: ₹1 million.

Som similarly gets a loan of ₹1 million from Desh Bank.  He too employs Shyam as his contractor and gives a cheque for ₹1 million to Shyam who deposits it in the bank.  There’s now ₹3 million in Shyam’s account although the actual amount in the bank remains the same original ₹1 million.

Now Shyam wants to take out his ₹3 million to start a business of his own.  What happens?

Desh Bank seeks government assistance.  The government agrees to help so that the bank won’t collapse.  Where does the government get the money from?  It can raise the price of petrol and diesel by a few paise and a few millions will be materialised within minutes. 

This is just a parable adapted from Yuval Noah Harari’s book, A Brief History of Humankind.  Replace the names of the bank and the persons with some real names, make it a little more complex with more people and bigger amounts, and you will understand the way our economy works.



Comments

  1. Durga Prasad DashSeptember 20, 2017 at 4:38 PM

    Your blog has a new look. Great.
    That is unfortunately, the story of human kind. You pay for someone else's sin, someone who is much much richer than you.

    ReplyDelete
    Replies
    1. Tomichan MatheikalSeptember 20, 2017 at 7:32 PM

      Ah, you put it so precisely. Great comment. Great understanding. I'm obliged for such understanding. At least you won't shoot me. :)

      Delete
  2. Pranju chakrapaniSeptember 25, 2017 at 7:16 AM

    I have been reading this book, sapiens. It has broken my several beliefs and at the same time has evoked a certain helplessness in the entire system of imagined realities that we hold dear to us. The concept of money is itself the biggest imagined reality that people believe in. Stock exchange, banks, limited liability companies , religion, feminism, nationalism, capitalism , gods and gossips come along and hold our collective imagination.

    But for what? Where is it leading us to? If you go back and find the barter system stupid , then is the currency exchange system also a stupidity or an evolution of the imagined realitities? Are we moving towards a converging point, towards a unity with such progressive imaginations? What would be the conclusion? I am yet to finish the book but nonetheless the book raises more of such questions and inevitably makes me embrace the cognitive dissonance.

    ReplyDelete
    Replies
    1. Tomichan MatheikalSeptember 25, 2017 at 7:35 AM

      The book raises many radical questions. As long as most human beings choose to wallow in mediocrity, the civilisation will continue with limited liability systems.

      Delete

Post a Comment

Popular posts from this blog

The Adventures of Toto as a comic strip

  'The Adventures of Toto' is an amusing story by Ruskin Bond. It is prescribed as a lesson in CBSE's English course for class 9. Maggie asked her students to do a project on some of the lessons and Femi George's work is what I would like to present here. Femi converted the story into a beautiful comic strip. Her work will speak for itself and let me present it below.  Femi George Student of Carmel Public School, Vazhakulam, Kerala Similar post: The Little Girl
47 comments
Read more

The Little Girl

The Little Girl is a short story by Katherine Mansfield given in the class 9 English course of NCERT. Maggie gave an assignment to her students based on the story and one of her students, Athena Baby Sabu, presented a brilliant job. She converted the story into a delightful comic strip. Mansfield tells the story of Kezia who is the eponymous little girl. Kezia is scared of her father who wields a lot of control on the entire family. She is punished severely for an unwitting mistake which makes her even more scared of her father. Her grandmother is fond of her and is her emotional succour. The grandmother is away from home one day with Kezia's mother who is hospitalised. Kezia gets her usual nightmare and is terrified. There is no one at home to console her except her father from whom she does not expect any consolation. But the father rises to the occasion and lets the little girl sleep beside him that night. She rests her head on her father's chest and can feel his heart...
19 comments
Read more

The Buddha in the Central Vista

Prime Minister Modi was taking a dip in the mineral water pond constructed on the bank of the Yamuna as part of his weekly photo op when Siddhartha Gautama aka the Buddha walked into the office of the National Committee for Correcting Civilizational Narratives (NCCCN) in Central Vista, New Delhi. An email was received by “Dr Sri Siddhartha Gautama Buddha PhD” from the PMO [Prime Minister’s Office] inviting him to attend a meeting “to authenticate and align the curriculum with indigenous perspectives as part of implementing the National Education Policy, NEP.” Siddhartha was amused on receiving the mail. “Is it possible they still wish to learn after proclaiming themselves the Vishwaguru?” He wondered with a wry smile. He was more amused to see the honorary doctorate conferred upon him by the Vishwaguru Vishwavidyala, in Spiritual Sciences. It’d be interesting to make a visit, he decided. When he entered the opulent office, whose floor was paved with Italian marble tiles, he reca...
11 comments
Read more

Being Christian in BJP’s India

A moment of triumph for India’s women’s cricket team turned unexpectedly into a controversy about religious faith and expression, thanks to some right-wing footsloggers. After her stellar performance in the semi-final of the Wormen’s World Cup (2025), Jemimah Rodrigues thanked Jesus for her achievement. “Jesus fought for me,” she said quoting the Bible: “Stand still and God will fight for you” [1 Samuel 12:16]. Some BJP leaders and their mindless followers took strong exception to that and roiled the religious fervour of the bourgeoning right wing with acerbic remarks. If Ms Rodrigues were a Hindu, she would have thanked her deity: Ram or Hanuman or whoever. Since she is a Christian, she thanked Jesus. What’s wrong in that? If she was a nonbeliever like me, God wouldn’t have topped the list of her benefactors. Religion is a talisman for a lot of people. There’s nothing wrong in imagining that some god sitting in some heaven is taking care of you. In fact, it gives a lot of psychologic...
16 comments
Read more

Sardar Patel and Unity

All pro-PM newspapers carried this ad today, 31 Oct 2025 No one recognised Sardar Vallabhbhai Patel as he stood looking at the 182-m tall statue of himself. The people were waiting anxiously for the Prime Minister whose eloquence would sway them with nationalistic fervour on this 150 th birth anniversary of Sardar Patel. “Is this unity?” Patel wondered looking at the gigantic version of himself. “Or inflation?” Mohandas Karamchand Gandhi chuckled standing beside Patel holding a biodegradable iPhone. “The world has changed, Sardar ji. They’ve built me in wax in London.” He looked amused. “We have become mere hashtags, I’d say.” That was Jawaharlal Nehru joining in a spirit of camaraderie. “I understand that in the world’s largest democracy now history is optional. Hashtags are mandatory.” “You know, Sardar ji,” Gandhi said with more amusement, “the PM has released a new coin and a stamp in your honour on your 150 th birth anniversary.”  “Ah, I watched the function too,” ...
15 comments
Read more