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Arbitary Obsessionist's Blog : Ambition is redundant. In life, mission is everything.

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Business Lessons from FarmVille

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1. You should never use your working capital to expand your business. Never!

In a rush to reach level 35 in FarmVille (read : expand my business presence), I used up all my coins to buy some properties, which gave me enough XPs (experience) to reach the higher level. But what I did not foresee was that I was left with a large farm, larger presence, but absolutely no money (read: working capital) to buy seeds! No seeds meant no crops. No crops meant no harvesting. And disastrously, no harvesting meant no money! Solution? I had to sell some of my buildings and animals to get enough money to buy seeds or else, I would have had to file for bankruptcy.

2. Too many acquaintances can be harmful to your business

There can be times that in an effort to increase the count of your neighbors (read: popularity), you end up having so much of ‘bull shit’ in your friend list. This practice should be avoided at all costs. In businesses too, maintaining an unmanageable number of acquaintances (for the sake of networking & marketing) is not recommended. People come to associate you with the type of people you are visible with.

3. Business is cyclical by nature. Always!

While playing the game, after you have harvested your crops (read : have been paid for your services), you need to plough as well as sow the seeds again (read : find customers & deliver them your services). And even after you provide your services, there is a waiting time before you receive your payments. So, businesses need to keep going on and on in this cycle. As soon as they decide to stop after harvesting, they will lose value. There is no stagnation in business. It either goes up or down. Period.

4. Look for other sources of revenue

When you are not harvesting, plowing or sowing (read : finding customers, providing services or getting paid), look for other avenues of revenue generation like fertilizing crops of your neighbors, etc. which in turn give you fuel to harvest/seed/plough in a more efficient way. Though rare, helping can be profitable at times. 😉

5. You can’t have everything & your core competency should be known to you

There may be times in business when you might get some exciting ‘never-before’ kind of opportunities (read : you get a building/animal/tree as free gift in FarmVille). You would love to take a plunge. But on deeper analysis, you will understand that this is not your core competency (read : farming). So, if you do place a building on your plot of land, you will be stopping the future cash flows from the farm you could have harvested at regular intervals. So, as evident, sometimes freebies are not that free. 😉

And finally, as the old one goes – You reap as you sow. 🙂

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Written by Dev

June 4, 2010 at 9:07 pm

Posted in Just for fun, Money Matters

Tagged with ,

How to be richer : Master your money in 2010-2011

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I know. You must be thinking that, by mistake you have landed on some personal finance blog. But let me assure you. You are right where you wanted to be. You are on Lumuhuku. 😉

Since the FY 2009-2010 has just ended and we have just entered in Financial Year 2010-2011, I decided to do a post on personal finance for a change.

[Caution: Dev is a self proclaimed financial expert (read stalker) and not a certified one. So beware. Your decisions should be your own, as the money you have is your own. Period.]

Before I start talking about money, I would like to specifically address those who believe that Money is the root cause of all evil. The underlined text just before, is bullshit. And to help you digest this fact, I recommend you read something historical here. And if you are still not convinced, just drop a comment. I’ll try to convince you. 🙂

So, lets start and let there be money,

First of all, do you know where you stand in the list of world’s richest people?

This is where I stand –

You can check your own rank here and then if you are inspired enough to rise up the ranks, read on.

1) Change your mindset: Think like the rich think

It all starts in that thing between your ears. You need to believe that you can take control of money rather than money taking control of you. In very simple words, you can become richer in just 2 ways.

The first one is to make more money. And the second one is to spend less of it.

Yes. It is as simple as that. And it is as difficult as that. As a matter of fact, the second option is much easier than the first one. Talking about the mindset, I would like you to download this free report (the link collects personal details; but it is worth it) from Donald Trump [Donald once said – “Show me a man without an ego & I will show you a loser.” Read more about him here]. This report is full of ideas which will ‘force’ you to change your mindset. Atleast, you will start ‘feeling’ rich when you read it. 🙂

Now, whenever we refer to financial planning of any sort, it should be realized that it is not just about managing your wealth. It is about how you can finance your ideas, stuffs & experiences you want from life. And this is a very important fact worth remembering.

2) Calculate your networth

Networth is your financial-worth-till-date. It can be calculated by subtracting your liabilities from you assets. Is it important to know your current worth? Following example will answer your question. Suppose you have Rs 2 Lacs worth of cash, FDs & investments. But you are also serving a loan whose outstanding amount is Rs 2.5 Lacs. So, what’s your worth? The answer is (–) Rs 0.50 Lacs. So even having loads of money is useless, if you have liabilities bigger than your assets. Plainly speaking, your networth tells whether you head is below water or above it. 😉

3) Budget

In India, a budget is something which we all hear around late February. Our finance minister presents the Annual Report of India’s Financial Health. But, for you and me, what is budget? Budget is a tool. A tool that will help in making a spending plan and also allow in planning one’s savings & investments.

Budgeting is tough. But it has its own rewards. Only resources required are a small notebook, a pen & you.

There are a few good approaches available for budgeting which are highlighted below –

There is a good approach known as the Balanced Money Formula [from the book All Your Worth: The Ultimate Lifetime Money Plan]. This formula is based on your actual net income (after taxes) and looks a bit like this –

As you can see, ideally, you should spend not more than 50% of you income on Needs. Of the remaining 50%, 20% should go to savings and rest 30% to wants. Here I would like to differ a bit. I feel that since ‘need’ of each and every person is unique, we can’t do much in this category, unless we take some concrete steps. What we can control is our ‘wants’. Wants are optional. 30% on just fulfilling our wants is fine for a time or two. But not everytime. I would rather propose a different pie –

I would increase the share of ‘savings’. And that too at the expense of reducing the fund allocated for ‘wants’. It is because, money going to ‘savings’ is the money that is going to work for you. It will earn you more money from interests, dividends, etc. So why not curb our wants a bit and make more money? And, if you really do want to have a better financial position, you should bring your ‘Needs’ down too. I know it is difficult. But it is possible. I will take up the topic in later part of the post.

Using this approach of budgeting will need a bit of labor from your side. You will need to keep track of each and every rupee you spend for one whole month to know what exactly is your money upto. Where does it come from and where does it go. And how you can take control of it.

A more simpler budgeting approach is proposed in The Only Investment Guide You’ll Ever Need. It gives 3 steps to a better budgeting

  1. Destroy all your credit cards.
  2. Invest 20% of all that you earn. Never touch it.
  3. Live on the remaining 80%, no matter what.

This approach is good for the starters as it removes all the complexities associated with budgeting. Taking an example of a person earning Rs 40K per month, needs to save/invest atleast Rs 8K per month (20% of 40K). The rest Rs 32K can be used as per his requirement.

4) Emergency Fund

Now this is really important. An emergency fund is what its name suggests. A fund where you can dip in when you have an emergency. Emergencies like job loss, theft medical emergencies, etc. So what is the adequate size of an emergency fund? Experts recommend that it should be able to take care of 3-6 months of your family’s living expenses. I am a bit conservative in the matters of money and will strongly recommend it to be on the higher side, i.e. 6 months. So if you earn Rs 40K per month and your expenses are Rs 25K, you should maintain an emergency fund of around Rs 150K (25K x 6 months).

An important point here is that you should not confuse this fund with your investments in stocks, mutual funds, gold etc. This is different from investments and should be highly liquid and readily available. It should be in the form of cash or in savings account.

I will also recommend that before making any major investments or purchases related to ‘Wants’ [as given in the formulae above], you should relentlessly add money to this emergency fund, till the time it becomes of adequate size. And remember to give this fund its due respect and dip into it only in cases of emergencies and not when you are bloody optimistic about some stock in a rising market [Read why the Reliance Power chaos happened 😉 ]

5) Frugality Rocks! Unless otherwise stated

As already mentioned earlier, easiest way to become richer is to spend less.

So how can we spend less every month?

Let me take a few examples –

Eat Out LessIt won’t be wrong to say that our generation is in a habit of eating out a lot. We just need an excuse to eat out or party. I am not advocating that we should stop going out with friends. What I want to convey is that we can reduce the frequency. An average working person in mid twenties will have 5 eating out expeditions or parties each month. Now if each one of it costs around Rs 750-1000/-, it shows that the person is shelling out around Rs 3500 to Rs 5000 per month!!

If the same person now realises that instead of 5 times a month, he should eat out only 2 times a month, it will lead to a monthly saving of about Rs 3000/- per month. Now if this amount is invested intelligently, the magic begins. This magic is known as the magic of compounding.

So here is the magic –

An amount of Rs 3000/- invested each month, for the next 30 years can get you a cool Rs 97 Lacs!! Yes. Rs 97,00,000/- [Assuming a rate of return of 12%][Forget inflation for the time being.]


& will you still eat out as many times as you already do??

🙂

Think before you buy that thing A lot of us are into impulsive buying. We suffer from the” We-need-it-when-we-see-it-and-then-we-have-to-buy-it rather than thinking-about-what-we-need-and-then-going-to-buy-it.

Whenever we want to buy something, we should ask ourselves some questions like –

  • Can I avoid buying it?
  • What purpose will it serve if I buy it?
  • Is this my ‘need’ or ‘want’?

The answer to the last question, if given honestly  will save you a lot of your money.

There are a few more examples where you can save money –

  1. Don’t drive to your nearby market. Walk or take your bicycle there.
  2. Do It Yourself – Reverse outsourcing [If you think hard, you will realize that there are loads of things which you pay for, but can do it on your own]
  3. Switch off those lights and appliances when you go out of the house. And when you are using them, use the energy efficient ones.
  4. Use that cellphone of yours a bit less. It is tough, but possible. 😉

Always remember to spend according to who you are and not according to who you want to be.

6) If possible, earn extra

When I say earn extra, I mean that you can convert some of your hobbies & stuffs you are good at into a source of extra income. If you watch TV or surf the internet without any purpose, you won’t become rich. But if you love gardening and can grow certain plants which people might be interested in buying, then you can definitely make some money. If you love making cakes and people are ready to buy them, then you can make some serious money. You can make money online also. But that is something that will take time and you will need to do a bit of research about the ways successful people like ProBlogger do it. You will also need to be aware of people who may fool you 😉

You can even start a consultancy if you are interested in selling your expert services & advices rather than products.

There is another good book, The Other 8 Hours. The author makes the reader realise that apart from sleeping 8 hours and working 8 hours, a person can also use the left over 8 hours do his monetary benefit.

Some of the words in the book are quite motivating –

This “free” time is the most valuable resource you have to achieve your ideal life…How you spend the other 8 hours determines where you are in life, your happiness, your weight, your level of debt, the satisfaction you have with your relationships, the car you drive, the languages you speak, your love life, your education, the places you travel, your bank account balance, and just about everything else that is important to you.

[Caution : Do not turn the other 8 hours into just another period of work. 🙂]

7) Investments

[Read this section only if you have interests in Stock Markets]

You should never confuse investment s with savings. Investment is what grows your wealth. Savings are what support you in bad times and your investments in good times.

Before even you think of investing, you should make the following very clear –

  1. You should have your emergency fund in place.
  2. Don’t expect to double your money every year.

There are millions of good books written about successful stock market investing. And being a non-pro, its better to avoid giving advice on the same. But I will like to share some of my own rules which I follow in the market –

  • I will invest only when I have adequate money in my emergency fund.
  • My primary aim is return of capital and not return on capital.
  • I will never buy a business that I don’t understand.
  • I will not invest for the short term.
  • I will buy stocks that have slipped out of popularity. 😉

I guess most of my readers would have been scared off till now. 🙂 So I will stop giving advice on stocks now. Rather, I will recommend you read about Warren Buffet [read about my imaginary dinner with him], Peter Lynch. I will also urge you to check out this site called Investopedia to get your basics of stock markets right. And if you are passionate about some books on stock market, then I’ll advocate Benjamin Graham’s Intelligent Investor & Letters of Berkshire Hathaway’s Annual Meetings (These are legendary!)

8) Get some financial education

In financial matters, it is very important that the source of your knowledge is authentic and worth knowing from. [If I still have any readers who have been able to read down till here, I will ask you to check with your own financial planners before taking your advice.]

One of the books I would like to recommend here is The Richest Man in Babylon.

Based on some very simple parables of ancient times, it tells you how to become rich. That’s it. Simple & Awesome. And if you can follow the advice given in the book, nobody can stop you from getting up the rich list.

Another one which should not be missed by anyone planning to be rich is Rich Dad Poor Dad.

Though a lot has been said against this book, but I still like it for the way in which it makes us relate to all that has been said in the book. The book is definitely worth a read.

You can also subscribe some good personal finance blogs, which can keep you on your toes and help you with loads of things financially. I recommend –

Get Rich Slowly

The Simple Dollar

[Now all these blogs are not Indian by origin. But art of getting rich is independent of currency. J So do read them. They might be helpful.]

I guess I have talked a lot and its time to end this attempt of mine. So my best wishes to the readers and always remember – “To be rich is  glorious”

Written by Dev

April 7, 2010 at 11:24 pm

Divine Truth

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I came about this quote in a newspaper…

 

Today’s “Take Home Salary” doesn’t even take you there!

 

Isn’t it the divine truth?? 

😉

Written by Dev

January 16, 2009 at 12:45 pm

How an asset bubble builds up & what are its consequences?

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Here’s a very interesting anecdote that describes how an “asset bubble builds up and what are its consequences.”

The Bubble

THE ANECDOTE –

Once there was a little island country. The land of this country was the tiny island itself. The total money in circulation was 2 dollar as there were only two pieces of 1 dollar coins circulating around.

1) There were 3 citizens living on this island country. A owned the land. B and C each owned 1 dollar.

____

2) B decided to purchase the land from A for 1 dollar. So, A and C now each own 1 dollar while B owned a piece of land that is worth 1 dollar.

____

3) C thought that since there is only one piece of land in the country and land is non produceable asset, its value must definitely go up. So, he borrowed 1 dollar from A and together with his own 1 dollar, he bought the land from B for 2 dollar.

A has a loan to C of 1 dollar, so his net asset is 1 dollar.

B sold his land and got 2 dollar, so his net asset is 2 dollar.

C owned the piece of land worth 2 dollar but with his 1 dollar debt to A, his net asset is 1 dollar.

The net asset of the country = 4 dollar.

____

4) A saw that the land he once owned has risen in value. He regretted selling it. Luckily, he has a 1 dollar loan to C. He then borrowed 2 dollar from B and and acquired the land back from C for 3 dollar. The payment is by 2 dollar cash (which he borrowed) and cancellation of the 1 dollar loan to C.

As a result, A now owned a piece of land that is worth 3 dollar. But since he owed B 2 dollar, his net asset is 1 dollar.

B loaned 2 dollar to A. So his net asset is 2 dollar.

C now has the 2 coins. His net asset is also 2 dollar.

The net asset of the country = 5 dollar. A bubble is building up.

____

(5) B saw that the value of land kept rising. He also wanted to own the land. So he bought the land from A for 4 dollar.

The payment is by borrowing 2 dollar from C and cancellation of his 2 dollar loan to A.

As a result, A has got his debt cleared and he got the 2 coins. His net asset is 2 dollar.

B owned a piece of land that is worth 4 dollar but since he has a debt of 2 dollar with C, his net Asset is 2 dollar.

C loaned 2 dollar to B, so his net asset is 2 dollar.

The net asset of the country = 6 dollar.

Even though, the country has only one piece of land and 2 Dollar in circulation.

____

(6) Everybody has made money and everybody felt happy and prosperous.

____

(7) One day an evil wind blowed. An evil thought came to C’s mind. “Hey, what if the land price stop going up, how could B repay my loan. There is only 2 dollar in circulation, I think after all the land that B owns is worth at most 1 dollar only.”

A also thought the same.

____

(8) Nobody wanted to buy land anymore. In the end, A owns the 2 dollar coins, his net asset is 2 dollar. B owed C 2 dollar and the land he owned which he thought worth 4 dollar is now 1 dollar. His net asset become –1 dollar.

C has a loan of 2 dollar to B. But it is a bad debt. Although his net asset is still 2 dollar, his Heart is palpitating.
The net asset of the country = 3 dollar again.

Who has stolen the 3 dollar from the country ?

Of course, before the bubble burst B thought his land worth 4 dollar. Actually, right before the collapse, the net asset of the country was 6 dollar in paper. his net asset is still 2 dollar, his heart is palpitating.

The net asset of the country = 3 dollar again.

____

(9) B had no choice but to declare bankruptcy. C as to relinquish his 2 dollar bad debt to B but in return he acquired the land which is worth 1 dollar now.

A owns the 2 coins, his net asset is 2 dollar. B is bankrupt, his net asset is 0 dollar. ( B lost everything ) C got no choice but end up with a land worth only 1 dollar (C lost one dollar) The net asset of the country = 3 dollar.

There is however a redistribution of wealth.

A is the winner, B is the loser, C is lucky that he is spared.

 

_______________________

A few points worth noting –

  • When a bubble is building up, the debt of individual in a country to one another is also building up.
  • This story of the island is a close system whereby there is no other country and hence no foreign debt. The worth of the asset can only be calculated using the island’s own currency. Hence, there is no net loss.
  • An overdamped system is assumed when the bubble burst, meaning the land’s value did not go down to below 1 dollar.
  • When the bubble burst, the fellow with cash is the winner. The fellows having the land or extending loan to others are the loser. The asset could shrink or in worst case, they go bankrupt.
  • If there is another citizen D either holding a dollar or another piece of land but refrain to take part in the game. At the end of the day, he will neither win nor lose. But he will see the value of his money or land go up and down like a see saw..
  • When the bubble was in the growing phase, everybody made money..
  • If you are smart and know that you are living in a growing bubble, it is worthwhile to borrow money (like A ) and take part in the game. But you must know when you should change everything back to cash.
  • Instead of land, the above applies to stocks as well.
  • The actual worth of land or stocks depend largely on psychology.

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Written by Dev

October 20, 2008 at 3:16 pm

Congratulations to every American!! You just became a shareholder, without even being asked for!

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It is said that equities (stock markets) in the long run do give much better returns than other asset classes. So is it not good to have a lot of shareholders? Pretty good I say. But it is good only if everyone becomes a shareholder by his or her own decision.

Sooner or later, this big $700 Billion Bailout is going to be a reality. Even if it is not passed again, still a lot of taxpayers money has already been invested in the companies on verge of collapse. So is it not a case of “people being forced to become the shareholders of dying companies?”

Today, every tax paying American has a become shareholder. Whether he likes it or not.

Now if the taxpayers are saving the financial system by buying up risky organizations, they should also get the share in some of the upside at the companies thus bailed out.

Now just think about the following and you will see how complicated things will become, very soon…

    1. Did you want to have share ownership of such temporary things? Will these survive even after the bailout?
    2. How will you resolve the conflict between wanting the banks in which you invest to make a lot of money and not wanting them to charge you $200 or $500 for turning in your credit card payment a day late? 😉
    3. Does this mean that all Americans get to go to shareholder meetings?

So, lets see if the house of representatives pass the bill or not. Even if they don’t, the process of damaging the US economy was started 7 years back.

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Goldman Sachs find their guardian angel – Warren Buffet buys into GS

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It is said that nothing brings out the vultures like smell of death. We can use it for Mr Buffet too..

Nothing brings out Mr. Buffet [..to invest..] like the smell of a ‘undervalued’ company ready-to-die.

GoldmanSachs_buffetWarren Buffet’s through his ‘legendary’ Berkshire Hathaway Inc. is investing at least $5 billion in Goldman Sachs. Now this is a huge thumbs up for one of the survivors of the credit crisis that felled two of its investment banking peers.

But that’s not all. In addition to buying $5 billion in preferred stock, Berkshire also got warrants to buy another $5 billion in Goldman’s common stock. Goldman on its own, would raise another $2.5 billion in its own public stock offering.

 

I was actually planning to title my post as Warren Buffet Strikes Back. But I thought Mr. Buffet as the guardian angel of the market and so the title. 🙂

So why did  Mr. Buffet, buy into Goldman Sachs? This is what he had to say –

“Goldman Sachs is an exceptional institution. It has an unrivaled global franchise, a proven and deep management team and the intellectual and financial capital to continue its track record of outperformance.”

A very important point to note here is that Buffet’s latest investment comes two days after Goldman Sachs Group Inc. and Morgan Stanley, the last two independent investment banks on Wall Street, won approval from the Federal Reserve to change their status to bank holding companies. That is, Mr. Buffet invested in the model of banks and not investment banks. It seems he has no faith left in the investment bank model.

What would have happened if GS had not converted to a bank holding company? The question can best be answered by Warren Buffet himself… 😉

By becoming commercial banks, Goldman Sachs gets broader access to borrow federal money and the ability to build a stable base of deposits. But it also comes with closer regulatory oversight that likely limit its ability to generate the kinds of sky high profits that were topped by few others companies.

Another major thing to notice here is that Buffet prefers to invest in organization that are usually present in ‘unregulated’ or partially regulated sectors. But here, Goldman will be under close watch of the Fed. So is Mr. Buffet changing his investment style?

To tell the truth I was really surprised to see Goldman Sachs panicking out, since Goldman stood alone among the investment banks in refraining from participating in the subprime market. Its balance sheet was the strongest, and it was still making money up to the present. Profits fell, of course, but at a time when others are writing off billions, a black bottom line should have kept its stock at healthy levels. When your competitors are all dying, hardy survival should point toward future dominance in your sector. But Goldman had other ideas…

Mr. Buffet was actually asked to buy its assets for 10% of their value; he wanted to pay just 5%, so it wasn’t a good enough deal. Buffet only commits his money when there is a very high chance of profit. He would have made money on even at 10%, and clearly the firm’s positions appeared to be eventual winners when the market settled down, but on short notice saw no reason to take on any risk. Buffet has passed on other potential deals as well, including Bear Stearns last year.

For a long time, Buffet had avoided Wall Street since he came to Salomon Brothers, when it was hit by a trading scandal in 1991.  He had bought a $700 million stake in the company four years before. He eventually turned a profit on the investment, but it was a long and difficult experience for him.

A really interesting observation of mine is that I think Warren Buffet’s $5 billion are much more important than Fed’s $700 billion. You must be thinking that I am out of my mind. But just think about it. Warren Buffet is THE MAN OF THE MOMENT.  He is a deep value investor and always picks the bottom. So he seems to have sensed the bottom. And that should be a very pleasant news for the people. 

And yes, during the credit boom, there were some idiots who kept on saying that Warren Buffet had lost his touch. Now the Berkshire Hathaway boss has collected what looks like a canny investment in Goldman Sachs. And those idiots are nowhere to be heard. Why? They have been crushed by their own stupid-high-risk portfolios. 🙂

Hail Mr. Buffet

AIG = America Is Gone !!

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“US government bails out insurer AIG with $ 85 billion of taxpayers money. “

Americans!! are you sleeping again? It was a terrible mistake to bail out Bear Sterns. Your government repeated it with Freddie Mac and Fannie Mae. And now AIG.

We thought China was a communist, but it seems USA is a bigger communist country.

Now most people don’t know what is written below –

When AIG ousted CEO Martin Sullivan back in June, he received a $47 million severance package.  Yes, after two quarters of record losses he still received $15 million cash, a bonus of $4 million for the portion of the year he worked, and held on to outstanding equity and long-term cash awards valued at about $28 million.

 

Exiting CEO, Robert Willumstad, who reigned for all of three months, joined AIG with a $1 million annual salary, and a possible $21 million in annual bonus and incentive awards. He also got restricted stock and options once valued at $36.5 million.  Word is he now leaves with nearly $9 Million in compensation.

$9 Million for three months at a company which has now been bailed out by Taxpayers.

Oh come on, bonuses should be tied to performance, not attendance.

Bailout

And why should the tax dollars go to bailout companies and reward their executives for their failure in a free market? There is absolutely no reason or sense for government to interfere in a free economy. I agree that repercussions of the falloff giants would have been felt for long, but what the US is doing is, just delaying the inevitable. Wall Street has to pay for its mistakes. That’s the way a free market works!  And in time the market will correct itself, and it always does.

Government interference only delays the inevitable downfall and slows the market correction that is desperately needed to avoid a deeper recession or possibly a depression if the government does not get out of the way. 

Till now I was not very sure of the recession of US economy. But if the government continues its passionate ‘bailout‘ing, rest assured, recession will not be a part of your nightmares, but reality.

Now what’s wrong with recession. I say nothing! If it takes a recession or a depression for the market to correct itself, than so be it.  Time heals all wounds, and other businesses will be there to pick up the slack.People simply have to understand that you can’t have success without failure.  Simply put our federal government is trying to erase the concept of failure. And that is simply being stupid, very stupid.

And do you think this is the end? Then go and wash your face and move to another country, as your US is a sinking ship as of now. All these mistakes of the past are going to come back to haunt the US for long.

bailouts22

To quote a similar example from American history itself, I quote the story of  Chrysler, which was bailed out in 1979. Everyone knows what Chrysler does: they make cars. Yet the justification and impacts of the bailout are similar regardless of whether the firms produce a tangible car or intangible investment instruments.Congress bailed out Chrysler, which means the subsidized loans were paid for by taxpayers. AIG is being subsidized by the Federal Reserve, and since the Federal Reserve has the ability to “print money”, taxpayers will still pay for the bailout, but through higher inflation rates, not taxes.

And you need to know this too. This bailout of AIG is only a 2 year loan. If you have to bail someone out and pay the mortgage off, how can you expect it to pay you back in two years?. AIG will not pay back and the U.S. will own a bunch of nicely appointed offices around the world until a “buyer” comes along to buy it from the government at a discount.

Now isn’t it immoral that the bad investment decisions of Bear Sterns, Freddie Mac, Fannie Mae & AIG management had suddenly become the liability of American taxpayers?

My friends in America, the debate on whether your taxes will increase or decrease in the future has been ended. In addition to the rising cost of programs like Medicare, Medicaid, and Social Security, the recent government bailouts have just ballooned the deficit and there’s no end in sight. If this continues, there will be no choice in a decade or two of whether your taxes are raised or not. It will have to be hiked substantially to meet our debt burden. Your children will face an exorbitant tax burden to fund the mistakes made over the past decade.

According to insiders and analysts, the company will eventually be liquidated. Now no need to surprised. The bailout is just a trick to buy some time and make the process neat and tidy.

My suggestions (not many, as I am no expert)-

    1. Why not bail out the American health care system instead and putting 85 billion dollars to save a firm that is bound to die anyway? Being all capitalist sounds stupid these days… 😉
    2. It seems that it is a government policy what it likes to think of as stability rather than allowing large scale companies that get into trouble to receive proper market discipline. The dramatic government bailout should prompt Congress to break up Fannie and Freddie and privatize them – and discard the model. Privatizing profits and socializing  losses is hardly a formula for increasing the blessings of prosperity.

So what more can I say to you friends, best of luck and hope there are no more bailouts. Keep praying…