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While charities take care of individual, governments – while not forgetting about individuals – must take care of the society as a whole. Forgetting that a functioning society is more than a herd of individuals living their life choices is the safest way to chaos. We are not immune!

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We should then expect that companies with unpaid chairmen, or no chairmen at all should perform the best.

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And for the nit-pickers amongst you who don’t accept any general statement without concrete examples. Here is one example to satisfy this perversion:

http://church-of-templar.blog.co.uk/2009/04/04/romanian-serial-rapist-5887465/

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Q: What are banks for?
A: To make money.

Q: For the customers?
A: For the banks.

Q: Why doesn't bank advertising mention this?
A: It would not be in good taste. But it is mentioned by implication in references to reserves of
$249,000,000,000 or thereabouts. That is the money they have made.

Q: Out of the customers?
A: I suppose so.

Q: They also mention Assets of $500,000,000,000 or thereabouts. Have they made that too?
A: Not exactly. That is the money they use to make money.

Q: I see. And they keep it in a safe somewhere?
A: Not at all. They lend it to customers.

Q: Then they haven't got it?
A: No.

Q: Then how is it Assets?
A: They maintain that it would be if they got it back.

Q: But they must have some money in a safe somewhere?
A: Yes, usually $500,000,000,000 or thereabouts. This is called Liabilities.

Q: But if they've got it, how can they be liable for it?
A: Because it isn't theirs.

Q: Then why do they have it?
A: It has been lent to them by customers.

Q: You mean customers lend banks money?
A: In effect. They put money into their accounts, so it is really lent to the banks.

Q: And what do the banks do with it?
A: Lend it to other customers.

Q: But you said that money they lent to other people was Assets?
A: Yes.

Q: Then Assets and Liabilities must be the same thing?
A: You can't really say that.

Q: But you've just said it! If I put $100 into my account the bank is liable to have to pay it back,
so it's Liabilities. But they go and lend it to someone else and he is liable to have to pay it back,
so it's Assets. It's the same $100 isn't it?
A: Yes, but....

Q: Then it cancels out. It means, doesn't it, that banks haven't really any money at all?
A: Theoretically......

Q: Never mind theoretically! And if they haven't any money, where do they get their Reserves of
$249,000,000,000 or thereabouts??
A: I told you. That is the money they have made.

Q: How?
A: Well, when they lend your $100 to someone they charge him interest.

Q: How much?
A: It depends on the Bank Rate. Say five and a-half percent. That's their profit.

Q: Why isn't it my profit? Isn't it my money?
A: It's the theory of banking practice that.........

Q: When I lend them my $100 why don't I charge them interest?
A: You do.

Q: You don't say. How much?
A: It depends on the Bank Rate. Say a half percent.

Q: Grasping of me, rather?
A: But that's only if you're not going to draw the money out again.

Q: But of course I'm going to draw the money out again! If I hadn't wanted to draw it out again I
could have buried it in the garden!
A: They wouldn't like you to draw it out again.

Q: Why not? If I keep it there you say it's a Liability. Wouldn't they be glad if I reduced their
Liabilities by removing it?
A: No. Because if you remove it they can't lend it to anyone else.

Q: But if I wanted to remove it they'd have to let me?
A: Certainly.

Q: But suppose they've already lent it to another customer?
A: Then they'll let you have some other customers money.

Q: But suppose he wants his too....and they've already let me have it?
A: You're being purposely obtuse.

Q: I think I'm being acute. What if everyone wanted their money all at once?
A: It's the theory of banking practice that they never would.

Q: So what banks bank on, is not having to meet their commitments?
A: YOU GOT IT!

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You notice the cows are on fire. Your paper still says $100.
Fortunately, mark to market has been suspended so you don't have to pay attention to the fire.

Your cows are dead from fire. Your paper still says $100.
Fortunately, mark to market has been suspended so you don't have to pay attention to the dead cows.

You notice that you aren't getting as much milk as expected, so you adjust the model and mark the cows down to $98. You are confident, however, that the dislocated stream of milk revenue will quickly revert to expectations.

You need to borrow some money so you ask investors for a loan against the cows. The investors tell you the cows are dead, and you already owe them $200 dollars you borrowed to buy them in the first place. You show them the paper that says the cows are worth $98 each.

They light your paper on fire. You ask the government to buy the dead cows at $98 each.

The government holds meetings all weekend and finally comes up with a plan to inject $45 dollars into your cattle ranch. In exchange, the government gets a right to milk generated from the cows at some point in the future. It expects you'll buy a new cow with the $45.

You have two dead cows, $45 and $200 in debt to your investors. You have no plans to buy new cows, so you take the $45 as a bonus.

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He's now 82 years old and has a new book, 'Where Have All The Leaders Gone?' In his book he is talking about the US, but it is just as relevant to what is happening here in the UK.

Here are some excerpts.

Lee Iacocca Says:-

'Am I the only guy in this country who's fed up with what's happening? Where the hell is our outrage? We should be screaming bloody murder. We've got a gang of clueless bozos steering our ship of state right over a cliff, we've got corporate gangsters stealing us blind, and we can't even clean up after a hurricane much less build a hybrid car. But instead of getting mad, everyone sits around and nods their heads when the politicians say, 'Stay the course.'

Stay the course? You've got to be kidding. This is America , not the damned 'Titanic'. I'll give you a sound bite: 'Throw all the bums out!'

You might think I'm getting senile, that I've gone off my rocker, and maybe I have. But someone has to speak up. I hardly recognize this country anymore.

The most famous business leaders are not the innovators but the guys in handcuffs.. While we're fiddling in Iraq , the Middle East is burning and nobody seems to know what to do. And the press is waving 'pom-poms' instead of asking hard questions. That's not the promise of the ' America ' my parents and yours traveled across the ocean for. I've had enough. How about you?

I'll go a step further. You can't call yourself a patriot if you're not outraged. This is a fight I'm ready and willing to have. The Biggest 'C' is Crisis ! (Iacocca elaborates on nine C's of leadership, with crisis being the first.)

Leaders are made, not born. Leadership is forged in times of crisis. It's easy to sit there with your feet up on the desk and talk theory. Or send someone else's kids off to war when you've never seen a battlefield yourself. It's another thing to lead when your world comes tumbling down.

On September 11, 2001, we needed a strong leader more than any other time in our history. We needed a steady hand to guide us out of the ashes. A hell of a mess so here's where we stand.

We're immersed in a bloody war with no plan for winning and no plan for leaving.

We're running the biggest deficit in the history of the country.

We're losing the manufacturing edge to Asia, while our once-great companies are getting slaughtered by health care costs.

Gas prices are skyrocketing, and nobody in power has a coherent energy policy. Our schools are in trouble.

Our borders are like sieves.

The middle class is being squeezed every which way..

These are times that cry out for leadership.

But when you look around, you've got to ask: 'Where have all the leaders gone?' Where are the curious, creative communicators? Where are the people of character, courage, conviction, omnipotence, and common sense? I may be a sucker for alliteration, but I think you get the point.

Name me a leader who has a better idea for homeland security than making us take off our shoes in airports and throw away our shampoo?

We've spent billions of dollars building a huge new bureaucracy, and all we know how to do is react to things that have already happened.

Name me one leader who emerged from the crisis of Hurricane Katrina. Congress has yet to spend a single day evaluating the response to the hurricane or demanding accountability for the decisions that were made in the crucial hours after the storm.

Everyone's hunkering down, fingers crossed, hoping it doesn't happen again. Now, that's just crazy. Storms happen. Deal with it. Make a plan. Figure out what you're going to do the next time.

Name me an industry leader who is thinking creatively about how we can restore our competitive edge in manufacturing. Who would have believed that there could ever be a time when 'The Big Three' referred to Japanese car companies? How did this happen, and more important, what are we going to do about it?

Name me a government leader who can articulate a plan for paying down the debit, or solving the energy crisis, or managing the health care problem. The silence is deafening. But these are the crises that are eating away at our country and milking the middle class dry.

I have news for the gang in Congress. We didn't elect you to sit on your asses and do nothing and remain silent while our democracy is being hijacked and our greatness is being replaced with mediocrity. What is everybody so afraid of? That some bonehead on Fox News http://www.foxnews.com/ will call them a name? Give me a break. Why don't you guys show some spine for a change?

Had Enough? Hey, I'm not trying to be the voice of gloom and doom here. I'm trying to light a fire. I'm speaking out because I have hope - I believe in America . In my lifetime, I've had the privilege of living through some of America 's greatest moments. I've also experienced some of our worst crises: The 'Great Depression,' 'World War II,' the 'Korean War,' the ' Kennedy Assassination,' the 'Vietnam War,' the 1970's oil crisis, and the struggles of recent years culminating with 9/11.

If I've learned one thing, it's this: 'You don't get anywhere by standing on the sidelines waiting for somebody else to take action. Whether it's building a better car or building a better future for our children, we all have a role to play. That's the challenge I'm raising in this book. It's a call to 'Action for people who, like me, believe in America '.. It's not too late, but it's getting pretty close. So let' s shake off the crap and go to work. Let's tell 'em all we've had 'enough.'

Make your own contribution by sending this to everyone you know and care about. It's our country, folks, and it's our future. Our future is at stake!!

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If they paid their bill the way we pay our taxes, it would go something like this:

The first four men (the poorest) would pay nothing.
The fifth would pay $1.
The sixth would pay $3.
The seventh would pay $7.
The eighth would pay $12.
The ninth would pay $18.
The tenth man (the richest) would pay $59.

So, that's what they decided to do.

The ten men drank in the bar every day and seemed quite happy with the arrangement, until one day, the owner threw them a curve.

"Since you are all such good customers," he said, "I'm going to reduce the cost of your daily beer by $20." Drinks for the ten now cost just $80.

The group still wanted to pay their bill the way we pay our taxes.
So the first four men were unaffected.
They would still drink for free. But what about the other six men? The paying customers?

How could they divide the $20 windfall so that everyone would get his fair share?'

They realized that $20 divided by six is $3.33. But if they subtracted that from everybody's share, then the fifth man and the sixth man would each end up being paid to drink his beer.

So, the bar owner suggested that it would be fair to reduce each man's bill by roughly the same amount, and he proceeded to work out the amounts each should pay.

And so the fifth man, like the first four, now paid nothing (100% savings)
The sixth now paid $2 instead of $3 (33% savings).
The seventh now pay $5 instead of $7 (28% savings).
The eighth now paid $9 instead of $12 (25% savings).
The ninth now paid $15 instead of $18 ( 20% savings).
The tenth now paid $49 instead of $59 (16% savings).

Each of the six was better off than before. And the first four continued to drink for free.
But once outside the restaurant, the men began to compare their savings.

"I only got a dollar out of the $ 20,"declared the sixth man.
He pointed to the tenth man," but he got $10!"

"Yeah, that's right," exclaimed the fifth man. "I only saved a Dollar, too.
It's unfair that he got ten times more than I!"

"That's true!!" shouted the seventh man. "Why should he get $10 back when I got only two? The wealthy get all the breaks!"

"Wait a minute," yelled the first four men in unison. "We didn't get anything at all. The system exploits the poor!"

The nine men surrounded the tenth man and beat him up.

The next night the tenth man didn't show up for drinks, so the nine sat down and had beers without him.
But when it came time to pay the bill, they discovered something important. They didn't have enough money between all of them for even half of the bill!

And that, boys and girls, journalists and college professors, this is how our tax system works.

The people who pay the highest taxes get the most benefit from a tax reduction.

Tax them too much, attack them for being wealthy, and they just may not show up anymore. In fact, they might start drinking overseas where the atmosphere is somewhat friendlier.

David R. Kamerschen, Ph.D.
Professor of Economics
University of Georgia

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How do they do it?

The Bedford to Moorgate trains, a morning service only, take commuters from Bedford, Luton, Harpenden and St Albans to the City. However, as Moorgate train ticket cost as much as a ticket to Farringdon, the masters have decided to stop this service altogether, and let everyone take the London Bridge train, and change at Farringdon to the underground.

This will have a strong cultural impact, as it will force direct commuters to the City to experience joys of the London underground. Paying the additional underground fare, will add to consumer spending, increase our GDP, and help the economy at this time of hardship.

On the other hand, by not operating this train, the train company will still get the same number of commuters paying the same amount of money. Absolutely genius isn’t it?

Besides, no one likes the City worker any longer. Let them all suffer.

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But what about the Government Mr. Brown? When will they be held accountable for anything?

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This will not come from the taxpayers’ pocket; this will go directly to those who need it the most; and this will lead to far smaller future inflationary pressure. After all, as fast as we print our own money, we can’t do it as fast as the government is doing now.

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• In 1929 crash, stock prices remained reasonably steady for about a year, until November, 1930. Then stock prices kept falling until 1942, with a major second crash in 1937.
• Stock prices recovered from 1942-1966. They didn't return to their 1929 high until 1954.
• During the crash the market lost nearly 90% of it’s value.
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• From 1990 the Nikkei crashed for 13 years, and lost 75% of it’s value
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• In 2000 The Nasdaq crash, it took the market 2.5 years before it stopped falling. During the time the market lost nearly 75% of it’s value

Without trying to forecast the market, history teaches us that cheap doesn’t mean that it will not get much cheaper. So don’t put your faith in experts. Whatever they tell you, it’s your own judgment you should follow.

If you don’t know, stay out of the market, you don’t have to be there.

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Indeed, if it’s talent that was needed to lose such sums, wouldn’t it be a prudent business decision to attract the less talented?

And let’s get serious for a moment. Bankers are not as hot as they once were. Do we really feel that if we didn’t increase their salaries they will resign, and take, for instance, public service instead? If banks don’t understand the current economic reality of supply and demand they are in the wrong job, and we’d better get rid of them altogether.

On the other hand, if we give them, why shouldn’t they take? After all, this is one of the only things they know how to do

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I only hope they are better at running banks than brothels

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'Titian reached the age of 90, finished the last of his 100 great paintings, and said: ‘I’m finally learning how to paint.’ That is where we are,’ said Mr. Brown.

And to this all I can say that I have not yet seen any of the 99 masterpieces done by Mr. Brown. So why doesn’t he just go away and come back to us in his 90s?

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All I can do it quote Einstein once more: we can't solve problems by using the same kind of thinking we used when we created them.

Is it just possible that globalization is the problem?

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This is a posting I blogged nearly a year ago, and I think that now, following the recent events, it is even more relevant.

In one of my previous blogs when I mentioned the word Israel, all of a sudden, by mentioning the unmentionable I seemed to have triggered a response like never before. Never in my blog-life did I encounter such strong responses, not when I talked about drugs, prostitution, slavery or harvesting organs from prisoners. Why is that?

Let’s look at some facts. Israel’s birth was out of war. Like most other wars it’s controversial, and there are numerous viewpoints and interpretations of the events. Undoubtedly, both sides had their fair share of atrocities. Yet, no other birth of a nation has created such one-sided hatred.

Nowadays the existence of Israel is a fact. None of those who took part in the birth of the country is in a position of power any longer. Most of them are dead. So even those who feel that Israel was born in sin must admit that most living Israelis had nothing to do with the birth of their country. Yet they are our target of hatred.

There is no doubt that the Arab-Israeli conflict is ugly. No doubt that this has been a horrible war in which both sides committed atrocities. But there is also little doubt that either side is the sole responsible. The situation is rather hopeless, and nobody, absolutely nobody, has a solution. Yet, we hate Israel.

The Arab-Israeli conflict is far from being the bloodiest conflict in the world. It’s far from having the worse record of atrocities. Let’s look at some numbers (all taken from the Historical atlas of 20th century Matthew White):

The total death toll of the Israeli Arab conflict in over 100 years claimed about 60,000 people, out of which 6,000 Arabs were killed in the 40 years of occupation (btw, do you know how many Israelis were killed in the same period?) . It’s a horrible number indeed. However, in the same period 83 million people were killed as a result of tyranny and genocide. That is, Israel has been responsible for 0.07% of all such killings, even though it’s population is 0.1% of the world population. Not so bad considering that the country has been in a war the entire period.

In China 40m killed under Mao
In Russia 20m killed under Stalin
Sudan conflict has consumed 225,000
Somalia 400,000
Romania 150,000
Cambodia 225,000
Algeria 100,000 (fundamentalist Moslem insurrection only, not including the Algerian war)
Kurdistan 300,000
Liberia 150,000
Angola 550,000
Philippines 50,000

Not that any of these numbers justify the Arab-Israeli war, but one must wonder why the hatred in the street is focused on Israel rather than on Algeria or Angola, for instance.
How come Israeli scholars are banned from many English academic conferences unless they condemn their government? Why don’t we ask the same from Burmese, Sudanese or Chinese scholars? And why, when any Muslim decides to detonate a bomb anywhere in the world, let it be London or Bali, calls against Israel are heard in the street?

Is it because blaming the bomber can lead to more religious hatred, and more bombs, while it’s safe to blame Israel? After all, no bomb, suicide bomber, airplane hijacking by an Israeli has ever taken place?
Is it just possible that we still hold the very same views that led London to blame the Polish when they were first occupied by Hitler?

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Before this time, landing on water had never been successfully attempted, yet, simulators were built to simulate such events, procedures were put in place, and pilots were trained. None of these were based on historical events, but rather on foresight. It was this foresight that made the difference, and saved the lives of the 155 people aboard the plane.

But this is not the only thing the financial industry can learn from the airline industry. Learning from mistakes and disasters can be just as educational.

Last year a pilot of a Garuda Indonesia, who had crashed his aircraft, was charged with negligence and deliberately causing an accident. It was shown that the captain had deliberately ignored 15 warning signals from an onboard warning system and from his co-pilot, force-landing the Boeing 737 which skidded off the runway and burst into flames killing 21 people.

The investigation found that had he listened to the warnings and followed the proper procedures, he’d have to go round a second time, which would have consumed more fuel and cost him his ‘saving fuel bonus.’ Isn’t it the very reason that so many financial institution crashed – ignoring the bad signals to get better personal remuneration?

We too often forget that the financial industry is not the only place risk is encountered. Many industries and disciplines – from airline to drug manufacturing, from space exploration to building submarines – have developed their ways to handle risk. None is based on historical analysis alone, as is the common practice in the financial industry. And yet, the financial industry has arrogantly chosen to ignore all these important development and reinvent the wheel. This time, however, it seems that they invented a square one.

So why don’t we force our regulators and those who invest our money to learn what other disciplines do with their risk management. After all, reality showed us that we cannot rely on the financial industry to make their own decisions. So let’s force them. Isn’t that what democracy and capitalism all about?

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When England economy was strong, England saw no benefit in joining the Euro, although at the time it had much power to dictate the conditions. Now, being weak, it might have no choice and will have to take whatever conditions Europe is willing to offer.

And some still politicians still claim that they understand the meaning of foresight

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Those lovely people in the street didn’t have an answer, but thought that raising money was a good idea. And I thought that they must be the same well-intending people that a couple of years ago poisoned a pond full of bird life as part of their anti-hunting campaign.

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CHANGE Mr. Obama, starts with getting rid of that which has been proven not to work. So why don’t you simply get rid of all those who until less than six month ago refused to see where these policies would lead us, and employ those few and far between who understand. As for the rest of the economist, let them join the ever growing unemployment cycle. They may learn something there.

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If you are honest with yourself, you must admit that you do not have a solution, and that it’s hard to find a single side to blame, as both are at fault. It is quite tribal thinking that forces us to take sides, favouring one over the other rather than try and look at the complexity of the issues and seek a solution.

Anyone who claims that Israel should let missile fall on its land, and suicide bombers explode in its cities, is a bit out of touch with reality. The first role of a country is to defend its own citizens. However, if you object the Israeli attack as you don’t believe it would solve the problem, I would fully agree, but do you have another solution? What would you have done if you lived there? What would you have done if busses exploded in London weekly, or if missiles were launched on Kent from France? All this is rather difficult and lazy thinking, although makes one feel good, has never solved anything.

The thing I am most perplexed about is why are the heated emotions here in England? After all, there were no demonstrations in the two weeks leading to the attack, when Hamas fired missiles on Israel and Israel made it clear that it would respond if the firing continued. Why didn’t you demonstrate to stop the attacks on Israel, even if not to protect Israel but merely to stop the unavoidable?

Why didn’t we see any demonstrations against Shiites killing Sunnis (and vice versa) in Iraq, against the war against PKK in Turkey, the genocide in Darfur; against Hamas killing the Fattah supporters in Gaza, Iraq’s invasion of Kuwait, Iraq-Iran War, the massacre in Algeria, Russia in Chechnya, the war in old Yugoslavia, and many others. There were no demonstrations in London, even if the death tolls were much higher.

Is it possible that under the intellectual and liberal veils, some good old anti-Semitism is raising its head? Just be honest with yourself and think why you are more emotional about Gaza than about the PKK or Sri-Lanka for instance. Are you simply the product of the mass media brain washing, or maybe you are not as liberal as you want to believe you are?

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The entire system is old, inefficient, and falling apart. Baby P case demonstrated, once again, that the bureaucrats are most concerned with from-filling than with doing their job. And when things do work, it’s hardly ever thanks to the system, but mostly due to exceptional individuals that manage to perform, in spite of the system.

For long time, all this was hidden by the phenomenal financial growth. But it’s over now, and when the free money used to hide the cracks disappeared, the cracks started showing. Led by a bunch of self-serving politicians, who demonstrate, over and again, that their only talent is holding to positions, things are not going to get better in any foreseeable future.

So let’s learn from Thailand. The Thai people got fed up with their incompetent politicians, and blocked the airport in protest. Their drastic action was proven successful, and a new government is to be elected. The Thai people have proven that they do matter.

But what about the UK? When will the English public wake up to realise that they deserve better; that they should not pay unreasonable prices for substandard services. That they deserve good education, good protection, and that incompetent bureaucracy is not a force majeure?

I wish the best for the Thai people, who were willing to fight for what they deserve. I hope that the English people will take it as a lesson that they too can make a difference.

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I am glad that for Mr. Hester £1 million is a pittance. However, this is enough to feed 3,000 African children for one year, provide half a million vaccination for malaria – the greatest killer of all diseases, or build schools in 50 villages.

But why go far? Many of ours schools here would be delighted to get only a few thousands dollars each to help with maintenance and acquire basic equipment so desperately needed.

So Mr Hester, as small as £1m might be for you, it’s not your money that you’re spending. It’s my money that you are using to save the bank. It’s me and a few thousands of my neighbours that pay your £1.2m a year salary (before bonuses).

If it were up to me, I would have saved few thousand children and not the bank, but it wasn’t my choice. The money was taken from me by the sword of the taxman. So don’t tell me it’s a small amount. If it is, I want it back.

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So how does our government plan to pay for all this extra money they are now spending? After all, borrowing more to pay existing debt is not a sustainable strategy, as although it may temporarily relief immediate pain, it always creates much bigger pain in the future.

Are we sacrificing our future?

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And I say, shame on those who while using our money to bail banks out, did not take the opportunity to force banks to become more socially responsible organisations.

Because, until someone changes the rules of the game, banks will play the only game they know, and profiteering is the name of their game.

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Once there was a little island, it had a piece of land, and two pieces of 1 dollar coins.

Three people were living on the island. A was the land owner, while B and C had 1 dollar each. One day B decided to purchase the land from A for his 1 dollar. So, now A and C own 1 dollar each while B owned a piece of land that is worth 1 dollar. The net asset of the country now is 3 dollars.

Now C thought that since there is only one piece of land for three people, its value must definitely go up. So, he borrowed 1 dollar from A, and together with his own 1 dollar, he bought the and from B for 2 dollars. Now A has a loan to C of 1 dollar, so his net asset is 1 dollar. B sold his land and got 2 dollars, so his net asset is 2 dollars. C owned the piece of land worth 2 dollars but with his 1 dollar debt to A, his net value is 1 dollar. Thus, the net asset of the Island is 4 dollars.

A saw that the land he once owned has risen in value. He regretted having sold it. Luckily, he has a 1 dollar loan to C. He then borrowed 2 dollars from B and acquired the land back from C for 3 dollars. The payment is by 2 dollars 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 dollars. But since he owed B 2 dollars, his net asset is 1 dollar. B loaned 2 dollars to A. So his net asset is 2 dollars. C now has the 2 coins. His net asset is also 2 dollars. Therefore the net asset of the Island is 5 dollars.

A bubble is building up.

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 dollars. The payment is by borrowing 2 dollars from C, and cancellation of his 2 dollars loan to A. As a result, A has got his debt cleared and he got the 2 coins. His net asset is 2 dollars. B owned a piece of land that is worth 4 dollars, but since he has a debt of 2 dollars with C, his net Asset is 2 dollars. C loaned 2 dollars to B, so his net asset is 2 dollars.

Now the net asset of the Island is 6 dollars, even though the Island still has only one piece of land and 2 1 dollar coins. Yet, everybody had made money and everybody felt happy and prosperous.

One day 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 dollars in circulation, and, I think after all the land that B owns is worth at most only 1 dollar, and no more.’ Coincidently, the same thought crossed A’s mind, so nobody wanted to buy land anymore.

So now A owns the 2 dollar coins, his net asset is 2 dollars. B owed C 2 dollars and the land he owned which he thought worth 4 dollars is now 1 dollar. So his net asset is only 1 dollar. C has a loan of 2 dollars to B. But it is a bad debt, although his net asset is still 2 dollars.

The net asset of the country is 3 dollars again.

So, who has stolen the 3 dollars from the country? Of course, before the bubble burst B’s land was worth 4 dollars, and the net asset of the country was 6 dollars.

B's net asset is still 2 dollars, and he has no choice but to declare bankruptcy. C as to relinquish his 2 dollars 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 dollars. B is bankrupt; he lost everything and his net asset is 0 dollar. C got no choice but end up with a land worth only 1 dollar. The net asset of the country = 3 dollars.

So we are back to where we started with redistribution of wealth. A is the winner, B is the loser, C has now the land but now money.

This Island is closed economy whereby there was no other country and hence no foreign debt. If foreign debt was involved, everyone could have ended up a loser.

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