Monday, October 13, 2008

Bankruptcy explained

Once there was a little island country. The land of this country was
the tiny island itself. The total money in circulation was 2 dollars
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, 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 = 3 dollars.

3) Now C thought that since there is only one piece of land in the
country, and land is non producible 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 dollars.

*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 residual asset is 1 dollar.
* Thus, the net asset of the country = 4 dollars.

4) 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.
* The net asset of the country = 5 dollars. 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 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.

* The net asset of the country = 6 dollars; even though, the country
has only one piece of land and 2 Dollars in circulation.

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

(7) One day an evil wind blew, and 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."

(8) A also thought the same way.

(9) Nobody wanted to buy land anymore.

* So, in the end, 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, his Heart is palpitating.
* The net asset of the country = 3 dollars again.

(10) So, who has stolen the 3 dollars from the country? Of course,
before the bubble burst B thought his land was worth 4 dollars.
Actually, right before the collapse, the net asset of the country was
6 dollars on paper. B's net asset is still 2 dollars, his heart is
palpitating.

(11) B had 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; his net asset is 0 dollar. (He lost everything)
* C got no choice but end up with a land worth only 1 dollar

* the net asset of the country = 3 dollars.

End of the story; BUT …

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 -

(1) when a bubble is building up, the debt of individuals to one
another in a country is also building up.
(2) This story of the island is a closed 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.
(3) An over-damped system is assumed when the bubble burst, meaning
the land's value did not go down to below 1 dollar.
(4) When the bubble burst, the fellow with cash is the winner. The
fellows having the land or extending loan to others are the losers.
The asset could shrink or in worst case, they go bankrupt.
(5) If there is another citizen D either holding a dollar or another
piece of land but refrains from taking part in the game, he will
neither win nor lose. But he will see the value of his money or land
goes up and down like a see saw.
(6) When the bubble was in the growing phase, everybody made money.
(7) 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.
(8) As in the case of land, the above phenomenon applies to stocks as
well.
(9) The actual worth of land or stocks depends largely on psychology
(or speculation) .

Thanks, Bhu.

Monday, October 6, 2008

Message sent to twistntales@yahoogroups.com on 6th Oct'08

Hi all,

Greetings of Navratri, Pooja and best wishes on the festive occasion of Dasera. As we herald the festive season, we in twistntales as usual will be celebrating our Saraswati Pooja on Dasera day (Thursday, 9th October) at 11.30 am. All of you are invited to share with us the joy of this festive occasion.

Lots of new books have been happening in the past few weeks (apart from the much awaited “Brisingr”) and we have been lagging behind in our reviews. Sorry about that and we are putting our best efforts in clearing that backlog. We have listed below lots of new titles that have been recently released. Do drop in and have a look.

Another reason to do so quickly over the next 2 week-ends, is because twistntales will be closed for a while due to some planned renovation work during Diwali. We hope to open with a slightly changed new look, with more space for books, by the 1st of Nov. So, please note that twistntales will be closed from the 21st of October to the 31st. We will re-open for business from the 1st of November. So, please do pick up your books in advance and stock up for the holiday season!

And now on to books:

New Arrivals:

Management:

“The Game- Changer: How Every Leader Can Drive Everyday Innovation” by A. G. Lafley and Ram Charan @ Rs.399/-(305 pgs)

A.G. Lafley and his leadership team have integrated innovation into everything Proctor & Gamble does - creating new customers and new markets. Through eye-opening stories, Lafley and Ram Charan show how P & G and companies such as Nokia, Lego and GE have become today’s game-changers. Through their own learning, they will help you achieve higher growth and higher margins, tap into the abundant creativity outside your business, manage risk and integrate innovation into your decision-making.

“A Sense of Urgency” by John P. Kotter @ Rs.495/-(194 pgs)

You know your organization needs to change. You may even know what the change needs to be: a new strategy, a new IT system or reorganization. But somehow, change comes too slowly, or it feels like you’re pushing a boulder up a hill.
What’s missing?
As change guru John Kotter shows in this eye-opening book, what’s missing in most organizations today is a real sense of urgency – a distinctive feeling and gut-level attitude that lead people to constantly shed low-priority activities to move faster and smarter, now.’ Raising urgency’ is the first step in his enormously successful eight-step-framework, first articulated in Leading Change. Moreover, as we transition into a world where change is continuous – not just episodic –Kotter shows how urgency must become a core, sustained capability.

“Stay Hungry, Stay Foolish” by Rashmi Bansal @ Rs. 125/- (325pgs)

The inspiring stories of 25 IIM A graduates who chose to tread a path of their own making and chose the rough road of entrepreneurship. They are diverse in age, in outlook and the industries they made a mark in. But they have one thing in common: they believed in the power of their dreams. Published by the Centre for Innovation Incubation and Entrepreneurship.

Indian Writing:

“Private Life of an Indian Prince” by Mulk Raj Anand @ Rs.395/-(389 pgs)

Maharaj Ashok Kumar of Sham Pur asserts complete independence for his small hill-station rather than join the Indian Union. A febrile romantic, who has inherited more of the vices than the virtues of his ancestors, he is encouraged by his nymphomaniac mistress Ganga Dasi, a powerful and illiterate hill-woman. To feed his mistress’s greed, he exhorts large sums of money from his starving peasantry; this is enough to provoke a revolt in Sham Pur and incur the extreme displeasure of the Indian Government in Delhi.
Anand’s most profound study of human nature, Private Life of an Indian Prince is the story of one man’s compelling love for a woman. It is at the same time a historical novel of unusual power, showing the demise of the princely states with the birth of a free India.

“You Are Here” by Meenakshi Reddy Madhavan @ Rs.199/-(255 pgs)

At twenty-five, life’s innumerable entanglements are getting to Arshi. Her blonde American stepmother is trying too hard, welcoming all guests with a traditional aarti. The gorgeous guy who has Arshi all flushed and dreamy is an Ice Prince who thaws at his own convenience. Her best friend Deeksha is getting married. And her normally unruffled, cocktail-concocting flat mate Topsy is getting testier by the day because her conservative family will never approve of the guy she wants.
A hilarious, sharply observant and surprisingly wise story about dealing with life’s quandaries while keeping your sense of humor intact…and your alcohol consumption just right. So if you’ve ever wondered where the crisis-crossing lines of your life converge, you are here! Maybe.

“The Healing” by Gita Aravamudan @ Rs.295/-(288 pgs)

The Babri Masjid falls on the day Ramanujam, patriarch and freedom fighter, is rushed to hospital after suffering a cardiac arrest. As his wife and children stand vigil by his bedside, a second demolition is about to throw their lives out of gear. Shanti Nivas, their sprawling family property is about to be transformed into modern apartments where all the members of the family will live in different homes, and possibly a different way of life.
Told from the perspective of Ramanujam’s younger daughter Bharati, this evocative novel set in Chennai maps the memories of Shanti Nivas and its residents. Delving deep into the sometimes fractious bonds that make up a family, The Healing is a meshing of stories woven into a gentle narrative.

“My Family and Other Saints” by Kirin Narayan @ Rs.295/-(339 pgs)

In 1969, Kirin Narayan’s older brother Rahoul announced that he was dropping out of school and leaving home to seek spiritual enlightenment with a guru.
Kirin’s sari-wearing American mother Didi enthusiastically embraces ashrams and gurus, adopting her son’s spiritual quest as her own. Her urban Indian father, Narayan, however, coins the term ‘urug’ – guru spelled backward – to mock these seekers.
Young Kirin, bewildered by the departure of the brother she adores, sensing her parents drifting apart, and observing waves of Westerners turning to meditation, Kirin is left to find her own answers. Vivid, sharply farcical and portraying the clash of culture in an Indian-American family with wonderful wit, this is the story of family, growing-up and finding one’s way.

Others:

“Empires of the Indus: The Story of a River” by Alice Albinia @ Rs.550/-(309 pgs) – (History)

In a land where it seldom rains, a river is as precious as gold. Water is potent: it trickles through human dreams, permeates lives, dictates agriculture, religion and warfare…

One of the largest rivers in the world, the Indus rises in the Tibetan mountains, flows west across northern India and south through Pakistan. For millennia it has been worshipped as a god; for centuries used as a tool of imperial expansion; today it is the cement of Pakistan’s fractious union.
Five thousand years ago, a string of sophisticated cities grew and traded on its banks. In the ruins of these elaborate metropolises, Sanskrit-speaking nomads explored the river, extolling its virtues in India’s most ancient text, the Rig-Veda.
Journalist, editor and audacious traveler Alice Albinia follows the river upstream and back in time, taking the reader on a voyage through two thousand miles of geography and more than five millennia of history redolent with contemporary importance.

“Freedom’s Child: Growing Up During Satyagraha” by Chandralekha Mehta @ Rs. 199/- (182 pgs) – (History)

Writing about her growing-up years, author Chandralekha Mehta, Pandit Nehru’s niece, sister to Nayantara Sahgal, gives us a peek into the momentous years of the freedom struggle. This was the age of Satyagraha, when India was awakening to new realities and inching her way towards freedom. The author, and her family, the Nehrus in Allahabad, were prominent participants in the extraordinary events of the time.
Inspiring, personal and filled with intimate stories of birthdays, family vacations, picketing, wearing khadi for weddings and much more, Freedom’s Child is an evocative portrait of the dynamic years of the freedom struggle, suitable for all ages.

“Mike’s Election Guide 2008” by Michael Moore @ Rs.250/-(155 pgs)

Democracy. It’s easily the best system in the world, ever. Which is why so many countries are desperate to have it enforced on them by soldiers!

Michael Moore is back to give you the low-down on the ins and outs of free elections, such as:
Why should I vote? It only encourages them!
Can my vote be bought? (And what’s the starting price?)
And the most pressing question of all – who would Jesus vote for?
If you thought voting was just a load of ballots, this is the no-hold-barred truth about democracy. Enfranchisement has never been so exciting…

“DK Eyewitness Travel: India” @ Rs. 895/- (823 pgs)

It is improbable that a travel guide could live up to its claim of ‘covering everything,’ but DK Eyewitness Travel has come rather close to it. Color coded according to area, covering everything from festivals to wildlife, hotels to trekking routes, this is a beautifully illustrated and diligently organized book. So if you are planning a weekend away, or that long-awaited family vacation, this is a guide that will direct you without taking up too much of your time.

“The Folklore of Discworld” by Terry Pratchett & Jaqueline Simpson @ Rs.905/-(372 pgs)

A child once asked, ‘Why does the Turtle swim?’
A wise man replied, ‘Child, there is no Why. IT…IS…SO.’
And that could be said of many things.

Legends, myths, fairy tales: our world is made up of the stories we told ourselves about where we came from and we got there. It is the same on Discworld, except that some beings which are imaginary on Earth, such as vampires, trolls, witches and possibly, gods – are real, alive and in some cases kicking on the Disc.
In The Folklore of Discworld Terry Pratchett teams up with leading British folklorist Jaqueline Simpson to take an irreverent yet illuminating look at the living myths and folklore that are reflected, celebrated and affectionately libeled in the uniquely imaginative universe of Discworld.

Other new books :

“Attila the Hun: Barbarian Terror and the Fall of the Roman Empire” by Christopher Kelly @ Rs.540/-(230 pgs)
“Kkrishna’s Konfessions” by Smita Jain @ Rs.250/-(369 pgs)
“Femme Fatale: Love, lies and the Unknown Life of Mata Hari” by Pat Shipman @ Rs.395/-(375 pgs)
“Indignation” by Philip Roth @ Rs.775/-(233 pgs)
“Girls of Riyadh” by Rajaa Alsanea @ Rs.295/- (300 pgs)
“The Snake Stone” by Jason Goodwin @ Rs.295/- (308 pgs)
“Star Wars: Street of Shadows” by Michael Reaves @ Rs. 250/- (308 pgs)
“Alternative Cures” by Bill Gottlieb @ Rs. 250/- (796 pgs)
“White Man Falling” by Mike Stocks @ Rs.250/-(302 pgs)
“Silks” by Dick Francis and Felix Francis @ Rs.395/-(368 pgs)
“The Book of Craft” by Shahnaz Arni @ Rs.199/-(103 pgs)
“Outlook Traveller: New York” @ Rs.445/-(343 pgs)
“The Evil Seed” by Joanne Harris @ Rs.355/-(443 pgs)
“Tales of Wit and Wisdom: Riddles, hilarious escapades and facts for young and old alike”
“Savvy Networking: 118 Fast and Effective Tips for Business Success by Andrea R. Nierenberg @ Rs.195/-(109 pgs)
“The Chase” by Clive Cussler @ Rs.250/-(487 pgs)
“Corporitual” by Raj Bhowmick @ Rs.195/-(138 pgs)
“It’s All In Your Head: Change Your Health” by Mark Pettus, MD, FACP @ Rs.345/-(309 pgs)
“The Exile” by Navtej Sarna @ Rs.450/-(251 pgs)
“Sahibs Who Loved India” Compiled and Edited by Khushwant Singh @ Rs.325/-(191 pgs)
“The Snowball: Warren Buffett and the Business of Life” by Alice Schroeder @ Rs.995/-(838 pgs)
“Kissing the Frog; The Magic that Makes Your Money” by The Brothers Middleton @ Rs.295/-(225 pgs)
“Moving out of the Box: Tools for Team Decision Making by Jana M. Kemp @ Rs.255/-(155 pgs)
“India Express: The Future of a New Superpower” by Daniel Lak @ Rs.499/-(295 pgs)
“Traffic: Why We Drive the Way We Do (And What It Says About Us)” by Tom Vanderbilt @ Rs.395/-(286 pgs)
“The Entrepreneur’s Guide to Writing Business Plans and Proposals” by K. Dennis Chambers @ Rs.275/-(168 pgs)
“The Entrepreneur’s Guide to Managing Growth and Handling Crises” @ Rs.275/-(154 pgs)
“Hot, Flat and Crowded: Why The World Needs a Green Revolution – And How We Can Renew Our Global Future” by Thomas L. Friedman @ Rs.595/-(412 pgs)
“Chicken Soup for the Shopper’s Soul: Celebrating Bargains, Boutiques & the Perfect Pair of Shoes” @ Rs.275/-(289 pgs)
“Solving Health and Behavioral Health Problems from Birth through Preschool: A Parent’s Guide” by Roy Benaroch, M.D. @ Rs.245/-(181 pgs)
“Looking Through Glass” by Mukul Kesavan @ Rs.325/- (378 pgs)
“Diary Of A Wimpy Kid: A Novel In Cartoons” by Jeff Kinney @ Rs.195/- (217 pgs)
“Captain Cool – The M S Dhoni story” by Gulu Ezekiel @ Rs. 150, (128 pgs)
“The Bourne Sanction” by Robert Ludlum @ Rs.275/- (484 pgs)
“The Weave of my life – a Dalit woman’s memoirs” by Urmila Pawar tr. from Marathi by Maya Pandit @ Rs.375/- (348 pgs)
“Dosa” @ Rs.70/- and “Jalebi Curls” @ Rs.70/- both Tullika bilingual.
“Diary of a Wimpy Kid” – novel in cartoons by Jeff Kinney @ Rs. 195/- (217 pgs)

Happy Reading and see you at twistntales on Saraswati Puja (Thurs, 9th Oct’08) @ 11.30 am.

From the team at twistntales