Chines Chu and American Joe are best of friends (MFN). Chu started selling cheap goods and Joe loved it. Joe keeps buying stuff from Chu and Chu made sure that no one else is able to sell any thing to Joe. Chu even sold the goods at lose by fixing the exchange rates. So everyone either have to stop making goods or make it in Chu’s backyard. Whatever money Chu got for selling to Joe, Chu kept in Joe’s bank.
Now Joe’s bank had lots of money from Chu’s huge sales and it did not know what to do with it. So Joe’s bank started giving more money to Joe to buy more of Chu’s goods. That was quite agreeable to Chu, for him that means he can sell even more goods!
Joe’s bank had more and more money and it did not know what to with it. So the bank asked Joe to buy houses and cars and on and on by borrowing more and more from bank. Joe has even borrowed more money from the bank then he ever hopes to earn. Since Joe and his neighbors have access to cheap money to buy homes, cars and other stuff prices were sky rocketing. But who cared as long as bank gives them money!
The bank even started to lend money to Joe’s friends and relatives who are known to have problems paying back the loans! Then one fine day Joe’s bank realized that they will never be able to recover lot’s of money they have lent Joe and his friend.
The bank runs to Joe’s government to get some help for this credit sickness. And Joe’s government obliges the bank with few hundred billion dollars of “Cash Injection”.
However, Joe’s bank refuses to lend any more money to Joe and his friends. The reason is obvious, the money that bank had was actually belongs to Chu and Chu can ask for the money any time. Now Chu gets the idea to renovate his own home in China and he expects to spend that few hundred billion dollars lying in Joe’s bank.
While Joe’s government is trying to help Joe’a bank, Joe’s car gets into trouble and it also runs to get some government help too!
Now Joe’s government is endlessly debating about what it should do. Should it save Joe’s home, Joe’s car, Joe’s job or Joe’s food and cloths?
While goings were good, Joe’s government also started some fights with others for Joe’s security and fuel for his cars and home and spent some of the Chu’s money in these fights.
While all this was happening, Chu was laughing all the way to bank! When you have a friend who is a drug paddler you can only expect to land in a rehabilitation center!
Now, possibly Joe realizes the situation he is in and genuinely wants to correct the situation. What he must do? Here are few suggestions from a “genuine” friend.
Joe can get rid of all the credit cards he has collected and keep just one card with 10% of his annual income as credit limit. This card must be use as convenience and not as credit. That way he can start once again living within his means.
Joe can agree to pay 5-10% extra tax which MUST be used to clear all his past dues.
Joe must reduce his energy consumption by 50%. He can give up all, but one car per family and get a car which is fuel efficient (at least 10 km/l). Move to a smaller home to reduce heating, cooling and lighting energy consumption. This will help in two ways. One, his government can stop fighting for the fuel, enhancing it’s internal and external security and better environment due to lower emissions. The lower demand and resultant lower crude prices will reduce or remove terrorist threat as most terrorist activities are mostly funded by petro dollars.
Joe should cut down 20% on his regular food and 50% on junk food. That will reduce the excess fat and weight and waste. This will directly translate into better health and lower expenditure on medicine and health care.
Joe has to take the bitter pill, if he has to get well soon. He has to think, if he still wants to be friends with Chu? If he continues to be friends with a drug paddler, Joe has to be ready for the consequences and get screwed again and again and again.
All the best Joe and over to you.