Business Related queries

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5:12 AM

@JohnRennie Sir what is meant by, "Minimum Government maximum governance? " Albeit this is written in the context of the Union Budget.

John Rennie

@RajorshiKoyal Don't know. I would have to see it in context.

Modi explains what he means by this phrase here

He basically means making the government work more efficiently i.e. use the minimum number of government employees to do the maximum amount of work.

Rajorshi Koyal

5:40 AM

Ok.

That is sort of hilarious😂

8 hours later…

Rajorshi Koyal

2:06 PM

In short, the government doesn't just go to the next local branch of a bank and asks for a loan. Instead, it asks "the public" for a loan, resp. for many "mini-loans" which can be bought by individual investors. I don't know their exact minimum in India, but in Europe, they can be as low as 1000 €. These loans (also called "government bonds") can be due in a short time (as noted above), others can be due after many tens of years. But that's no problem - they can be bought and sold at the secondary market (at exchanges).

Can you explain the concert of mini loans and liquidity to the economy?

If yes please explain

Also what are government bonds basically

It would be great if @JohnRennie can explain this.

John Rennie

3:07 PM

@RajorshiKoyal ping me when you're around and we can discuss it.

Rajorshi Koyal

3:37 PM

I am free

John Rennie

@RajorshiKoyal hi :-)

Rajorshi Koyal

Yup

John Rennie

We talked about government bonds yesterday didn't we?

Rajorshi Koyal

We did but not in this context as far as I remember.

John Rennie

So you know that bonds are a way for governments to borrow money.

Rajorshi Koyal

3:41 PM

Yes I do

John Rennie

And we talked about the issue of selling bonds to retail investors who only have small amounts of money.

Rajorshi Koyal

Yes aboslutely

retail investors

John Rennie

I think that's what the "mini loans" are i.e. selling small amounts of bonds to retail insestors.

Rajorshi Koyal

Why would people lend money to the government?

John Rennie

Because it's safe. Governments don't go bust so you are guaranteed to get your money back plus interest.

Rajorshi Koyal

3:45 PM

What is this called..in general fixed deposit?

John Rennie

I don't know what it's called. Sorry :-(

Rajorshi Koyal

What is liquidity to the economy?

John Rennie

Suppose when times were good and I had a lot of money I bought a lot of the government bonds.

Rajorshi Koyal

What has this to do with "liquidity"?

John Rennie

But then covid happened and I lost my job.

So I had less money to spend.

Now, I have a load of government bonds, but you can't spend government bonds. I can't use them to buy food or petrol for my car.

Rajorshi Koyal

3:52 PM

I cannot really follow you..

I can follow

ok so...

What next?

John Rennie

So in theory I have lots of money because I have thousands of dollars worth of government bonds.

But I can't spend those bonds, so actually I have no money to spend.

This is the liquidity problem.

"Liquid" assets are assets that can be easily converted to cash, then I can use the cash to buy things. Money in the bank is liquid because you can go to th bank any tim and draw it out.

But government bonds are not liquid.

Rajorshi Koyal

Got you...but then why do I even need them if they are money but not liquid?

John Rennie

When times are good government bonds are a very safe way of keeping your money. If you put your money in the bank the bank could go bust and all your money would be lost.

But that doesn't happen with government bonds.

Rajorshi Koyal

4:13 PM

Reinvigorating Human Capital

What does this mean?

John Rennie

@RajorshiKoyal it doesn't really mean anything.

Rajorshi Koyal

Can you explain slightly?

John Rennie

"Human Capital" is the just the people who make up the work force.

Rajorshi Koyal