The bubble that burst

Here is nice read I found somewhere on the net describing the current economic scenario. Read it even if you dont know crap about markets :

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 ownes 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 ownes a piece of land that is worth 3 dollars. But since he owes 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. Continue reading “The bubble that burst”

SBI launches third party transfer

State Bank of India has finally launched a much awaited feature for its online banking customers : third party transfer. Earlier users could transfer funds only among SBI group’s branches using OnlineSbi but now they’ll be able to transfer funds to any bank : ICICI , Bank of Baroda , PNB .. (you name it ) .. Now you can transfer funds to any branch of any bank that is participating in RBI’s NEFT network (some 32000 branches on the last count).

SBI will use RBI’s NEFT service for interbank transfers. There is no minimum amount limit for NEFT. The amount will be credited to the beneficiary within 3 hours in normal course of business. And if you want to transfer funds above INR 1 Lakh, you may use RTGS. With RTGS, the funds will be settled instantaniously .. As of now there is no service charge applicable for this service. Here’s some info on the service taken from SBI’s Online Banking FAQs:

  1. What is Inter Bank Transfer? Inter Bank Transfer is a special service that allows you to transfer funds electronically to accounts in other banks in India through:
    • NEFT – The acronym “NEFT” stands for National Electronic Funds Transfer. Funds are transferred to the credit account with the other participating Bank using RBI’s NEFT service. RBI acts as the service provider and transfers the credit to the other bank’s account.
    • RTGS -The acronym “RTGS” stands for Real Time Gross Settlement. The RTGS system facilitates transfer of funds from accounts in one bank to another on a “real time” and on “gross settlement” basis. The RTGS system is the fastest possible inter bank money transfer facility available through secure banking channels in India. Continue reading “SBI launches third party transfer”