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Posted by on Aug 25, 2010 in Economy, Podcasts, TG Roundup, USA, మోహనమురళీ గానలహరి (MMGL)

Rubber Band Economy

What is a rubber-band economy? Imagine the rubber material to be hard cash (currency in circulation) – notes, coins etc outside the central banks and the vaults of depositary institutions.

Stretching it would mean that you have expanded credit. More stretch means more credit. More and more stretch – to the point that it breaks, that is the financial crisis in 2008!  A run on the banks is nothing but the rush to cash, like rubber-band retreating to its material state. Then they grabbed the broken ends quickly, tied them with a knot. Will it work?

This is a good analogy. If you care to know what is happening in the US economy in relatively simpler language – listen to this conversation between me and Sumanth.