The Art of saving money. Where does it leads to ?

Once in a study day, we all have been in our study tables, with tons of books around, and thought that it can turn our future fate. Obviously, it becomes our fate, but it is always not in the same way as we believe. It’s ironic to say, but this is the cruel world and allows the limited ones. Phrases like “Dream comes to those who dream of” and further thousands of similar expressions are just motivational until you prove them wrong, not wrong if others show it. Had it been only accurate, then you had dreamed of being, I had, but they’re just a handful of persons on the Forbes wealthiest list out of the staggering seven billion people on earth. To be rich is a combination of hard work, passion, exposures, skills, perceptions, and mostly a fortune. What it takes to feel “rich” today, or even merely comfortable, is mostly a matter of personal knowledge and feeling of what makes you rich. To be rich is a dreadful pathway, but to be more productive and the richest is not that dreadful one. 

The term ‘Economic bubble’ plays a vital role in this scenario. It is trading in an asset at a price or price range that strongly exceeds the asset’s intrinsic value, which is ambiguous. It is a result of a situation in which asset prices appear to be based on implausible or inconsistent views about the future and are now widely regarded as a recurrent feature of modern economic history. 342.25 sq.feet(1 ana) of land, which used to cost around $5000(five lakhs) in Kathmandu a few years back now, costs an eye-watering around $20000(twenty lakhs) which is. This drastic price rise has occurred due to people’s strong belief of many people that this place is a hub for their every wants and demands, which is an inconsistent view. This problem has given rise to the following terminology,, and a question too called cheap money and the answer to how the rich become more prosperous. Someone deposits some amount in his account at the bank and earn interest, bank loans the same to investors and charge a loan interest from them. This is how the banking sector is believed to work and works in a similar pattern but differently. Linking above scenario, those who took loan of $50000 purchasing land, throughout 5 yrs, at flat rate 13% pays the bank,$82500 over 5 years but at the end, he’ll be earning $200000 after the sale at the end with the net income of $117,500. The depositors of the bank will be making an 8% interest on $50000, which is around $20000.The rich get richer, economic bubble performs, and original money holders, left with a handful of cash. The economic bubble has been viewed in the housing market of all major cities around the globe, higher education bubble in the United States is claiming that excessive investment in higher education could have negative repercussions in the broader economy. According to the claim – generally associated with finance, college tuition payments are rising, the supply of college graduates in many fields of study is exceeding the demand for their skills, which increases unemployment and underemployment. This in turn increases the burden of student loans on taxpayers, and recent drastic increase in the price of bitcoins, the research of which brought me to write on a different topic instead.

However, the economic bubble doesn’t always bring tons of fortune. Still, it has resulted in the two major downfalls of the global economy, The Great Depression that took place mostly during the 1930s, varied across nations and lasted until 1941. The Great Recession of 2007-08, which resulted in the scarcity of valuable assets in the market economy and the collapse of the financial sector in the world economy, and we Nepalese remember as the period where 1 US Dollar was equivalent to around 60 NRP, and our purchasing power had increased. The bank may, therefore, attempt to keep an eye on asset price appreciation and take measures to modify high levels of speculative activity in financial assets by increasing the cost of borrowing money i.e. interest rate. This is how an economic bubble looks after the bust.

During Boom                                                                      During Bust

The main reason for the rich getting even getting richer is some of us people ourselves, the middle-class ones, and our mindset. Cheap money is in term because of our acts, where we fear investing in investment properties, stock market, bonds, debentures, and real estate. There’re risks, but not every time it’s not the same case, there’re profitable investments too, but having a fear of threats, our liquid assets are in the bank accounts for earning penny profits. Those go to funding the more prominent companies with strong financials. To acquire or subsidize companies, which deprives those startups to get any funding from the bank, and this results in selling out their ideas to more prominent companies where they earn a small amount and some lucky even get to collect a royalty. Still, companies make a lot and a lot of profit from these. Facebook buying, a startup Instagram for $1 billion, is known to most of us but has no idea that Instagram was a startup. This ongoing trend has been long since long, profitable is carried out while the non-profitable are bought in fear that they don’t harm their companies and just shut up. Thus, in many western countries, people have stopped to let cash only in their bank accounts, and startups have been gathering the same workplace to figure out their sources of loan.
However, in Nepal, there are no situations in the banking sector, as they pay reasonable interest rates on deposits since the economy is in the boom cycle similar to that of 1960-70 in the western countries. Once there is enough growth, and the economy begins to stabilize and move a very little towards the bust cycle, there’s no doubt we’ll be on the same phase as the European these days. Believing that the art of saving money definitely leads to nothing for the middle class since the interest earned counterbalance inflation and leads to the rich being more prosperous and more.

– UTSAV LUITEL(livinglikenomads)