Stay calm when they go bankrupt.

Stay calm when they go bankrupt.

by tonytran2015 (Melbourne, Australia).

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(Blog No.20x).

#bankrupt,

1. Bankruptcy is just a rude awakening:

The bankruptcy of a person or an economic entity is declared when after he or that entity cannot meet his or its commercial or financial obligations. After a bankruptcy has been declared, all moneys owing to all creditors will be paid with priorities determined by bankruptcy rules.

The declaration of BANKRUPTCY DESTROYS NEITHER WEALTH, NOR EARNING GROWTH of that person or economic entity. The declaration only means that the person or the economic entity can no longer control the flow of money as he or the entity is not able to meet the obligations imposed on him or the entity. The control is now legally placed in someone’s else hands.

The periodic loss (earning deficit) caused by unreasonable assumptions, uncontrolled spending, loss of income sources, the extravagant payments to directors and managers have slowly and certainly devoured and eroded the growth and sustainability of the economic entity. A declaration of bankruptcy is only a legal report that the madness within that economic entity must be halted.

A bankruptcy declaration is just similar to the medical detection of an illness in a patient, the detection has not caused the illness, the latter has been caused by other causes which may include his genetic condition, his environment, his living style, etc …

2. People often blame their hard time on the bankruptcy of someone else.

Gullible people always rely on the statements of boasting con-men that they can engage in unreasonable, unsustainable dealing with the con-men: Lending money to con-men for a high earning, trading with con-men for some astronomical profits.

Once a con-man has been declared bankrupt, all those gullible people dealing with him will lose on money on loan to him or on in-executable commercial contracts. The gullible often blame the bankruptcy declaration as the cause of their loss, they never blame themselves for having their blind spot on the extravagant claims by the con-men.

3. Tax money should not be spent rescuing imprudent businesses.

Sometimes, the government of the country may feel compelled to rescue those gullible, imprudent people who had given their hard earned money to sophisticated con-men.

Such rescue is unfair to other prudent tax payers as they had stayed clear of the con-men and had not enjoyed the good time provided by the con-men.

Governments should better spend money making laws forcing widespread practice of escrow accounts [1] in commercial contracts to prevent the forcing of imprudent, one-sided contracts on contract partners in weaker position. This method of using escrow accounts would be quite effective in confining the contagion of bankruptcy.

When any local government goes bankrupt, the next higher level (state and federal) of governments should not rescue it. Any such rescue would be unfair to other local governments and would only encourage future irresponsible behaviors. The constituents of that failed government should bear the consequences and learn their hard lesson of not spending beyond their revenues.

4. Staying calm when acquaintance go bankrupt.

You can remain calm when your acquaintance go bankrupt if you strictly follow the following rules:

a/- Be self-reliant both in your lifestyle and financially.

b/- Know how to live within your means: Acquire not what you want but only what you really need. Spend your money on your prioritized necessities: Buying your mean of transportation to widen your area of earning, buying household essentials to lower your cost of living, buying your residence to reduce your cost of accommodation.

c/- Don’t have blind spots on the sustainability of the lifestyles of people and the operation of companies around you (which include banks and pension funds).

d/- Don’t deal with, don’t rely on any individual who had been bankrupt.

e/- Don’t leave your hard earned money in any kind of banks without the “guarantee by government of the nation”. Building societies, merchant banks, investment banks, hedge funds are mostly without such guarantee.

A responsible government should also educate customers of its “saving banks” that they would only get back a set percentage of their deposits in the event that their relevant “saving bank” goes bankrupt. This action would hurt the short term interests of “saving banks” but would make a knowledgeable base of depositors, who are also tax payers, which are resilient to economic disasters.

Building societies have a lot of real estates mortgaged to them, but they are not allowed to take those real estates unless the borrowers are in default in repayments.

f/- All your commercial and financial contracts with all individuals, economic entities must be risk proof against any of them going bankrupt. Many good but imprudent businesses had been destroyed for not taking this precaution (Large amounts of payments in contracts must be kept ready in escrow accounts [1] waiting to be released upon delivery of goods or satisfactory completion of work).

f/- Pay also attention on the sustainability of the economy of the nation. The nation may also go bankrupt and some nations had actually lose some of its territories or utilities (communication companies, power companies, water companies) to its creditors. Be prepared for that eventuality when you have your politicians spending national treasures like drunken sailors. If your nation go bankrupt, blame only yourself and your countrymen for not having been active enough politically and for not having thrown out those politicians.

References:

[1]. https://www.escrow.com/what-is-escrow

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