I didn’t understand the US Debt Crisis very well, so looked around a bit, this is an analogy I cooked up (with a little help from mostly wsj.com, huffingtonpost.com, etc.):
Pinkiiii Sharma had been borrowing money to keep her beauty parlour afloat for many years.
On the surface, her beauty parlour business is rocking; behind the scenes, she’s been taking small and big loans from everyone, to keep the business going, over the years.
Who’s ‘everyone’, and why are they giving her money?
It’s mostly her smaller but richer neighbours and relatives; she’s been selling shares in her beauty parlour. Since she has a steady stream of customers, and is very well-known, with ambitious expansion plans, the neighbours keep investing.
So why does she need so much money to run one beauty parlour?
Pinkiiii has problems, big problems. She supports her brother’s family in Iraq (her brother has a business there, it’s bleeding money); her sons Doodmindar and Koolmindar have successful auto parts businesses in Crawl Bug, but never contribute to the family; also, she pays her staff triple the market salary rate.
What’s the future like?
The neighbours have been making noises; at the RWA picnic, they grumbled if Pinkiiii couldn’t get her act together, they would stop payments, take her to court. And…?
Frankly, Pinky’s good for another two years. Her neighbours will keep supporting her, though the interest rate will go up. But the day they stop financing her, the Sharma’s will crash badly – they might have to move out of New Friends’ Colony to Govindpuri.
The investors will take a big hit too, some of them might end up worse than the Sharmas.
What’s Pinkiii’s CA saying?
Pinkiiiji’s CA says no problem madamji, cut Mediclaim for your staff and stop contributing to the local mandir ka charity which feeds poor people.
What’s the best Pinkiiii can do, really?
It’s common sense, ji. Get her brother back, give him a job in the parlour; ask her sons to start contributing to the home; and cut staff salaries for three years (those who stay on will get big bonuses after she’s out of the red). Pinkiiii needs to stop her expensive foreign tours too.