eskiador (12469º) 

Este artículo ha sido marcado como molesto Deshacer
eskiador
11:23 el 02 julio 2009

THE MIRACLE OF PPP (part 4)

A-1) Technique of swelling capital

Please take example of "Snowball". An initial small snowball rolls down a slope and becomes a bigger snowball. By the same way, an Investor puts an initial small amount of funds. Bank Trader will make it bigger ot ivest in PPP. The technique of multiplication of the initial investment consist of issuing Bank Guarantee, then discounting it; issuing new Bank Guarantee, the new discountig of this one; this rotations is repeated many times. That´s the method of swelling capital. The multiplication is realized by two steps:

A-1-a) Leasing of bigger amount of funds to invest

With a small amount of initial investment, for example 200´000, the Program Manager can arrange a leasing of a bigger amount, for example 1´000´000 for investment. This is the first swelling of capital. Other swellings are realized as per in the following step.

A-1-b) Utilization of Financial Multiplier and of the repetition rifle os issuing and discountg Bank Guarantee to swell Funds

A-1-b-i)Financial Multiplier

The economic Keynesian Multiplier can be applied to momentary circulation through banking system. That´s the Financial Multiplier. For example, a Commercial Bank receives a cash 100´000 and it must keep 20% in permanent deposit. Then this Commercial Bank can liberate 80% as loan into circulation. The Bank knows that it will receive again cash from circulation, then can liberate 80% as loan. Total amount through repetition of liberating bank notes in circulation is equivalent to initially received cash 100´000 multiplied by 5 (k=1/1-80%) = 5: Financial Multiplier). If we compute the profit with interest rate 6% applied to total credit 500´000 (100´000 x 5), it will be 30´000 a year. If we think only of the initial capital 100´000, this profit is 30%. t´s HIGH YIELD, with normal interest rate, but with a total capital swollen by Financial Multiplier.

500´000 x 6% = 30´000--------------------------------30´000/100´000 =30%

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