‎​It is the month of August, on the shores of the Black Sea... It is raining, and the little town looks totally deserted.

It is tough times, everybody is in debt, and everybody lives on credit.

Suddenly, a rich tourist comes to town. He enters the only hotel, lays a 100 Euro note on the reception counter, and goes to inspect the rooms upstairs in order to choose one.

The hotel proprietor takes the 100 Euro note and runs to pay his debt to the butcher. T

The butcher takes the 100 Euro note, and runs to pay his debt to the pig grower.

The pig grower takes the 100 Euro note, and runs to pay his debt to the supplier of his feed and fuel.

The supplier of feed and fuel takes the 100 Euro note and runs to pay his debt to the town's prostitute that in these hard times, gave her "services" on credit.

The hooker runs to the hotel, and pays off her debt with the 100 Euro note to the hotel proprietor to pay for the rooms that she rented when she brought her clients there.

The hotel proprietor then lays the 100 Euro note back on the counter so that the rich tourist will not suspect anything.

At that moment, the tourist comes down after inspecting the rooms, and takes his 100 Euro note, after saying that he did not like any of the rooms, and leaves town.

No one earned anything. However, the whole town is now without debt, and looks to the future with a lot of optimism. 

And that, ladies and gentlemen, is how the United States is doing business today

JUG SURAIYA’s COLUMN in TOI – Debt do us part (http://blogs.timesofindia.indiatimes.com/jugglebandhi/entry/debt-do-us-part):

When i was a child in Calcutta, i got four annas a day as pocket money. Enough to buy a packet of toffees or a bar of chocolate. One day, being greedier than usual, i wanted both the toffees and the chocolate, which involved an outlay of eight annas. I asked Richhabhai, the owner of the corner store, if i could pay him the extra four annas the next day. Richhabhai, a shrewd Kutchi businessman, knew that my mother's credit, if not mine, was good. So he gave me four annas worth of credit. As a precaution against possible default, however, he telephoned my mother and told her about the transaction. My mother immediately sent a domestic with four annas to Richhabhai to clear the debt. Then she gave me a talking to about taking udhaar. Udhaar, living on money one does not have, was a bad habit - like not brushing one's teeth regularly - which if unchecked would lead to ruin. From then on i've been fearful of udhaar and its consequences.

The downgrading of America's credit rating - which threatens to send the economy of the entire world into yet another tailspin - has shown that my fears were justified. Shorn of jargon, what the US has been doing is living on udhaar. Like a greedy child whose stomach is too big for its pocket, it has been consuming today and deferring payment to a tomorrow that never comes. The US long ago stopped making material goods, like cars and clothes and TV sets. It bought all these things from other countries, like China. Instead of material goods, the US produced and exported ideas, which it believed were more valuable than physical products. And the most potent and profitable idea - some would call it a mirage - the US produced was the idea of the almighty dollar, the currency in which all the world's trade is conducted.

While countries like China kept the US well supplied with goods, the US in return supplied the world with more and more udhaar in the form of US treasury bonds. China alone reportedly has more than one trillion dollars worth. What can China, or any other country, buy with these dollar bonds? Only more dollars, which the US will print. In other words, more udhaar for America.

How does America's udhaar affect you and me? The sensex, along with markets worldwide, has fallen; if you are an investor you will have lost money. Even if you're not invested in the stock market, you will be affected. Economic uncertainties make individuals and governments take funds out of the market and put them into supposedly safe investments like gold. This means there is less money available for people who want to make goods - like clothes and cars and TV sets, or cement and steel, or fertilisers and pesticides - so the prices of all such goods will go up, leading to even more inflation than is currently besetting us. In worst-case scenarios, companies making such goods may become unprofitable and be forced out of business, causing unemployment. This in turn will conjure up that evil, nine-letter bogey that economists love to scare us with: recession.

It's not just the US that's been living on udhaar, building up debt until it has reached unpayable-back proportions. In the eurozone, countries like Greece have been doing much the same. The euro, which was supposed to be a counterbalance to the dollar in the global economy, is as undermined as Uncle Sam's greenback.

The western world in general has for too long been living beyond its means, and now everyone has to pay the price for its profligacy. Indian economists assure us that India won't be hit too hard because, unlike China, our economy is not predominantly export-driven but is powered by domestic demand. This, however, will not insulate us from a global tightening of purse strings which will affect investments in our industry and agriculture. There will be fewer things - roti, kapda, makaan - and they will cost more.

We'll all have to foot the bill run up at a globalised Richhabhai's store by an irresponsible brat called the USA - the Udhaar State of America.