Money Makes Money
The Chinese proverb “Money makes money” has a certain truth to it. If you have money, it is much easier to make more money. And you have probably seen this joke somewhere.
If you owe $1,000, you are a piker,
If you owe $100,000, you are a businessman,
If you owe $1,000,000 you are a tycoon
If you owe $1 billion, you are a magnate
If you own $100 billion, you are the government
Again, this is quite funny AND has some truth to it. The more money you have, the more people are willing to lend to you. Where am I going with this? In Yahoo finance, it was reported that even companies are lending money in the billions to either consumers or other companies. Take a look at this.
Last year 82% of Sony’s $1.1 billion in pretax earnings came from its financial unit, Sony Financial. General Electric gets 34% of its pretax earnings from financial services. Boeing carries $8 billion of customer leases and interest-bearing receivables on its books. Paccar, maker of tractor-trailer trucks, has $9 billion.
What does all this mean? This means a wide range of global companies makes lots of money from financial activities. In fact, some companies like Sony makes more from such financial activities than producing movies or consumer electronics. It also means these companies are exposed to the debt crisis should it wider further.
Could all this implode the economy?
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