Mandated - Too important to fail

Recently, I visited Scotland and the first thing that I noticed (apart from the breathtaking view, that is) was the fact that currency notes were guaranteed by the Royal Bank of Scotland. It was extremely surprising given the fact that most banks that guarantee the payments of the amounts denominated are central banks. And central banks do not operate as commercial or investment banks (which RBS does).

And the fact that RBS was indeed rescued by the British taxpayer during the last crisis, gives more weight to my suspicion that it is mandated by the government to be too important to fail. A vast majority of the notes in circulation in Scotland are RBS guaranteed and hence the government can just not afford it collapsing.

Some thing even more surprising was the fact that England was one of the first countries to have a central bank and almost all of world's central banks are based on its model. Central banks operate in accordance to the government's fiscal policy and since they do not have any financial arms, they are immune to shocks from market crashes. This typically gives more credibility to a country's economic system. So if tomorrow the markets crash down, and RBS looses so much money that people lose trust in RBS's promise to pay the bearer an amount equal to the denominated pound value, a run on the bank occurs and all of the country's financial system stops working. To me that is a very scary thought. The only was the government can stop a run on the bank is such a case, is by mandating that RBS is too big and important to fail. So whatever happens, government will have to provide assets to back up all the banks that issue notes on its behalf.

As I later realised, "Clydesdale Bank" also issues currency notes. Now what is not clear to me is if all banks in Scotland are mandated to issue notes on their own or not. Though entirely possible,  this does not strike me as particularly prudent. Essentially the government then risks having the credit rating of the worst credit rating of the bank issuing notes.

It is possible that the government has only allowed banks to issue notes in return of some highly under valued collateral so that it can withstand the shocks, but I am not sure about it. Anyone who can enlighten me on that? Also I would really like to know how such a sytem evolved in Scotland when England had a central bank system. Any guesses?

Source of motivation

Watched "Slum dog Millionaire" last night. and have not stopped thinking about it.
A wonderful movie - none of the actors overshadowed a 10/10 script. And the best part about the movie - the guy never forgets his childhood love, and tries to get her time and again: despite all odds. All this while there was not once that they professed love towards each other. Like the instance when he had to fight his elder brother to try to elope with the girl. And the girl willing to sacrifice for the sake of the boy.

The story got me thinking, what motivated the protagonist to do all that he did. For that matter, what drives a person to attempt world defying feats? what makes a man try things that none else would imagine doing? Assuming everyone to be rational, a person will venture into such a thing only if he/she finds the potential rewards to be greater than the value of the effort required. The only way this could happen with a consistent valuation is that he/she sees a potential that others don't. It requires a vision to be able to spot an opportunity when its not evident. Also it needs courage to try out new things, may be the fact that they trust themselves when they do so makes them successful. Ancient Chinese script, Tao Te Ching says - Love gives the ability to be brave. In this context, its the love for the winning that gives them the ability to attempt things unprecedented.

Lets look at various motivational techniques people use:
For a few people, its easier to stay focused if they have something to look for, like Clearing IIT-JEE, Clearing CAT, designing a novel pump, building a world class organization.

But if a persons' aspirations, dreams are limited to falling into the arms of some other person: I don't see how that can drive him/her. Probably I am ignorant of the ways love works.


As I am pretty sure, you must have observed: The journey towards the goal is often more fun filled than the destination itself. That is what drove the founders of now world leading companies - continual improvement. Once establishing the organisation was complete, they could have gone to cool off their heels. But they did not - they toiled hard, to improve, even if by just a tiny bit. That's what made them great.

Its the determination and perseverance that gave them a reason to work. And when a quantifiable goal is cut-out, motivation comes naturally.

But is the challenging work, the only motivating factor for us? Apparently no. As documented so well in numerous Bollywood scripts and romantic novels, "LOVE" triumphs all when it comes to motivating the protagonists. Apart from that, (I risk being politically incorrect when I write this, but what the hell !), money that one makes while working is also a huge (de)motivating influence.
Probably its to do with personal priorities. Different people are driven by different things and its the valuation of the work-love-money mix against one's own standards is what determines the motivation level.

PS - While writing the "Different people are driven by different things..", I could not help recalling the lovely Obelix from the Asterix series who cared for nothing more than a sumptuous meal of wild boars. Well now You know why I named this blog "Foodological".