better world · Real Life Economy

National debts, the real problem of the average person. Part 1 – What is a national debt?

What is a national debt? It is not a secret that life in the west becomes progressively more complicated. People need to work more to earn less, while the cost of living is growing constantly.  The reasons for that can be divided to two. The structure of our current economy and the international relationship that has been created between the world countries. To learn more about the first reason, you can click here and read more about the vicious cycle of your current economy.  A this series of posts I will concentrate in talking about one of the most important factors that is making the economic life of so many people extremely complicated.

The reason for the increasing burden in the daily lives of many people is not as obvious as we would like to think, it is called the national debts. We hear about it all the time and take it as a reality that is bigger than us. We leave it in the domain of the abstract facts that are painting the background of our society, letting it be handle by “The professional people in charge”. The truth is that this subject is one of the most relevant to our lives and need to be addressed as a top priority in our political and social conversation.

Lets start by understanding what it is all about.  External loan (or foreign debt) is the total debt a country owes to foreign creditors. The debtors can be the government, corporations or citizens of that country. The debt includes money owed to private commercial banks, other governments, or international financial institutions such as the International Monetary Fund (IMF) and World Bank. In simple words, it means that the national debt, is money that a government (a public institution) owes to  private institution around the world attached the a certain interest rate. If you are interested to know the status of your county click here. As you can notice, if you’re living in a western country the national debt of your government is between 90% – 6000% of the GDP. In simple words it means that the country do not have the capacity to pay back the loan. In many cases, not even pay back the interest % on the loan.

What is a national debt

Why does it matter? First, it means this debt will never be paid and that no real solution exists to solve it. Secondly, It means that more the time will pass more problematic the situation will be. And the third point (maybe the most relevant to this post), is that real prosperity for those country is not possible. It is important to understand that these points and numbers are known to all and that it is not a new situation we put ourselves into. This debt problem exists for many decades. It is true that the last economical crash in the last 20 years made the balance inflate. But it is known a understood by all the world leaders and economist for many decades. Now, please take the time to think how many changes of government you had in you country in the last 20 years. All of them understood the problem, part of them not only ignored it but worsen the situation, letting it be the problem of the future generation and governing party.

The national debt of many western countries has increase dramatically in the last 15 years. The speed of loan taken by countries is a direct warning signal to us all. This loans that are taken are a clear sign of lack of responsibility of local government, as they are well aware that they do not have a real plan to solve the current debts they are in.  This lack of responsibility need to stop! simple solution exist and should be implicated. At the moment, just keep in mind that if you’re searching to understand why life has become so economically complicated for the average person in the western society, the national debt of your country is probably one if not the most important factor for that.

Share you thought with me in comment and express your opinion. Awareness and open conversation are the key for the creation of a better future.

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better world · Real Life Economy

The vicious cycle of our new economy – Part 3. Single Income model

The economic structure ruling the western world have a very simple set of principles. Promising the survival of the system and its rulers. In many ways, the only way the elite could promise the continuation of such an unequal mechanism, is to maintain a certain level of ignorance in the masses. For the sake of truly understand why the rich get richer while the rest stay poor, I believe it is time to open our eyes to some simple and logical principals. As I’m limiting myself in the length and complexity of each posts, the subject will spread on a few posts

The foundations of our current economic system require the existence of 3 different models, functioning simultaneity and supporting each other. “The Single income model”, “The multiple income model” and “The socio-economic separative model”. At this post we will concentrate in the first one.

topic-image-social-change

The Single income model can be defined in the following manner – A model in which an individual is supporting his existence by the creation of only 1 source of income while be committed to a multiple channel of spending. As you could figure out yourself, the majority of the population is surviving based on this model.

This kind of living is unstable and fragile. To start with, the income of the individual is the only mean of survival. While a massive imbalance exists between the channels of income/expenses. In many cases, the commitment of an individual (by contracts) to rents, bills and services put a high minimal price tag on the monthly required income of the person in questions.  In case a mathematical equilibrium exist between the income to expenses (Income= expenses). The need to maintain a specific job, will be required for the sake of not defaulting the obligations. In such a model, the worker become oblige to continue his employment regardless of the terms he will get.

single income model

As you can see, I did not add many trivial costs. As free time hobbies, alcohol, cigarette, kids, vacations unexpected expenses and so on. The fragility and inflexibility of this model is clear. Logically, to maintain such a system for a long period in a safe manner will require the income to constantly be higher than the total expenses. Moreover, it is crucial that the employment itself will be secure, for all the period of the individual life. A reality of employment that do not exists in our generation.

Looking on the market of our days, the capacity of an individual to keep his job for a long period is limited. The general expenses are constantly rising due to inflation and our growing need for consumerism. In the reality, in such a model the capacity to save money is very smallIn many cases, a person will require a life time to save enough money for being considered rich. The idea of taking a loan is not a solution. The only thing that it does, is adding a momentary income for the sake of paying it back with interest. Which is another expenses in the balance.

This model promise survival, as one will manage to live in many cases comfortably as long as he cooperates with the system. From the other side, it is exactly this long-term cooperation that is needed for the sake of promising the survival of the elite and maintaining their enrichment.

Does it make sense to you? Can you identify your self-working based on this model?

This post is part of series, describing in simple world the economy of our days.

Share with me your thoughts. Awareness and open conversation are the keys for the creation of a better future.