Friday 6 December 2013

Living on Debt - AKA - Stealing from the Future

Living on Debt - AKA - Stealing from the Future

The World economy is living on borrowed time as it is built on a mountain of debt and no country will get to escape. Debt is an insidious thing, because it promises so much and delivers so little, let me explain by asking you a question. Is it better to owe $1000 or to have $1000? Most people would say it would be better to have $1000 and I would agree. But many people borrow money, many of those people have good reasons to borrow. Some don't and in a healthy banking system they would be denied credit, the ability to borrow money.

But thats not the world economy today, today nearly everyone who has access to credit can get credit. Do you have a credit card? Everyone who does has a direct line of borrowed money, no questions asked in most cases. You can get into debt without even trying and have alot of fun doing it and the banking system and the Government will support and help you into debt at every stage. Do you have an education? Did you have to borrow money for that? If you did you'll be paying that off longer than the education lasted, whether it helped you or not. In the United States you cannot get rid of a student loan even if you declare bankrupt, you can escape all other creditors but not that one. It makes you wonder.

But before I continue let me say that borrowing money can be necessary and indeed a good thing. It all depends on why the money is borrowed, a house can be a good reason or to buy a business. But most borrowing should for something that in the end will improve your economic situation, if it does not do that then it's probably not right to borrow the money.

Until now I have talked about personal debt and that is important, but the really scary debt is Government debt because it affects us all even though non of us have borrowed the money. Our Governments, and nearly every Government is in debt, borrows money for good and bad reasons. Firstly the good, the Government doesn't get it's revenue as regularly as it needs to spend money so to cover the lag it borrows money. That is a legitimate way of financing the Governments shortfall until the revenue arrives. Secondly the bad, much, maybe most of the money borrowed is in reality a bribe. A bribe to keep the population ignorant of how little the Government can in reality do.

Most Governments cannot provide for Defence, Welfare, Health, Education and the 101 other activities that Governments must provide for to the degree that most people want, so it borrows money and pretends that it can afford this lifestyle. The Government uses this debt to bribe the people, sometimes you receive it indirectly when the Government supports something you think more money should be spent on, health or education for example. The money doesn't arrive in your pocket but they have bribed you non the less by giving you what you want. Sometimes it a much more direct bribe, Welfare for the poor, subsidies for the middle class and economic subsidies for the wealthy. The Government gives you money directly, paying for working mothers to stay home with their new born baby, paying for education costs, something that people should be doing themselves.

It isn't a bribe just because the Government spends money, it's not a bribe just because you support it, it's not a bribe because you obtain a direct payment. It becomes a bribe when the Government borrows the money because it doesn't have it and pays for things you desire. Not things you need but things you desire. It may be that what you and the Government want to spend money on is a good thing but unless it provides an economic benefit in the future it's a bribe. If it provides an economic benefit right now, it's a bribe.

It's not my debt and it's not your personal debt so why should either of us be worried about Government debt?

Because the only people who can pay our Governments debt is us, the taxpayer. The Government does have other ways of making money, but the best way is through tax, either direct tax such as income tax or indirect tax such as sales or company tax. All of these things force up the price of living meaning they will have a direct affect on everyone who isn't very wealthy. If you happen to be poor and you rely on Welfare to survive, how well will you do when it's is cut or when they start missing payments?

Debt needs to be paid but instead we have an economic system built on more and more debt. How do you get out of debt when you continue to borrow money? The short answer is you don't. Unless our Governments start to rein in debt we will all suffer the consequences, whether you live in a nation that borrows money or a nation that lends money. The worst part about debt is that the money is borrowed from our children and grandchildren. It is they who will get to pay the price for this excessive lifestyle, both personal and public and just to rub salt into the wound they will get very little benefit from it.

Upon Hope Blog - A Traditional Conservative Future    

1 comment:

  1. Your last paragraph is very true. As a young person I get very angry at the presumptuousness of politicians who think it's okay to go on a debt-binge, and the people that support them. The debt-financed luxuries they enjoy are ultimately going to come out of my taxes. But we should be thankful that Australia's public debt is nowhere near the astronomical levels of some foreign governments like the USA and many European countries.