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Debt

CREAM; Cash Ruins Everything Around Me.

 

It’s great to see Nick Leeson, a banker that was almost singlehandedly responsible for the fall of Barings Investment Bank while he was living in Singapore in the mid-1990s, talk about “More control, […] and regulation”. Anyway whether you agree with big banking or not he explains that they need more quality regulators to sort out what the financial traders are cooking up in terms of financial instruments. These financial instruments work within the bounds (or gray areas) of the laws and regulations whilst earning the traders large profits. I guess if the financial sector would want to regain the confidence of the general public; financial managers should be held publicly accountable for the losses they have caused the general public and through transparency the public should be informed about what kind of constructions should be avoided in the future.

 


Blog>Current Events
Blog>Opinion

Crisis Infographics

The following info graphics serve to explain the different aspects of the current global economic crisis in understandable language. Basically governments are over-borrowing to pay for the different facets of government; war, bank-bailouts, economic bailout packages, along with the regular costs of running countries.

When the debt to GDP (ratio to debt) of a country gets too high they have to continue to finance the interest on the government debt, leading to a deficit in national income. GDP being the ‘gross domestic product’, the amount of income per capita (citizen) that a country generates. Eventually the debt gets too high and this means that the country can either default or print more money (causing hyper-inflation).

The system is based on secrecy, because if it was clear how much money major countries are in debt then the financial / investment markets would become unstable, giving the governments unfavorable credit ratings, causing investors to move to other markets and generally causing economic decline. An integrated facet of the current school of economic thought is that the economy must continually be growing in order to pay off the ever growing national debt. If the economy would reach a no growth or decline situation than the interest on national debt could no longer be covered by national income (unless taxes were raised). However a continually growing economy is an irrational thought because the earth and her resources are finite, eventually leading to a no growth situation (which is predictable and agreeable). In this leveled off or no growth situation national debt becomes impossible to pay off. The current economic paradigm is therefore impossible to sustain.

The American 2007 (+/-) homeowner crisis

Japan’s 2012 Debt Problem Visualized

Food Speculation

Less to do directly with the crisis but more so about the nature of international business on a large scale. Our current paradigm and system allow for economic exploitation at the cost of regular citizens.