I have been hooked about discussing every nook and cranny relating to business and economy for a while now.
The political situation in the USA is heating up right now because the presidential election is around the corner. In general, nations will have an endless political discussion and argument when there are elections taking place. People always throw around the word debts and deficits when arguing. And the seemingly negative impact on the country. That statement is somewhat true, but the effect will only be seen when it causes an economic crisis.
Before progressing, the definition of debt should be clear. Debt is the result of excess government spending during that year. So, Germany's overplus expenditure last year will not be included as a debt in this year's financial report. Experts formulated new terms to resolve this problem. The solution is adding every unpaid debt that a country has during its reign to the deficit section. The key is an unsettled debt will be a deficit.
Still, both debt and deficit are a controversial matter. Even economists and experts alike debate whether debt should be considered crucial for nation development or will burden the next generation after our time. As we all know, economic is an intricate field of study. There is no correct answer, but there are tons of wrong answers. If we want the best for our lives, we must be able to respond to every situation with the most rational and highly probable reactions.
Rise and Set Like the Sun
Known as the nation of the rising sun, Japan was a powerhouse in the early twentieth century. But its domination was put to an end when this country lost the second world war. After that, Japan tried to reconstruct its nation while still adhering to its true philosophy: cultural influence. A cultural state most likely has a more challenging approach regarding diplomacy than a liberal one, but Japan is an exception to that statement. Japan thrives without dominant diplomatic forces.
Post-war Japan’s economy was a train wreck. There is nothing left to salvage for the next generation. So, Japan received a loan to help recover its crumbling economy. Because of efficient decisions, Japan’s many sectors rose. Technology, education, and comer are the field that Japan excels at handling. Japan is predicted to be highly probable in paying its debt in the future even though its GDP to debt ratio is way above the other.
GDP to debt ratio is the benchmark to let experts know whether the economy is progressing toward the right way or not. To illustrate, a developing nation with 10$ million dollars debt has a bigger problem than a developed nation with 100$ million dollars bill to pay. Many countries face difficulty paying their debt when its GDP to debt ratio is high, but Japan is not one of the examples. So, this concept summarizes that some nations can’t be trusted to receive debt because they most likely won’t pay it back.
“If you owe your bank a hundred pounds, you have a problem. But if you owe a million, it has.”
— John Maynard Keynes
The Nation of Heroes Is Also Struggling
On the contrary, Greece was on the winning side of the second world war. Shortly after, Greece experienced its final civil war, which is won by the democratic side backed by allied forces. Greece's economy grew year after year, and this nation became a dominant economic force in Europe. Hence, many nations that do not own many natural outputs try to mimic Greece because this nation could be in the same league with countries that thrive on abundant machinations and resources.
In 2008, disaster struck the world. A global recession devastated every nation, making the economy impossible to improve. Many sectors also felt the impacts. Greece was damaged both in the political and economic sectors. Additionally, Greece took a loan to grow its nation just before the event. Greece tried to cut its spending and raise the taxes to pay back the debt, but it wasn’t enough. Greece couldn’t return the loan, and its credibility plummeted like the economy.
The unpaid debts kept increasing, which resulted in deficits, and less government spending affected the whole nation. There was less infrastructure to build, and people didn’t have an incentive to work because of the decreasing values of money. Unemployment skyrocketed, and many people can’t fulfill their daily needs. Protests sparked everywhere, and most of them were demanding the same thing: More employment. The situation was dire because of debt.
Loan or No loan?
This debt and deficit topic is a discussion best suited for experts. Individuals should only try to help by choosing the right candidate to take a seat in the government. People that attempted to understand them will most likely delve into one perspective of political view. This belief may stir up problems that are not there in the first place, resulting in unwanted conflicts in a nation. When there are problems, governments will try to finish them first before making any further progress.
“Always listen to experts. They'll tell you what can't be done, and why. Then do it.”
— Robert A. Heinlein
If a nation believes that it will progress in the future, the country must not be deterred from taking a loan. Taking a loan is the same as investing from an ordinary person's perspective. It will be a gamble if he does not know what he is entering into, but it isn't a bet if he understands the prospect and knows that it is not that dangerous. Therefore, there are no correct answers as to why nations should or should not take a loan. Trying to make sure that a state is not overwhelmed by debt is good, but this idea may also slow down the process of development if done hysterically.
To conclude, the idea of taking a loan is not for ordinary people to discuss. It is an intricate matter that needs years of study to at least comprehend because the effect can result in a nation-wide protest for the respective country. If people want to argue about debt, they should understand the economy so they won't make a fatal mistake.
Should People Care or Not?
Yes, people should care about national debts and deficits, but most people can’t influence it directly. For advice, work hard to get a stable job and experience to not panic about the future. The future is uncertain, and the example is in front of us. Experts predicted that commerce and economy would keep growing in 2020, but the novel coronavirus denied all of that. It is already foreseen that a lot of government will try to take loans to normalize their economy, but the effect depends on how they handle it.