Thursday, February 9, 2017

What is with all this DEBT?

  Now it is time to start thinking about taxes. Remember them? Then look at the news and wonder.
  I keep reading about all this debt and wonder. Student debt is approx. $1.3 trillion. National gross debt is approx. $20 trillion.
  Now whether you understand math or not a ‘trillion’ is (1,000,000,000,000; one million million; 1012; SI prefix: tera-). And a million is a thousand times one thousand. A thousand is equal to 10 hundreds.
  You can get your calculator out and wear the battery out but that is a lot of cold hard cash.
  Who came up with this process?
  How is some poor kid out of high school going to pay for all that tuition, even with government assistance that is just another loan? How many years will a bright young mind have to be burdened with paying back (with interest) loans on a minimal salary? Beginners trying to start a life blockaded with overwhelming debt.
  Not an economic major, I remember when the plastic card arrived at my college apartment. I didn’t ask for it but the bank said I could use this instead of the amount in my account to pay for whatever I wanted. They said I could pay them back later and in real small print declared the massive interest on payment.
  It was like FREE CASH. Then another bank and another sent me these pieces of plastic and my lottery had come in. After a few minimum payments did I realize the balance wasn’t shrinking?
  A few decades later I dug my way out of all the FREE money but I wondered why everyone didn’t fall to the temptation in this banking trap. Then the recession hit and I realized everyone did.
  The promise of more money than you earn is very tempting. To possess things you can’t afford is a drug and America took the bait.
  I am certainly not knowledgeable enough to place blame on our cultural delusions. The banks and credit companies are only being capitalist making money on interest with the threat of late payments to reprocessing of property.
  I know as well as the next smuck out there that if money is being given away I’ll stand in line, but there is no FREE lunch. Even investors (those are the folks with the bucks in their wallets) want to have a return on investment. Solid agreements of “I want to borrow this amount and will pay it back by this time” don’t always work. People have other monetary problems or may lose employment or unforeseen crisis that disturbs the normal pattern of payments. Financial organizations appear to understand knowing the longer the loan the more interest. Even refinancing will extend the loan at a higher interest rate.
  That is my common take on the problem, but how did we get to these numbers? I remember when $100 was a lot of dough. A couple of $100 could buy a car, paid in cash on delivery. Having $1,000 in the bank account showed you saved more than you spent so the bank sent you a credit card. A loan for a house seemed like the most massive debt a family could ever have to suffer and accepted with the commitment to spend years paying the bank back for their shelter.
  My folks who lived through the depression knew how to budget but they never passed that knowledge on to me. Always trying to provide better for their kids than they had, they forgot the banks were plying them away from austerity.
  So there were millionaires. There was even a show on TV about a old fat guy going around handing out checks for one million dollars to complete strangers and everyone watch the show wanting in. It was a big deal and those were the rich and famous.
  Then came the billionaires. Folks that had so much money (real or fake) to choke on the millionaires and brush them aside appeared on the scene. Companies stopped counting in thousands or millions but went up to billions. It was like Monopoly money that didn’t mean anything to the common slob working for saw bucks. There was no comprehension of what a jet plane cost or an aircraft carrier or a restoration of the Washington monument or a government official’s office. No one reports that our country is going to war and it will cost $$$$.
  Most folks aren’t bean counters and just try to get by but wonder what a ‘trillion’ is. How can this country have so much debt? Who do we own money to? How long will it take to pay it back? Will we ever pay it back? Will that affect my taxes?
  On the local economy the community reports deficits in revenue so they can’t pick up the leaves or the trash or cut the services to fill the potholes and then hire another administrator to decide how to balance the books. Sorry I’m too busy getting the kids to school and paying the sitter and taking the dog to the vet and paying for the gym fees that I never go to, so go ahead and juggle the numbers and the newspaper will report the disparities that we will not read.
  Now with our bleeding hearts we turn to governmental officials to relieve this overwhelming debt and they talk about committees that will investigate the options and form plausible actions while the kids are strained on paying they way.
  Do we really want to get out of debt or just keep going down the road to despair? What will we do when the banker calls in our loan and we cannot pay?
What is 'Gross National Product - GNP'
Gross national product (GNP) is an estimate of total value of all the final products and services produced in a given period by the means of production owned by a country's residents. GNP is commonly calculated by taking the sum of personal consumption expenditures, private domestic investment, government expenditure, net exports, and any income earned by residents from overseas investments, minus income earned within the domestic economy by foreign residents. Net exports represent the difference between what a country exports minus any imports of goods and services.
GNP is related to another important economic measure called gross domestic product (GDP), which takes into account all output produced within a country's borders regardless of who owns the means of production. GNP starts with GDP, adds residents' investment income from overseas investments, and subtracts foreign residents' investment income earned within a country.
GNP measures the total monetary value of the total output produced by a country's residents. Therefore, any output produced by foreign residents within the country's borders must be excluded in calculations of GNP, while any output produced by the country's residents outside of its borders must be counted. GNP does not include intermediary goods and services to avoid double counting since they are already incorporated in the value of final products and services.
GNP and GDP are very closely related concepts, and the main differences between them comes from the fact that there may be companies owned by foreign residents that produce goods in the country, and companies owned by domestic residents that produce products for the rest of the world and revert earned income to domestic residents. For example, there are a number of foreign companies that produce products and services in the United States and transfer any income earned to their foreign residents. Likewise, many U.S. corporations produce goods and services outside of the U.S. borders and earn profits for U.S. residents. If income earned by domestic corporations outside of the United States exceeds income earned within the United States by corporations owned by foreign residents, the U.S. GNP is higher than its GDP.
While GDP is the most widely followed measure of a country's economic activity, GNP is still worth looking at because large differences between GNP and GDP may indicate that a country is getting more engaged in international trade, production or financial operations. Finally, real GNP may prove to be a more useful measure, since it factors out any changes in national income due to inflation. The real GNP takes nominal GNP measured in current prices and adjusts for any changes in price level for goods and services included in the calculation of GNP.

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