Tuesday, May 3, 2016

Economics 101 – Debt

First and foremost, it's very important to differentiate between public debt and external/foreign debt. Public debt compares the cumulative total of all government borrowings less repayments that are denominated in a country's home currency. Public debt should not be confused with external debt.

External / Foreign debt is debt that is owed to foreigners. In most contexts, external or foreign debt means debt that is owed by the government to foreigners, although in a globalized world, it can in some contexts mean debt that is owed by national entities (governments, national based companies, and private individuals) to foreigners.

This means that most public debt in a country is still owed to its citizens. One of the things this means is that when we pay back the debt, the money will still be inside our economy, where hopefully it will stay and recirculate.

However, when we pay back foreign debt, it essentially leaves the economy, and transfers its purchasing power to another economy. It's interesting to note that Japan, even with its huge public debt has relatively little external debt.

This isn't the case for the UK, that owes hundreds of billions to Germany and Spain – while its banks are on the hook to Ireland, Italy and Portugal. Iceland and the Netherlands aren't looking too good either.

In a similar situation but to a lesser extent are France, Spain or the USA, the later with the largest amount held by China and Japan.

Clearly, there appear to be too much unproductive debt and it would be nice if governments began to behave like normal citizens, I mean the one that spend no more than what they earn!

Monday, May 2, 2016

Economics 101 – Budget Deficit

It's generally admitted that a 3% deficit is acceptable and this rather dogmatic view is based on a hypothetical 3% inflation rate. Instead, the goal should be a balanced budget, period.

Better yet, if the country is indebted, its goal should be to create a surplus that would be used as a reserve for repaying the debt.

This said, if we look at the list illustrating this blog, the countries that understand responsible accounting (Norway, Germany, Switzerland) or are oil rich (Qatar) are few and don't surprise anyone.

While the USA isn't doing too badly, it sure could do better and balance its budget, or better yet, create a surplus to begin repaying its humongous debt.

There's no excuse for government to lose money (creating deficit) and in the case of France, it would be totally possible to make huge cuts in its unproductive bureaucracy or overly generous social benefit system.

Sunday, May 1, 2016

Economics 101 – Taxation

In order to run its own affairs, a country must collect from its citizens.

Taxes and other revenues help do this. This income includes personal and corporate income taxes, value added taxes, excise taxes, and tariffs.

There are also other revenues that include social contributions - such as payments for retirement and health care costs; also counted are grants, plus the net revenues from public enterprises. In theory, a country must tax just enough to run its government and have no deficit. Sure, a surplus would be nice, but please, don't hold your breath!

If you need a good social safety net, it may cost you a bundle as you chose to live in Scandinavia, Finland or France. All take about more than half of what you make. On average the European Union is tad less greedy at about 45%.

The sweet spot is probably found in Australia, Japan and Switzerland that only takes around one-third of the total income while some “good deals” are found from Mexico to Hong-Kong.

Even though its politicians are clamoring for lower taxes yet, the United States still stands below the 20% threshold, along with the Bahamas and Russia, so the good news is that we, Americans, have some taxing room to balance our budget and repay our humongous debt!

This said, I have no appetite to move to India or Iran on account of taxation alone!

Saturday, April 30, 2016

Economics 101 – Per Capita GDP

Per capita GDP is a measure of the total output of a country that takes the gross domestic product (GDP) and divides it by its population.

More so than the GDP that mixes nations of all sizes, this measure is a better measure of a country's true wealth.

While it's not to be confused with any measure of personal or household income, it can still serve as good marker as to where life is easier than in other places and therefore a pretty good ...

This measure could serve as an indicator as to where country in which to live, even though, considerations like cost of living (Switzerland), taxation (Norway), quality of life (Isle of Man) or climate and culture (Qatar) would seriously need to be taken into consideration.

Of course, the most frugal among us can always choose to move to Somalia!

Friday, April 29, 2016

Economics 101 - GDP

I don't know about you, but when I try to get some economic information that is clear, understandable and conclusive, I never can.

Everything is either contradictory or so convoluted that I feel that trying to decipher what I find is a total waste of my time. Since we're currently in the midst of a chaotic primary presidential campaign and get bombarded with all kinds of outlandish claims, it's hard to find one's bearing and relate to what is thrown at us.

With this in mind, I decided to conduct some research and so, each of the upcoming days, I'll take one aspect of the world economy and related issues, and attempt to discuss them in this blog.

We'll begin today with GDP. China and the European Community are now leading the dance with GDPs of $19 trillion each, while the USA, once the dominant economic power, follows at $18T.

When we add to these three behemoths, Inda and Japan, we get to about $66 trillion, more than half of the total world GDP, $113.7 trillion for 2015.

This measure of GDP based on purchasing power parity, is the gross domestic product converted to international dollars using purchasing power parity rates. This means that international dollar has the same purchasing power over GDP as the U.S. dollar has in the United States...

Thursday, April 28, 2016

God-Fearing?

I never cease to be amazed by this expression that means that a “God-Fearing” person is deeply religious, which would suggest that if you don't fear God you can't really be viewed as a true believer, and further down this line that God must be a pretty awful character to worship if fear is the main motivation to do so.

Sure, this is just an expression that finds its origin in 1835, I'm told, but it remains nonetheless very misleading while I'm certain it's more logically grounded than most would suspect.

I can't deny that the God I was told about when I was young was more an enforcer than a lover and this is why I choose to get as far as I could from him as possible.

So for me, “God-Fearing” still rings true and literal while fear isn't a measure I want around me!

Wednesday, April 27, 2016

Facebook scam

I generally pride myself on being quite wise and very unlikely to fall for scams and particularly gross ones. So yesterday, in browsing Facebook I saw this Starbucks offer promising a $50 gift certificate at their coffee shops.

Greed blinded me and I clicked, followed the instruction, giving my personal info and compromising around of my “Facebook friends”.

Did I learn my lesson quickly? You bet! Will I do it again? I certainly hope not! As my wife then said to me: “If it's too good to be true, it probably is...”