Conclusion
This economical theory tries to explain that modern capitalistic economy is not able to exist without debt or constant monetary easing.
It is not possible because of category of profit, which if not spend in full is draining resources from real economy. Personal loans, through which people are trying to supplement their missing buying power are not answer to the problem as with repayments even more buying power is leaving the system(because of existence of interest).
Businesses are viewing the situation as problem of high costs and are responding with cost cutting, outsourcing and trying to marginalize the power of unions.
Consumers are feeling their lack of financial resources and demanding higher taxes and more transfers to complement their inadequate salaries.
This leads to bitter confrontations between left and right, Democrats and Republicans. However, both parties are in a way correct in their complaints but misunderstanding of principles of debt creation can lead to wrong policy decisions.
As a result, states are pursuing different strategies aimed at solving that dilemma: they are debtors, money printers or predators.
While incurring more debt and printing more money are each sustainable strategies (even with their own flows), they could be practiced indefinitely only if our psyche would not stop us at some point in time.
Predatory strategy of running trade surpluses on the other hand is unsustainable strategy, aiming at gaining the upper hand over other nations and leads to conflicts which will have to be reconciled at some point.
Based on model knowledge, there are certain business approaches that are causing stronger pressure to debt growth, mainly faster productivity growth than wages growth. This practice is responsible for majority of pressures causing additional need for debt. The wage increases should be always at the level of productivity increases.
The theory is also offering an alternative economic system to unsustainable debt growth or monetary easing. The solution seems to be introduction of fully digitalized monetary system, which would enable through subsidies and transfers get rid of today´s problems of outsourcing, unemployment stemming from increases of productivity and pension deficiencies. The problem of inflation remains within our characters but the new system would provide much better management methods and macroeconomic tools to combat remaining issues.
Thank you for your attention.
Tomas Kurian
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