Our Economy...and its troubles...

Let's begin with our question: why are the prices rising?

We all are suffering because of the rising costs, aren't we? We will see how and why in three parts.

PART I:

We already know some simple things. We take loans from the banks. The banks lend us money and we repay the loans after some time. We use the money we borrowed, to make more money from our business, or we buy assets. We pay the loan installments from the profits we earn, or from our salaries.

Let’s see a simple case, the bank prints money and suppose you borrow a loan of $100 at 5% interest. You earn more than $5 profit and repay $105 back to the bank. You keep the remaining profit for yourself, seems good enough right? You and the bank, both earn profits. Let's take a closer look.

• The bank creates the $100 at a cost of less than 20 cents, and lends it to our very happy businessman at a 5% interest.

• You use talent and skills to make more money out of it. Where does the extra $10 come from? - The bank itself, given to some other guy who happens to be your customer. Because money can only be printed by the bank. The $5 was made at a cost about 5 cents.

• So let's do the math on bank's profit. Its total cost was 20 + 5 = 25 cents. The bank gains the $100 back, plus the interest $10. This means, it makes $105 out of 25 cents of its investment. Our list of problems is just beginning here.

Now let's consider some facts on a National scale.

Fact no. 1: The bank prints money and keeps lending it, forever. As a result, the people will need even more money to repay the loans, forever. This means the banks will keep printing even more money, forever.

The value of our currency depends on the amount of goods and services it can buy. These goods and services are created and provided by us (people of the country), through our businesses and employments.

Fact no. 2: If the bank creates money at a higher rate, than the rate of production of goods by the country (the GDP growth), there will be less goods for more money. Implies the cost of goods increases. A good example is - almost every country. It's the GDP to debt ratio that matters in the end. Not the GDP.

Fact no. 3: And if it creates money at a lower rate than the rate of growth in GDP, there will be more goods for less money. Implies the cost of goods decreases. For example, currently, temporarily, only due to the earthquakes and tsunami, and due to enormous national debt - Japan. Else this never happens. Trust me, you don't want to work the way Japanese people do these days. You can google some terms like Japanese work environment and see for yourself.

So our part 1 is the cycle of loan and interest through which the money keeps getting printed.

PART II:

Who asks the bank to print money? - Our governments do. Why? - Because the poor people in our countries are asking for help. Sounds fair enough, right? And so the mighty money gets printed. How does it get circulated among the people it was printed for? This is a question every single one of us must ask.

I'll make it easier for me and use the example of India now, but the case is almost the same everywhere. I can say this because people are suffering everywhere, either due to more work, or due to rising taxes. You can easily relate it to your countries.

1. Reserve Bank of India (RBI) lends the freshly printed notes to other banks of the country at 5-6% interest. The banks then lend the money to the people and business which "they trust" will repay the loans, at 10-12% interest. The profit these banks earn is how banks pay the salaries of their employees and grow themselves. Good business, right?, Wrong.

2. Only a small percentage of this money goes to the poor people among us, because the banks can't "trust them enough" to be able to repay the loans. So, despite the money being created for the poor, it doesn't really get to them this way.

In case value of currency drops, the prices rise, and the bank would say, "It's not our fault ... we printed the money for poor people and gave it to the other banks for circulating it. They gave it to the rich people to expand their businesses. Not our fault." I'll fill the dots later. This gets more stupid, trust me.

This is where our governments come in, like knights in shining armors. Heavy taxes are enforced on the rich people. Lesser taxes and new shiny schemes are implemented for the poor ones. Is this it? NO.
The profit earned by the RBI is now borrowed by the government at the same or lower interest. And how does the government repay these loans? – Taxes!!

1. Govt. invests the money in creating jobs for us (education and health is about jobs, about us being able to work), which would make the country more productive (rising GDP). More goods produced means more the value of currency, so same amount of money collected as taxes should be able to pay the debt since its value is now increased.

2. This doesn't help much - the rich people have bigger businesses. So they make more profits than the poor ones, and they make these profits faster, thanks to their commitment to repay their loans, only so they could get more. This way, their businesses help them gather more money, and stay rich. The profit they earn of course comes from the pockets of poor people, and so the problem of poverty remains.

3. If the productivity doesn't grow enough, the debt is paid by increasing the taxes.
   Govt. never clears any debt, we do - either by working more, or by paying more. Plus I don't understand why our leaders boast so much about their developments and spending, if they are only lending us that money. Not like it was free lunch for us. We will be working much harder than our leaders to repay those loans - with compounding interests - as taxes. We are economically enslaved owing to these debts.

The question then is, shouldn't we pay taxes for their own development? Or should we pay them to clear the loans on money that was just printed out of thin air, for pennies?

This is basically how everyone, everywhere, is being duped.

If the price of currency falls, it's always the people who get blamed for not being productive enough. The bank says, "It's not our fault. You didn't create much more enormous amount of goods the way we printed enormous amount of notes. We printed the money for poor people and gave it to..." It's that stupid.

The rich people just keep getting richer. They get loans easily, and they can use the loopholes in the system to avoid taxes and/or they can use corruption. They aren't rich already without a good reason, they are smart enough. We gotta give them that. No wonder we see a poor guy making his way into one of the rich as a hero. It's just not easy with such a system.

Part III:

Sometimes, RBI basically takes money from the banks if there is too much being circulated, and gives it back with a 5 – 6% interest at a later time. It is done in order to increase the value of the currency, but much worse happens due to this. During this time, many of the businesses don’t get the loans they depend on because the banks don’t have enough money.

There are more goods for less money in the country. And nobody wants to sell their goods for a lower price. Now most businesses can’t pay their employees the salaries they had promised, they go bankrupt and many lose their jobs. It causes a shortage of money in the country. Those who can’t pay the loans due to unemployment lose their properties to the banks.

So it doesn’t matter if the money is being put into the system or being taken away from it, people suffer either way.
This article was for the basic understanding of the problems we are currently facing with our economic and government system. There is so much more about these problems and their solutions all over steemit. Steem blockchain itself is a part of the solution. Some most important solutions that steemit offers is:

i) We choose who gets rich here, and who gets the power. We vote for them, as witnesses and we upvote their blogs here, or videos on dtube, and even comments. Great enough?

ii) All of the transactions are permanently stored on the blockchain to be viewed by anyone, anytime, anywhere. A transparency our corrupt leaders just can't afford.

Let’s hope our lives get easier in future.

Take care.