Capitalistic Renaissance 6: The origin of the debt problem
We need to rethink the notion of jobs, credit, interest and finance for a modern capitalistic economy if we are to solve the debt problem. Our exploration into the origin of this problem will help us balance our perception of jobs, credit, interest and finance with an awareness of equity.
This balance of perception is essential, helping us understand why the financial concepts of unlimited credit and interest are the cause of debt as a function of a limited job. We feel the financial pressure of debt. It’s time for us to understand what’s going on.
The discipline of finance uses mathematical methods to measure various relationships between credit, interest and debt. Financial engineering develops debt instruments such as mortgages, bonds, credit cards and derivatives for consumers, private businesses, public companies and governments to use.
Banks are the primary deliverers of these deadly debt instruments to their customers. These instruments are flawed in their design because they hide the silent unbalanced consequence of debt to an unsuspecting public.
Credit causes financial heart attacks when the repayment of the interest on a credit card or loan first causes the debt to rise faster in a fixed structure than the consumer’s income.
A financial heart cannot effectively pump the lifeblood of cash-flow through arteries whose inner surfaces are littered with the debris of interest. When the arteries get clogged up because of unbalanced (financial) living, it’s only a matter of time before a (financial) heart attack happens.
To further understand the origin of debt, we need to understand the role of the public company as the vehicle of capitalism. The public company uses raw materials to produce equity for itself and its shareholders. The operative words of capitalism are the public corporation and equity.
Debt is really not part of the structure of true capitalism. After looking at the fundamentals of the generic public corporation, we will understand why debt is not part of capitalism.