Few people think of tax as a noble act. For a country to function it needs revenue to pay its workers and improve upon itself. Some countries can produce from the ground while others are waiting on your behalf to pull it off. Some countries cannot wait, so they go straight to debt in order to run everything and then tax will hopefully cover the bills. Somewhere in between you get to meet inflation where value varies where you stand in your community. By the way pay your tax when due otherwise you risk problems you never imaging.
Debt and inflation are often discussed as they are two separates issue for the economy. If you look not too far from each other they play the game to reinforce the connection. Just think of them for a few second, they reshape the value of money depending where you are in the world. You feel it by cost of living, how you pay for things today and how people plan for the future.
DEBT AND THE FUTURE
Let's say you take a loan for $100k for a small business with great demand. Your borrowings are a reflection on your future earnings to pay back that loan. Governments acts the same way but with bigger demand, thinking they will make the difference via tax. Most likely it did not happen, reverting to debt they may never pay. This is a continuous problem that can easily escalate to a bigger pool of debt.
Debt just by itself is a good value proposition when there is plan in place to put it to work for the population. The list is long to mention where borrowing can help to stabilize a situation, building for education, investing in a promising infrastructure that pay for everything later in life. Now the problem surges the minute the debt grows faster and it takes longer for the economy is weak and it has become unsustainable.
This is where inflation comes into question. Even if the entrepreneur we mention earlier cannot keeps up with inflation, he has to borrow more to service his debt. He has to raise price to keep up. He has to produce less to control loss. It is purely a chain reaction when you mix debt with inflation. Definitely more debts are needed to move forward.
While moderate inflation can exist when the economy is healthy, it means we need more funds and it is a result of loss purchasing power over time. This is why many countries try to curb inflation to a certain number to add confidence to the market.
PICK YOUR BATTLE
Do you want more inflation or more debt? To start this scenario, you have to deal with the debt. A country debt is a burden on everyone mostly the working class. Getting rid of a country debt is like gymnastic where you have to maintain a balance between wages, taxes, economic output, revenue, etc... Inflation can help reduce the debt in a way it does not cause a depression.
You cannot tax the wealthy a way to punish them. You cannot allow inflation to fly out the opening door. Otherwise it will be a burden to service your debt and you know where drama will start. There should be a starting point. The problem you can see, the financier, the person in charge will always play the game like he is doing something.
Again more debt equals to more larger interest cost, that will bring more borrowing needs. The result should be fix the problem, stop the leak. Another year, same problem, more debt. Stopping the leak is like an intervention to stabilize the debt by spending restraint, change the tax code, bring more economic growth while you stick to control inflation and change habit with debt consumption. You are definitely thinking over your head with this one.
So far so good we are living in a economy where debts are everywhere. Inflation is crazier in some place than others. If nothing happen today, they are robbing the future generation blind. We did not get there by accident. this is the real problem, the elephant in the room. This is why you see recession sometimes comes and the lesser pays the price always.
Having hard asset can make a difference how you understand the economy. Again debt can buy time. When the debt has become a major problem, someone will absorb it. That someone may not even born. Let's hope you and I plan for sustainable prosperity in a world where only a few get to benefit. It is never too late to find ground. One at a time we can build and change community by community by adhering to better economic value. Maybe we need to start spending less, focus on hard asset. Behave like it is tougher than ever, maybe that way, we all can make a difference.