Debt Instrumented Economy Model

Today our economy is fueled by debt. Economy only growth when debt continuously introduced. This because of fiat currency system set in placed since 1971. Fiat currency is a currency pegged by government ability to service the interest of debt. It does not tie to any kind of commodities such as gold and silver. It make government , or the bank cartel to able to print money at will as long as the public sentiment confident on the government public to service the debt. It enable government for the first time be able to use future resources.

Debt is leverage instrument commonly known today. We buy a house, we leverage by ratio of 90:10. It introduced debt to our account at certain interest rate. It entrusted the debt to us for betting our future capacity to pay it off. It does make sense to most of public since for the first time, one does not required to save up to years of working, then only be able to buy a house at full price. It gratify most of people in instance, making such economy model so favorable on facet. However, the truth behind the debt economy model, it only really benefit the riches. As originally most of the real estate are owned by the riches, it enable the riches to command an future resources simply by selling it. In fact, the property price ever since increase at astronomical level, since suddenly, there are so many affordable buyer, but the available piece of real estate very much limited by its nature. And again, since most of the financial institution is owned by the riches, the riches could simply secure the debt they introduced to the public by making the piece of property they sold at the first place collaterally tie to the term and condition of the debt. It make public working for them forever by selling the property at high prices, with high interest rate.

Introduction of debt make flux of money supply into the market. Since the resources now is multiple by the factor of future available resources. it enable all financial institution to bloated. With so suddenly so much money and resource to be utilized now, which only get to be paid by future generation, gratification surge, private and public consumption raise to a whole new level. Economy was doing good, since now people spending like there is no tomorrow. Debt was pass on from one to another like the value of which ever transaction they are into it will continue raise forever. The truth fact was, people just in the game of switching debt chair hoping there is another fools willing to take the barton at higher price for the speculative instinct. Government and financial institution understood the game. Ever since all economy surge event solely due to more debt was introduced at sentimental value rather than real productivity innovation or technological innovation. So, in order to continue enjoy the gratification now, and knowing it will never required to be paid by now generation, government, politician and financial institution continue stimulate the market with policies encourage public to continuously put themselves into debt. Credit card, car loans, private loads, school loans, pay-it-later scheme become new economy trend. As baby booming age now all in its golden age of productivity and peace time after cold war, it create miracle economy booms like everyone is a genius by themselves.

Until recently, the debt game had come to the brink of total collapse. Unfunded government obligation such as medicare, retirement funds, unperformed private debt, overload government debts, with stagnant of industrial productivities, and negative demographic trends; the risks is imminent . Among all the issue created by the debt, negative demographic trend was the vicious of all. The debt model only will work when young generation has the capacity to service the debt passing down by prior generation. It is like running on the barton. Currently demographic trend shown that at most of the developed country, there are far less younger generation in population compare the the coming retirement of baby booming age generation. The old players exist at no new player to make the replacement will utterly cause the greatest disturbance to the stability of our current economy model. The riches are already exist the game since they introduced the debt game. The 90% of the rest of the public population is the one that is not prepared to such phenomenal catastrophe economy apocalypse . It will potential destroy everything we known of if the house of card collapse abruptly. It will create global social chaos. Unfortunately, government and banks cartel are not taking effective step to allow the economy cool down itself. They continuously feeding for debt to hopefully cure the debt. What do you think about our economy and social structure at our current economy trend? Unless new industrial innovation or some kind miracle global economical collaboration, we are going nowhere.

Correlation Between Technological Innovation with Economy

Steam Engine invented by James Watt during 1781 mark the first economic boom in our modern society. Work done by utilizing steam with heavy mechanical parts proven to be much more effective and powerful in relative to animal and human strength during that time. It make western civilization to overpower the eastern nation despite civilization in the west was much younger by archaeological records. Productivity increase follow by higher quality of goods could be produced at the shorter time and economical way open up unprecedented wealth to the nation who master the art of steam engine. Larger and larger mechanical meant was now accessible such as steam ship which make goods to be transported internationally faster and cheaper.

Second revolution come with discovery of electricity. Electricity make power transferable and storable in a very efficient and safe manner. Battery made of ceramic jar compound was invented to store energy.  Discovery of direct current by Thomas Edison make electricity bulb possible to make night time a day light. Tesla alternative current make possible of cheap power grid to be installed that able to connect power through out a large region despite differ capacity at many terminal point. A single power pant can feed a whole city. It make a city economy even more prosperous. Giant business organization like General Electric was the product of such revolution.

Third revolution come with democratize of horseless carriage of automobile. Henry ford Model-T mark the history milestone of individual mechanical transportation revolution. Automobile induce development of infrastructure such as road and bridges interconnect cities. It open up the whole new level of communication and trade within a region making new kind of economical boom. Cities make adjacent town become new cities. Accessibility make economy competitiveness within region more efficient therefore increase incentive based economical innovation.

Fourth Technological milestone is telecommunication. Telegraph make information spread faster than ever. Intercontinental and geographical limitation for people to communicate become less obvious. Efficient communication and information exchange make possible cross continental idea exchange further enhance the technological breakthrough which give birth to new economy. Alexander Graham Bell, father inventor of telephone taking another step to make communication through individual more powerful. Business now can be conducted through voices and faster making trade more efficient.

Then coming the age of electromagnetism. Radio and satellite was made possible. As ephemeralization dictated, the invisible force of electromagnetic open up a new level of inter connectivity. It was the cradle of internet and world wide web. It made computer and electronic equipment to be valid for mass produced to utilize the availability of electromagnetic force in the sky. It open up a whole new kind of business never fully comprehended by public. A greatest boom in the history since 1989.

As such are some of the brief correlation of economical boom with discovery of new technological breakthrough. Although, many of technological event such uranium revolution (nuclear energy, from Einstein E=MC^2), quantum mechanism etc, were not mentioned here (no doubt many of the above breakthrough was directly or indirectly from such discovery); the important message from this essay here is to emphasize that, all the historical economy boom and burst is direct correlated to technological event, rather than financial aspect. Economy boom when useful technological innovation is introduced. And Economy become plateau or downward when technological invention stagnant.

   

Economy is not about money, it is about people

History of modern economy started from invisible hand concept by Adam Smith during 17 century. Market force was recognized as the major factor that dictate a market growth or otherwise. As economy structure become more complex, invention of trade mechanism was introduced such as the concept of money. Money concept made economy growth faster, as it made trading more convenient , save and efficient. History shown allocation of money will ultimately decide the trend of economy growth. at least at its facet. 

Understanding economy events from recorded history scripts, logs and books, modern economic pundits unanimously concluded, monetary policies is what economy subject all about. Stimulation, spending, debts, export and import are all monetary. 20 Century economic figure such as John Maynard Keynes and Milton Friedman agreed on regulating economy can be done through regulating the monetary supply. From creation of IMF during 1944 at Bretton wood to abolishment of gold standard on 1971 by Nixon; it made monetary system controllable by America (since US dollar is International Nominated currency). Monetary Valves (such as interest rate, discount rate, government bonds) were installed through out financial institution around the world to regulate the monetary supply. However, economist might been chasing the wrong shadow.

From the perspective of fundamental on economy, it should be always and will be about people. Economy term itself is come from greek means household management which mean again people. People is the one who buying and selling. People is what supply demand came from. And in fact, in all of economical revolution from agrarian economy to industrialization to today information boom economy are driven by innovation of people, not money. Money is nothing mere than a medium of convenient exchange. It is a economy apparatus. It does not induce or cause people to spend. Imagine if million dollar is given to every each of us, but if there is no goods nor services to be purchased, the million dollars mean nothing. Money is good incentive to encourage people to do what they did for the economy for the pass 500 years and so, but was never the root of economy itself.

Economy should be subject of psychology. Ultimately a given nation economy condition is very much depend on psychological wealth of its people. If a nation fill good citizens who possess strong psychological strength, oftenly, the nation wealth grow exponentially. Innovation, creativity and perseverance are the result of psychological aspect. Money in fact was never the best motivator. All great man never look for money, they look for a vision. However, vision is never in the equation of modern economy structure. 

Vision is something we envision for better goods for all. Alleviation of  standard of living, social status, social development all involve humane aspect of vision. Monetary wealth incentive had since accidentally increase our technological breakthrough for the pass 500 years, however, it hinder any form of social development. When you see there are nations (developed countries) of citizens who enjoy lifestyle of King could never experienced before 500 years today, while billion of poor nation (under developed countries) country people cant even has proper access to basic needs (such as water, sanitation and food), the common sense should had tell us that the current economy system is ill. The saddest part, social development today even measured by how much money you had or you have. Modern society population are always ignorance against the current real situation especially when they are in comfortable life. Such trend will eventually make human social structure self destructive. 

The good news is today, many of us have a better freedom to express our concern. There are plenty of channel enable use to share our thought appropriately. By collective informative empowerment at the right magnitude and attitude, we all be able to make changes regardless government monetary policies. As nature always come back with vengeance,  the law of nature of economy will always prevail. Economy is about people. Therefore, if we really want to change current economy system, the best way is by starting change ourself and act upon it. 

Real Estate Economy is Local

In today global capitalism economy structure, virtual everything is available to global market 24-7. One side of the world market closing is another side of market opening. American Stock exchange will direct impact the economy sentiment of it eastern nation counter part. Isolation of economy downturn has since become obsolete after berlin wall crushed down on 1989. Today, as long as your portfolio are in financial derivative, you vulnerable to any global economy incident.

However, Real Estate investing, aka property investing is very different from other financial apparatus investing. Even though, there many paper derivative of property investing such as reit or mutual fund or public company; still such portion of investing scheme are not comparable to stock market or commodities derivative exchanges.

First, Real estate as refer to it term itself, is an estate, therefore are local. Real estate value are mainly driven by local market sentiment or it local supply and demand aka population. Local population is what really make a piece of real estate valuable or otherwise. A healthy demography which has a lot of young people who eventually translate into home buyer will drive the market up. While a aging demography where older population selling off homes with no enough young home buyer to absorb the supply will drive the market down.

Second, local political stability is very important to have your land valuable or desirable. Regardless how global market is booming, if your piece of land is situated at country where it is not very desire to live in, your property is worthless. Property only as good as the safety, comfortability, conveniency and shelter quality it could provide. Regardless you bough to live in or rented out, is about livability.

Third, infrastructure and tenancy quality of the neighborhood. A home is nothing but a home. The value is driven by the neighborhood quality it could provide. Buying a home is buying its neighborhood. Imagine regardless how luxury your unit you bought with, but your unit is situated in the middle of slump. It make your property worthless as it is to your vicinity. As equal, if you bought a luxury vacation villa, but there is no access to it, your home is worthless.

Finally, investing real estate are almost restricted by it own government regulation and policies. All government tend to have control over it property supply and demand to secure it own political interests. making your own country home unaffordable to your own people, tend to make your citizen quality bad. A country only as good as its citizen itself. Therefore, all socially stable country, always impose certain restriction on how foreigner can own the local property. Politician understood that, foreigner are just foreigner. They are not staying here, therefore , houses here has no sentimental value to them. Any Short term property market down turn will bring down the whole property market if major percentage of property is owned by foreigner. It is the concept that make stock market vulnerable, because it is easily accessible by global investor.  However, as long most of the property is owned by local healthy population, regardless economy condition, as long people are staying here, they are unlikely to push the panic button to sell off. And local people will keep the property occupied which is to avoid high vacancy that drive a neighborhood into a ghost town. Therefore, a good government property investing policies very important to make it property market vibrant and healthy.

Economy, Poverty, Stability, Competitive, Future

Economy had always been with us since millions years ago. It was not prominent until we shift from gather and hunter lifestyle to agrarian community.  Agriculture made human for the first time be able to be a settler. Community proved to be more effective in expand its demography by settle in one strategic location than continuously roaming around. Expansion of population made subject of economy become the pivotal pillar for our human culture ever since.

In any complex civilization, it consist of population scale which required to be regulated. Human behaviour has to be regulated to ensure stability in a given community. Kings, barons, aristocrats or the great pirate (depicted in Dr. Fuller series) ; were the first group of "class" to acknowledge such concept. Unlike gather and hunter, virtually everyone are equal in term of economy, which shared everything they hunted without surplus. In fact, food and meats was very difficult to be store given the primitive lifestyle we all used to be. Agriculture made storage possible, with corps and corns often yield more than enough to feed a community during good season. The surpluses of harvest instead of given to people (which make them without incentive to bow to the kings or ruler classes) become a useful tools for ruler class to exert control over majority population. By controlling how and when to feed the people, we may have power over people. Regulated population was translated into stability, but at the expenses of systematically subservient condition to major population. That was the trend until industrialization age, when people can no longer within the poverty and revolution took place in many countries.

Incentive was what make human to behave in the way they behave. Jobs, roles, and responsibility, all are traced to the basic necessary gained and needed of each individual. History prove people are much easier to be control by psychological  meant than forces. Therefore, starve and poverty imposition was obsolete. In fact it eventually create back fire to the ruler classes. New ideology such as sociology, democracy and marxism  was the product of poverty imposition. Instead of making people a lower class, ruler class now create a new class of middle class. It make people can possess property for the first time. It give many most of us today something to lose, should we want to change any current circumstances now. Competitive economy policies was created. It make everyone in the context of paper regulations, has the equal chances to move to upper class. Hope is there. Something to lose and hope make human behaviour stable. The system created to ensure people are not desperate, therefore, under control. Good business to ruler class again. Same trend, different scheme at different time.

However, despite rulers class uses the economy, military and even technological meant to continuously exert their influences to majority of people, current economy trend with exponentially technological development has open a whole new opportunities to human kind to rethink what is best for our species regenerative. The brief history of economy as a tools to regulated people seem to be harsh in some way, but given superstitious ,naive, self interested , paranoid instinct human nature (when we lack of proper knowledge and wisdom access) during ancient time (when writing and printing was not even a prevalence social mechanism); utterly freedom without "cruelty" regulated society, perhaps we had long time perish from the history books, let alone discovery of sciences and economical growth that in certain degree uplifted the overall standard of living today. The true question here is, are we as human kind are playing our roles to properly educate ourself, and understand the history (therefore not repeating the same old mistake, and stop using history to critic human event today, make action rather than complain), and let the truth as authorize what is best for our civilization? We are at the cross road in human species history book, either we evolve or we perish... The road will not be easy, as complexity of culture and demographic now was never be comprehend through history pages. Bottom line, this road was never an option. It is necessary by nature.