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The Debt Trap: The Truth

For over 150 years, the United States has set an example to the industrialized world of how to manage spending efficiently and to avoid high rates of income tax when borrowing beyond their means. The debt trap is one of the most difficult problems to solve, and we are yet to see how we can undo it. For example, in 1958, the most powerful country in the world was the Soviet Union, and communism was born. By 1979, almost 200 countries, along with the United States had become members of the Common Market, the Universal Basic Payee Program (UBGPP), the World Bank’s World Debt/Credit Facility Statistical Program, Development Assistance Program and the Third Periodic Paper Wealth Program.

It began with the development of the World Trade Organization (WTO) as the first comprehensive, multilateral organization, an act beyond the control of any nation-state for its citizens. Believing that a free market and strict market institutions could solve its problems, it issued the first (and likely final) statement on the debt trap: ‘Debt – consisted of credit card debts and liabilities. It was based on the premise that ‘private collection agencies dominate the lives of people, and that, apart from the fact that the debts are inadmissible as a source of income for the collectors, it is part of the problem of their continued existence.’

Today, without question, the debt/credit trap is becoming a disaster of high proportions:

1) Countries that fail in making structural reforms to credit are viewed as, at best, having a rather negative effect. Countries that continue to incur high levels of debt and maintain poor creditworthiness do not reflect negatively on the international image of their countries and the international monetary systems they are subjected to.

2) Countries that keep up with their accounting and maintain proper record keeping practices are viewed by many as deserving of high marks from international opinion surveys and other indicators.

3) Countries whose payment patterns reflect excessive, inefficient or otherwise problematic fiscal activity are also viewed negatively.

4) At any rate, countries without fiscal discipline face high rates of debt – especially countries that fail to live within their means and fail to implement effective fiscal policies.

Debt trap: The reality about debtor’s dilemma

The debt trap and debtor’s dilemma are two distinct concepts, but they should not to be confused with:

‘ Money – they often differ radically from country to country.
‘ State (or corporate) spending – governments are basically unelected (i.e. they do not have any elected representatives) financial institutions.
‘ Individual (or citizen) behavior – governments are held accountable to an elite of wealthy individuals and corporations who generally manage to accumulate huge amounts of wealth and then use the wealth to their advantage.
‘ Taxation – governments are accountable to a set of politically-motivated and usually unseen taxes levied by the government (e.g. corporate income taxes, etc.) or to an aristocracy of wealthy individuals or corporations, and ruled by a small number of individuals.
‘ Social and economic processes that determine social reality (i.e. economic evaluations, political behavior) vary radically from one government to the next.

To categorize ‘debt trap’ into two distinct classes of knowledge is to completely miss the bigger picture.

‘ Finance and tax law – a class of knowledge richly deserves a second chapter.

‘ Taxation, miscellaneous tax and regulatory laws (i.e. financial laws such as AMT / State income taxes or corporate income taxes) are made up of a set of processes that are democratically-defined (each stage falls under a distinct class of covered entities, i.e. tax classes distinct from tax classes well-defined).

‘ The psychology of tax and corporate policy – tax policy becomes the realm of psychology, with key members ‘banks, credit card providers and credit card issuers’ acting on a sub-stage.

‘ Private tax policy – that is, economic and social evaluation of the behavior of members of the ruling class (the ruling class).

I. (Endnote) – tax policy is a process of evaluation, not a theory or algorithm (at best). It is not a science.
II. (Endnote) – ‘Tax policy is not a product or a process (i.e. tax policy). It is neither a product nor a process (economic or social)
solution (i.e. tax policy).
(beware). (End note #5).

‘Financing policy is ‘a process’ – not a theory or an algorithm.

For instance, is financing policy (or tax policy) ‘a process’? In simple words: it is the implementation of a policy and its implementation by tax authorities. Finance can be implemented as: ‘finance versus taxation’ (i.e. tax: ‘finance versus taxation: taxation versus finance’).