Debt And Deficit Financing Quagmire



DEBT EXERCISE   google image

 Updated 30th July, 2011

Most probably, despite legally desciplining of the loan sharks, debt enslavement still continues in a few countries. However, some countries including Canada and Pakistan prohibit interest rates above the prescribed level. Interest rate exceeding the permitted level is called usury. Yet, it's a criminal offence punishable under the law of land-- (only when caught).

Usury is an ancient legal concept, notoriously known and adversely felt throughout the centuries, and historically considered a sin.

Although, the Muslims are involved at some level with or without excuse, Yet, according to the glorious noble Qur’an -  "under no circumstances, charging or paying interest at any level is  permissable."

Rampantly, flourishing corruption is fast turning into mega corruption almost in all countries/societies - differing only in the level of degree. Not alarming enough, as almost each one of us behaves so naively that the root cause of the problem continues to stay unnoticed, which is more frustrating of course.

Historically speaking, the age-old debt trap introduced by the loan sharks is the main culprit for spreading other unethical diseases around. In fact, the financial state we are in today is the “by product” of unfair indebtedness - at individual, local or global level.

Obviously, lenders from lower level have progressed to higher levels and having been re-classified as financial institutions they work day and night to earn money through borrowing from any source to do the lending business with a purpose of earning interest income - left and right.

Tricky Debt system is the creation of the loan sharks of the past, who eventually became more sophisticated machines of milking money.

Most troubling is “the needy’s desperation” to get loan at whatever cost - depending on the nature of urgency or lack of qualifying for the loan due to missing collateral.



debt load passes on to people  [google image]

   But, the blindfolded poor fellow signs the deal silently when it comes to borrowing under desperation. Unaware of the dire repercussions of such loans, the borrowers’ troubles are endless indeed.

Painfully, most of the countries are facing debt crises today as the debt usually grows year-after-year. And, with each additional deficit, the debt continues to grow.

Recently, a rescue package was given to Athens from euro zone governments and International Monetary Fund. And a range of some other austerity measures have put some brakes on the growth across the region.

OBAMA  LOOKS  WORRIED

Also, President Barack Hussain Obama, during the deficit discussions, warned the Americans about economic doomsday - if the country defaults on its debt, therefore, credit limit needs be increased to fulfil its promised obligations - meaning more borrowed dollars to pay for legally binding obligations.

In fact, deficit and budget quagmire is not an easy scenario to handle, and it has serious consequences.

In Canada, the size of the overall external debt had reached $58.698 billion during the third quarter (July-September) The total debt in Canada is 4.599 trillion$ and the nominal GDP is 1.622 trillion (according to the Canada Budget 2011 document). The total debt to GDP is 283% of the year 2010.



Please save me I am drowning in debt  (google image)



Canadians generally have taken advantage of the country's historically low interest rates to borrow cash at advantageous terms. But, experts have begun ringing the alarm bell regarding higher debt levels for individuals. As Bank of Canada governor Mark Carney warned in a recent speech that Canadians had debt including mortgages (valued at 150 % of disposable income). This is quite worrisome.

With regard to Italian loans to Pakistan, the former has agreed to waive latter’s total bilateral debt by swapping half of it for expenditure incurred on Afghan refugees, while the remaining amount of debts of $26.52 million and 58.74 million euros will be swapped for the jointly-agreed social and developmental projects under Debt for Development Swap Agreement in 2006. Pakistan’s total external debt amounted to $58.393 billion at the end of December 2010 while official liquid reserves of the country stood at $14.126 billion in the same quarter (October-December) of the last year.

In many other countries, Public services are being slashed and public assets are being sold off to balance budgets that can't be balanced because the money supply itself has shrunk. Governments usually get the blame for excessive spending, but governments did not actually initiate the crisis. The flaw is in the banking system and in the credit system which is responsible for creating and sustaining.

Admittedly, there is big problem of excessive deficit financing for which there is no repayment plan and that is pushing the world to the most Destructive Economic Tsunami of the 21st century.

Furthermore, Inflationary pressure is fast turning into hyperinflation, which is really deadly for the economies based on fake values. By deficit spending means spending the borrowed money or newly printed bills/notes as legal tender with a fake face value.

The result: Beyond control price hikes of goods and services are adding to economic hardship for the public and the governments in adversely affected regions. Particularly, when people are unable to earn enough money to pay their bills.

Coming back to the market manipulators who control the borrowers:




bye bye darling   [google image]



 

It’s all about loan sharks community of yesterday, which has succeeded in becoming bankers of today.

Believe it or not, the legitimatized manipulating vampires are the major source of the world's financial woes.

Even the Haves are no longer in charge of the money machine they created. They have set into motion, forces over which they have no control any more.

And the financial dealers/wheelers have further sophisticated the system of exploitation to their advantage in order to steer the economy accordingly - but at the cost of the entire system which is about to go down.

Actual trick of the trade is through borrowing money at lower interest rate to produce goods and services or for lending to sub borrowers at a higher interest rate. However, some experts are of the opinion that it’s a legal variation of the illegal pyramid scam.

Furthermore, the astonishing scenario shows that the manipulators have approved questionable loans. They borrow huge sums for high-risk investments which is doomed for one reason or the other. That’s how they rip off billions of dollars and they just walk away from the collapsing companies.

It’s so true about the manipulators for they are good at tackling the Rules skilfully in order to milk billions of dollars from corporate retirement funds.

Surely, without major changes soon, the system is about to self-destruct.

In other words, big money lenders have succeeded in manipulating the laws and have legalized some very shady deals for themselves. For example, the illegal, 1930's-style loan sharking became legal and is now the property of the financial industry.

In the remote past, "loan sharking" was considered a serious crime and those caught went to jail.

Highly troubling, now the former criminal activity is legal. The criminals of the past have taken over the government, changed the laws and declared themselves to be immune from prosecution in many countries.

Nevertheless, it’s still illegal for you as an individual to charge any interest over 10%, but some corporations are now charging as much as 100% interest and that's perfectly legal. Credit card companies commonly charge you up to 30% or even more in certain cases.

In fact, most of the money today is not created by governments; it is created by private banks as loans. The private system of money creation has grown so powerful over the centuries that it has come to dominate governments globally.

Under the flawed system, the banks advance “bank credit” repayable with interest, continually requiring more money to be repaid than was created as loans; and the only way to get additional money from the private banking system is to take out yet more loans, at interest.

Partial Remedy: All governments must control unnecessary administrative expenses through downsizing and minimizing military adventures via encouraging “peace process” throughout the globe.

Most importantly, the banking system needs to be evolved fairly enough to accommodate the changes to encourage financial empowerment of “the endangered middle class.”

Lastly, governments of the countries should start narrowing down the wide gap between “the haves and the have nots,” so that debt dependence is automatically minimised to some reasonable extent.

A Blessed Month For Muslims

O ye who believe! Fasting is prescribed to you as it was prescribed to those before you, that ye may (learn) self restraint [al-Baqarah 2:183].
Ramadan is the (month) in which was sent down the Qur'an, as a guide to mankind, also clear (signs) for guidance and judgment (between right and wrong).

Since, the Islamic calendar is lunar and the days begin at sunset, so there may be some discrepancy of a day depending on when the new Moon/Crescent is first visible. Thus, the Moon sightings may cause a variation of the date which begins at sunset on the day before the date specified for the first Ramadan (Ramadhan or Ramzan). Furthermore, Ramadan is the 9th month in the Islamic calendar consisting of 12 months with 354 days.
The month is so blessed as the first verses of the noble Qur’an were revealed to Prophet Muhammad (PBUH) on the night called “Laila tul Qadr” which happened on one odd night during the last ten nights of the month of Ramadan. Prophet Muhammad (PBUH) said, “Whoever misses Lailatul Qadr - is indeed a loser.”

Hadrat Abu Hurairah reported that the Messenger of Allah has said, “When Ramadan begins, the doors of Paradise are opened, while the doors of Hell are shut, and the Shiateen (Satans) are chained tightly.” Also the doors of Mercy are opened.” [Sahih al-Bukhari Vol 1, Page 255 and Sahih al-Muslim, Vol 1, Page 346]

This year, the blessed month is likely to begin on Monday, August 1, 2011 - depending upon the moon sighting.

Fasting in Ramadan is compulsory for every Muslim, as it constitutes one of the five pillars of Islam. Therefore, Muslims all over the globe feel excited to begin a period of self-overhaul.

Being one of the five pillars of Islam, fasting from dawn to dusk during Ramadan is obligatory upon all healthy Muslims. Nevertheless, the sick, the elderly or the travellers are conditionally exempted. Those exempted also include children who are yet to attain the age of puberty and women during their monthly cycle of menstruation or those still discharging blood after delivering the baby. Also, the pregnant woman, who is worried for the fetus in her womb, is certainly allowed to eat and drink during Ramadan.

If a breast feeding mom is concerned that her child would not have enough breast milk after she starts fasting, she is also allowed to postpone her fasting till after Ramadan on some convenient time.

The fasting starts at dawn and ends at the Sunset with IFTAR followed by slaatul Maghreb, however, Fasting has to be intended prior to dawn in order to be valid. And during the fasting hours, the Muslims are strictly required to abstain from even Halal things such as satisfying the stomach including sexual advancement towards spouses.

Another advantage of Fasting is: it disallows a fasting person to use tongue unwisely - telling lies, doing gossips, backbiting and slander.

Instead, it motivates the Muslims to spend time reciting the noble Qur'an, attending khutbas (sermons), performing nawafils, etc. Those who offer nawafils during Ramadan would have their sins forgiven by Allah SWT. Ramadan also encourages the Muslims to perform ten days of i’tikaf (seclusion) for more reward from the Creator SWT.

The Prophet (SAW) also strongly recommended Tarawih prayers during the month of Ramadan. The Tarawih, which is to be performed after Isha prayer, can be done either individually or in congregation. Some Muslims offer twenty rakaats, while the others leave after just eight.

The most inspiring is the aware Muslims take almost complete advantage of doing their self-accountability for their own discipline. It does provide a greater chance to Muslims all over the globe to offer prayers and observe fasting in order to please  Allah SWT.

Moreover, the month gives an excellent opportunity to all the fasting Muslims to feel the degree of torture due to an ongoing hunger, which the destitute people have to go through almost on daily basis. In Ramadan, Muslims donate a lot by participating in food drives for the poor or other charitable activities.

The Prophet of Allah said, “Whoever does not give up lying and evil actions, then Allah is not in need of his leaving his food and drink” [Saheeh al-Bukhari].

In short, the Muslims can greatly benefit from the Ramadhan to create a real connection with Allah SWT that can continue throughout the eleven remaining months.

There are tens of thousands of starving people around the globe who remind the fasting Muslims of how the hunger really feels like.

No doubt, fasting has health and spiritual benefits, yet we must never forget that the main goal of Fasting is to provide an environment of individual and collective training and character correction.

Hence, the essence of fasting remains the attainment of greater heights of righteousness by getting closer to Allah SWT.

Common sense is not so common

It’s all about the harmonized sales tax (HST), which was implemented in Ontario at 13%, - in British Columbia at 12%, - and in Nova Scotia at 15 %. The government of British Columbia announced previously that if the HST survives the referendum, the rate will be reduced from 12 to 10 per cent by 2014.

Under the Comprehensive Integrated Tax Coordination Agreements signed by the provinces with the federal government of Canada, the HST rates cannot be changed for one more year because of the “two year” anniversary date.

 Come what may, some tax payers always remain in mood of tax revolt, so they are seriously dissatisfied and are very angry with HST, while the others are complaining about the confusing language on the ballot paper of the upcoming referendum prepared by the Elections B.C. which is an independent office of the legislature - responsible for administering voting for provincial elections and referendums.

The British Columbians will soon be voting on whether to abolish or keep the harmonised sales tax (HST). More than three million HST ballot packages have already been sent out to registered voters for the August 5 referendum.

In the upcoming referendum, voters can either vote “yes” to extinguish the HST and return to the PST and GST or they can vote “no” to keep the HST.

The Ipsos-Reid poll of 1,117 B.C. voters last month suggests that more than half of those surveyed were confused about what the ballot question meant.

Surprisingly, the anti-HST respondents are more likely to understand that voting “yes” means getting rid of the tax. Where is the problem then?

Question is simple: Are you in favour of extinguishing the Harmonized Sales Tax and restoring the Provincial Sales Tax (PST) in conjunction with the Goods and Services Tax (GST)?

You may vote ‘YES’ if you want to extinguish the painful tax, or you may go head and vote ‘NO’ if you want to keep it. It’s so simple – There isn’t any ambiguity as claimed by many. 



As it’s so straightforward, ‘YES’ means no more HST if total number of "yes votes” exceeds the total number of “no votes.”

On the contrary, a majority of "No" votes means the HST is here to stay. A "no" vote is a vote to keep the harmonized sales tax that is imposed under the Excise Tax Act (Canada) and regulations set by the Government of Canada. Thus, Canada Revenue Agency will continue to administer and enforce the HST in British Columbia.

In order to remove the ambiguity or confusion, despite english as second language, a voter needs a little bit of common sense to understand the “language of referendum” with reasonable ease. Still, it’s hard to believe that there is any confusion. Some confused British Columbians are fussing about nothing really?

Nevertheless, a "YES" vote further means the government of British Columbia has the power to restore the provincial sales tax at the rate of 7% or higher depending on the real outcome of the YES vote.

Furthermore, the sales tax base would shrink to the goods and services that were covered under the Social Services Tax Act (British Columbia).

However, the sales tax base can be expanded by the Government of British Columbia if the majority of legislators vote to approve amendments to the Social Services Tax Act.

But on the other side, a "No" vote means the HST rate will decrease from 12% (current rate) to 11% on July 1, 2012 and to 10% on July 1, 2014 exactly as previously announced.

Under the provincial sales tax system, the BC government can change the sales tax base and the sales tax rate at will.

Yet, at this point in time, the consumers are in the dark having no clue as to what they will really get in place of the HST. Therefore, the consumers have greater stability with the HST, because tax changes are applied at the federal level.

Angrily, the unhappy tax payers maintain that the HST is horrible tax policy for the non beneficiary, and the consumption taxes are bad for the economy and bad for the voter. They discourage people from making purchases.
 

They claim that the taxes on services are just another tax grab on labour. “We already pay taxes on labour - called income tax, and the HST adds up a tax on top of a tax when you tax the services. We don't need to pay anymore.” said many tax payers.

The registered voters must exercise some caution using common sense at the voting hour.

Referendum questionnaire mentions the provincial sales tax will be restored if HST is abolished.

This of course may be leading to another scenario of uncertainty with regard to future taxes.