Wednesday, July 27, 2011

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.

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.


Sultan said...

Pertaining to Pakistan, corruption is the main factor for the external debts. However, those at the
helm of the affairs seem to be totally irrelevant due to vested interest. Well done Tariq Mian.

Sultan Saeed

Anonymous said...

Stop relying on foreign dollars - Trust me-- all the related corruption will go to Hell.

M.A. said...

There are some very scary figures here! What is the solution ultimately?

Imagine the world finance system is a tree, one branch is the banking system, another the capitalist so called 'free market' governmental policy (that is in actuality just a policy that serves to maintain status quo) followed by many other small branches in the form smaller subsidiarie industries such as the cheque cashers and loan sharks that plague the middle and lower income class neighborhoods in particular. The root of this tree of corruption is simple.

It all comes down to USUARY. Creating money from money is simply a matter of greed. It invokes monetary policies which require the printing of more fiat currency*(money not backed by any precious metal but rather a governmental stamp of legitimacy) in order to maintain the astronomical numbers that are fabricated.

The real value of material goods is drowned out in this egregious process of false wealth creation. And the solution is simple as stopping the fictional economic process of dealing with interest. Cut the root of the corruption tree and her stems will fall off dead.

Order would be restored to the international community since capital gains would not be the goal and thus humanity could focus on moving forward as a race instead of trying to become richer than each other.

We would have no need for neo liberal institutions such as the IMF and World bank. Cash cropping would come to a halt and droughts would no longer lead to millions dying since the victim state would be able to rely on neighboring countries to produce the neccessary surpluses of actual goods to make up for any damages from natural disasters.

tariq said...

@Sultan Sahib---------------Thank you very much for your valuable comment - however, Sir, you stopped a bit earlier from touching upon yet some more relevant portion of topic under discussion.
You are most welcome to visit again as you are a valuable commenter being business oriented.

tariq said...

@MA-------though, your comment is lengthy, but it carries weight for it has an impressive substance close to reality.

Very informative and impressive----thanks again.

I believe you are right some countries only think about "CASH CROPPING" and don't care about their hungry populace.

Please! do come again with your brilliant ideas.

saleem shah said...

Debt becomes "loaned amount plus interest plus compond interest."

USUARY is the word stays : It stays over the weaker backs of the borrower through the lifetime. For the individual borrower it's a kind of spending jail time but outside the concrete walls of the actual jail compouned for the whole life.

saleem shah said...

Debt becomes "loaned amount plus interest plus compond interest."

USUARY is the word: It stays over the fragile back of the borrower throughout his life.
For the individual borrower it's a kind of spending jail time == but outside the concrete walls of the actual jail compouned for the whole life.
Alah bachai sood khorron sey.

Canada said...

I have gone through the above post and all the related feed back underneath.
My conclusion is - the unethical business practice (though legalised) is gradually dragging the whole world towards a mega finacial disaster worldwide. This is very scary. The UN must step in to save the nations from the total ruin.

Anonymous said...

CBC reported : “A $900 billion debt-limit hike would come first, coupled with $917 billion in spending cuts over 10 years. A second vote, late this year or sometime next year, would allow another $1.6 trillion in borrowing power, provided that Congress and the president have agreed to another round of spending cuts of that amount or more.” Let’s see what happens next.

Anonymous said...

sood khori aur seena zori
saari dunya ka bayra gharaq

nomi said...
This comment has been removed by a blog administrator.
nomi said...

communism failed, socialism is slightly alright but capitalism illiminates the middle class and favours the business class.
But feudalism is the worst one.
Economic mis-expoitation of natural sources is going on without an end in sight.
Poor labour class is tired of being exploited. In many countries, the citizens are deprived of amenities of life with no fair justice availability. Fairly said, "Delayed justice is justice denied."
We need economic, social and political justice.

Anees said...

The regulated "USURY" was aimed at to prevent the separation of MONEY from REALITY.
Money is just a measure.
Usury is making money from lending money; it is making money from nothing. This is exactly what is happening today on a colossal scale.Pathetic!

tariq said...

Survival of America is important for Canada's survial.
America has to be granted an increase in its credit limit. That's the only way to rescue the super Chachoo jee.


yes...Corruption is a burning issue among all the developing nations specially...and we must think about the root cause of it.

A very well narrated n descriptive post by you Tariq bhai.

Jalal said...

very informative post tariq bhaie.and yes I like it N.W.F.P better:-)

tariq said...

Thank you so much for going through the "DRY POST" and leaving your valuable input to it.

tariq said...
This comment has been removed by a blog administrator.
tariq said...


"Look who is talking"
-------Is IT you Jalal?
---Yeah yeah it's Jalal the great from NWFP.

JOHN A said...

It scares us all the most concerned---- that the US government is most likely to run more than a "Trillion Dollar plus deficit" this year alone.

tariq said...

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 a 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 big sin.

Although, we 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."

tariq said...

@John A---I just left a comment as well as added an update to the main post.
Thank you for stopping by.

Mishi said...

okay now what caught my attention most was the last paragraph of your post..Partial ramedy! I remember a thing of this sort was introduced by our HIS-HIghness PM Gelani sab last year..when one fine morning he realzd its very important for govt of pakistan to cut all the extra expendtrs..and it was propoagtd well ..and those were the days when they were celebrating NFC awards..and to show off the solidarity they arranged that absltly unnecessry gathering at Gawadar POrt..where all the four CMs were gathered along with PM...Now I dont need to remind you how much money was wasted..and every single penny was from Govt fund...Ahhh what more to say..debt you say!? pakistani need not to know much about this..we are living a life under this debt..we are paying the price already..which is our National Integrity..

tariq said...

I am glad you raised very good point here.
Let me say this:
Everyone knows beyond a doubt that Islamabad's political posturing and brinksmanship has been an obstacle to the Pak economy. Furthermore, the way our flawed system and our insincere leaders are dysfunctional, Pakistan is far away from being fixable easily.
It's so unnerving that due to the selfish Political elite, the middle class is fast getting decimated - rather it’s merging with one which is far below the poverty line.
Due to political paralysis, incompetence and poor governance, the unemployment is growing fast.
Pakistanis buried under tons of personal debts are already having problem with their two daily meals.
Moreover, Pakistan’s foreign debt is burden on our children and the generations to come.
Shame on the Pak government for wasting borrowed money so lavishly.
The question is:
Why our foreign Minister needed PAF plain to go to New Delhi?
She could have gone through a regular flight in the first class at the most.
The nation is sick and tired of the fuedal families because they are still biggest threat to the rights of Pakistanis.

Asma Khan said...

Hmmm true, now-a-days we Muslims are involved in this sin, with or without shame, giving different names, logic & reasons to interest, that will never change the orders of Allah Pak...

Interest also called ribbah, is prohibited and a haram money. Allah Pak has prohibited it & called this war against HIM & HIS Prophet Muhammad (Peace & Blessings Be Upon Him) and any business, trade or matter of loan that involves giving or taking of interest is clearly haram. It is one of the biggest sins.

The law of Allah will never changed, who fear from Allah & take HIS orders as a final thing & who believe in Quran & Hadith will not dare to eat sood in any way...

Those who devour interest shall not stand on the Day of judgement, but like the standing of one whom the evil spirit has by touching made mad. This is because they said 'The trade too is like interest,' and Allah made trade lawful and made interest unlawful. So he, who received admonition from his Lord and refrained, then whatever he took before is lawful to him, and his affair is with Allah. And now whoever shall commit such. Fault, they are men of hell, they will live therein for longer period.
Surah Al-Baqara : Ayat 275

Umm Maryam said...

Do you really think that the puppet governments will take charge in reducing debt. They are All involved in making this mess, governments and Private banks. It all boils down to how well you can manipulate the system to control people.

tariq said...

@ ASMA KHAN:***** you desrve five stars as being familiar with Surahs to the point.[MashaALLAH]
It's ecouraging to know that we have a Muslimah (ASMA KHAN) who is a source of explaining Allah's message with clarity.
___________________________________Asma, my audience will surely benefit from your input with Allah's blessings.
It's true that we can't modify Devinely rulings with any logic or reasoning just to satisfy our worldly desires.
INDEED, Ribbah (interest)is strictly haram and prohibited.
Absolutely, no excuse can justify giving or taking (extorting) SOOD as it is one of the major sins (Ghunah Kabeerah).
Month of Ramazan is a blessing - for it steers us away from sins as satans are chained. Hence, we are able to correct our direction towards QIBLA.

tariq said...

puppets and banks around the world continue to manipulate the people.
Thanks for your sharp comments.

Yusra said...

Excellent post !

tariq said...

@Yusra----Thank you for coming by and leaving a comment.

Asma Khan said...

@Tariq Mian: Thanks a lot for your kind words... :)

Mishi said...

hmmm you are right ! and see what I feared is true! hope you have read all the feedback of khar's visit to India..,all she cost us is more humiliation...she dint even mention Kashmir! what a shame! I hope at-least she is the one who is happy with her visit

tariq said...

Thanks again for coming by.
RU GETTING READY FOR SEHRI?--we are in the middle of first fasting day alhamdolillah.

tariq said...
This comment has been removed by a blog administrator.
tariq said...

@MISHI-- *****
Question: Why did ZORDARI send a Fuedal Beauty Contestant/pageant to India--?
May be "the Khars" want some approval rating from our neighbor.

What a mockery?
Kashmir Issue not been raised as yet as being major the core problem.
I am afraid this is another wasteful trip leaving yet more burden on the poor tax payers of our side of the border.
Let's wait and see what happens next --which seems to be a definite Zero with this glamorous Hero.
Actually, we are like a (pigeon) "kabooter" who closes his eyes with fear when bajee billy jan is about to eat him up.

May God bless Pakistan with purified politicians. However, this looks not very likely-- because of our own hypocratic DISORDER.

How long will we sleep sanoringly?

Monday, August 01, 2011

TARIQ said...

@ASMA KHAN-- thanx again for visiting.
Please keep coming and joining us with your brilliant opinion on matters of extreme importance.


May Allah bless us with his mercy, accept our prayers n fasts...
Duaaaon mein yaad rakhiyega Tariq Bhai.


Mishi said...

I cant get access to your new post and btw nice page out-let FINALLY !! hehe

tariq said...


Let's understand Allah's message in the Holy Qur'an with the help of authentic ahaadith alongwith practising Sunnah of our beloved Prophet Sallalaho alaihey wasallam.

tariq said...

@ MISHI the great:
No new post yet-
will do in a couple of days.
Let's get used to our friend Ramzan Sahib first.

Anonymous said...

american rating is gone down

ALAM said...

US debt ceiling debacle is over for now, but the financial woes are haunting many other countries too.

al-munir said...

If you don't borrow, no money is generated as no economic activity takes place, thus market dives deep into the Recess mode.

tariq said...

@ anonymous,
yes you are right.

tariq said...

@Alam, thanks for the feed back.

Tariq Mian said...

@ almunir,
yes-- sir! you raised a strong theoritcal point.

mazloom said...

Post debt ceiling debacle, US rating has been downgraded from AAA to AA+, yet Obama wants it back up by pressuring the Americans for higher taxes.
If G7 countries go down then the other countries go down with it.
It's quite a scare.

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