Debt is bad
July 23 2021 · 5 min read
It is an evident fact that debt can give an instant source of income that one can spend on infrastructure or buy capital, and as a result, they can increase their income, thus they will return their debt and become wealthy. But in reality, it seems more like a reverie. In the world of economics and politics, there are pernicious and hideous facts behind the intellectually attractive concept of debt.
Debt is a risky game
One point about debt is that it is a risky game. Getting the debt, investing it somewhere, and expecting lucrative returns is always an uncertain thing. Debt in itself means a perilous deal because you owe someone money and it is certain that you will have to pay it back. The intrinsic nature of every human is to stay in a secure spot and play a safe game, while the dubious nature of debt makes the prospect bleaker. And if there are few prospects of success, then you will have to face double loss.
Debt is a deception
Another well mannerly veiled facet of debt is that it is a conspiring trap like a quagmire that pulls the person's inner and inner. To make a long thing short, as every mediocre has a limited and finite income and the debt he has to pay back from the pay cuts the real income. And resultantly, it takes the person closer to bankruptcy because that finite income could not cover all necessities that once fulfilled with the unadjusted income. Debts in the name of student loans drag thousands of students into the abyss each year. The hundred thousand dollars of a loan with an average interest rate of up to 6% given to students in the US puts their future at stake. A grim reality behind this loan system is a well-nurtured game of the administration to rob off students' pockets. The abysmal game leads hundreds of thousands of students into bankruptcy at the start of their professional careers.
The shortest distance to riches is not having debt
Professionals argue that a safe and secure route to wealth is to not have debt. Like, Dave Ramsey said, “the shortest distance between you and wealth is having no debt". This statement he said after reviewing and researching through the myriad of data of millionaires and billionaires.
Debt is another name of manipulation
Another most conspicuous fact about debt is that it has become a decoy to control and rule over people and nations forcefully and by use of fear. Big nations, like the US, bait developing countries with enormous debts. Developing countries under the burden of these debts are used for unfair advantages like natural resources, strategic locations, political means, and economic and military needs. John Perkins, the author of the confession of Economic Hitman, amazed the world with accounts about how the US has been deceptively using debt as its means to rule over impoverished countries. The US, through the channel of IMF and World Bank, has been manipulating smaller and developing countries to foster its imperialism over the world.
There is also a well-known idea that debt is pernicious and detrimental to society because it ways to economic exploitation and ill-distribution of wealth in the society. Even this idea is also supported by every religious doctrine. Our reasons also approve the notion that debt can be used to increase one's leverage over another.
Similarly, we can find huge controversies about the debt diplomacy of China, IMF, and the World Bank. Back-channel diplomacy of China's CPEC and BRI is a huge question to the world. In 2018, according to The Guardian, some countries are reconsidering their participation in the BRI because they will be unable to repay the debt. "It's also a vehicle for China to write new laws, create institutions that represent Chinese interests, and reshape 'soft' infrastructure," Jonathan Hillman, director of The Reconnecting Asia at the Center for Strategic and International Studies, said.
According to a CNBC post, Chinese investment in Latin America is booming, but the initiative has been widely criticized due to debt-trap diplomacy and neocolonialism accusations. Ecuador has agreed to export 80 percent to 90 percent of its crude oil to China until 2024 in exchange for $6.5 billion in Chinese loans. Moreover, Ecuador borrowed US$4.2 billion from the IMF in March 2019, at a rate of 6% of its annual GDP, whilst still owes the World Bank and the Inter-American Development Bank US$6 billion.
Many think the Sri Lankan example exemplifies China's peculiar brand of 'debt-trap diplomacy,' a predatory scheme intended to trap countries in debt servitude. In a 2017 article for Project Syndicate, Brahma Chellaney discusses how Chinese loans are secured by strategically valuable natural assets with a high long-term value (even if they lack short-term commercial viability). The port of Hambantota, for example, traverses the Indian Ocean trade routes that unite Europe, Africa, and the Middle East to Asia.
Pakistan is no less ensnared in debt traps, reviewing to statistics Pakistan has taken an estimated total of $44 billion in assistance from the World Bank since 1950. This has given the bank the ability to make local and national decisions in the country, such as awarding public contracts and assigning State Bank governors.
The problem is clear and limpid as a crystal, but the solution to it is often worrisome. Well, one may take a smaller loan with its point of relation to avoiding coercion or undue influence. For states and nations, countries must act realistically to increase their exports and reduce imports and government investments- as economics suggests.
To encapsulate the overall idea, debt can be used in eclectic ways to drive one's illicit and illegitimate intentions over others. One must remember that there is no free lunch if you’re getting a loan, then you will have to pay something back- it can be by any means. And, a rule must be added that the road to riches is by having no debt. It is on you to choose the road!