Chai's Blog

Yes­ter­day at 4 pm Prime Min­is­ter Jacin­da Arden announced that New Zealand would go one lev­el down to lev­el 3 from 11:59 pm on 28th April. We would fur­ther go down to lev­el 2 from 11th May if the down­trend con­tin­ues. It is so much reliev­ing!

I am impressed with how this coun­try man­aged the out­break in the world where many oth­er first and third world coun­tries have had appalling results. I nev­er took it grant­ed, and I have always been grate­ful to be liv­ing in this coun­try, but more so in the present test­ing times. I could­n’t have lived in a bet­ter place dur­ing this pan­dem­ic and I am very grate­ful for that!

Over the past few weeks, I have been read­ing and pon­der­ing a lot about the social and eco­nom­ic impacts of Covid ‑19, espe­cial­ly on thou­sands of small and local busi­ness­es. For about two years now, as a fam­i­ly, we have been think­ing more and more about where the dol­lars we spend would be going. We have been spend­ing local­ly as much as we can. I look for­ward to doing more of the same in the com­ing years. There has nev­er been a bet­ter time to spend local­ly. I want as much of my mon­ey to go to the peo­ple and busi­ness­es in my com­mu­ni­ty, and I will pri­or­i­tize local spend­ing for my dol­lars.

I had a feel­ing that the bailout mon­ey and finan­cial pack­ages gov­ern­ments all over the world are announc­ing is not free. But I did not quite know the answer until I read this post titled Who Pays For This?

You don’t pay it off. You grow your way out of it. This isn’t intu­itive because it doesn’t apply to peo­ple. When a per­son takes out a mort­gage or a car loan, there’s a repay­ment date. But that’s only because peo­ple have finite careers and lifes­pans, so there’s an “end date” where all debts have to be repaid.

Coun­tries (and to some extent com­pa­nies) are dif­fer­ent. They have indef­i­nite lives. So they can remain indebt­ed indef­i­nite­ly, even with ris­ing debt.

As long as nom­i­nal GDP growth is high­er than the annu­al bud­get deficit, debt to GDP goes down, and spend­ing more than you take in leaves you with a low­er debt bur­den.

This is so sim­ple, but it’s eas­i­ly over­looked because it doesn’t apply to peo­ple.

What mat­ters for coun­tries isn’t the amount of debt they hold. It’s how bur­den­some that debt is to main­tain over time.

Here is anoth­er enlight­en­ing post I read late­ly on the Finan­cial Times: Virus lays bare the frailty of the social con­tract

And the continued timeline…