Follow Up Article Middle Class Will Remain Middle Class

Ahh...!

 

The EMI culture is always something of a concern for me. When we were all raised, we were told not to borrow funds unnecessarily unless it is for building a house and that too, we should make every effort to close the loan as quickly as possible. Later the financial savvy people told us that balancing the equity and debt in equal proportion is the way to lead a perfect life and it is not okay to just rely on our own funds when we can lead an ideal life with proper management debt with repayment capacity. These savvy people taught as about Debt:Equity Ratio and Debt to Income Ratio and so on.

Now, we are moving towards a stage where EMI culture is becoming dominant while no one is paying attention to the details including financial institutions. The concept of lending money based on the value of assets have started in the western world without looking carefully on the income stream of the individual. This culture resulted in subprime market crisis where many had to foreclose their houses as their debt exceeded even the market rate of the houses. Even as a country, the US has a national debt of $36.17 trillion while the GDP is $29.35 trillion while ideal debt:equity ratio is 50%. Government spending exceeds every year resulting in budget deficit and increased debt to the nation.

It is time for the national leaders to look at the government efficiency, overall productivity of the country as a whole, avoiding unnecessary conflicts and plan the defense expenditure below a manageable level. Even welfare measures such as giving away freebees to the people whether they are immigrant or citizens must stop and there should be more effort to increase the work force in the US with retooling their skillset and train them to generate personal income. I have personally seen people (that too people younger) who get long-term disability for a minor physical condition generating $3,500 to $4,000 per month without them working. I am not against social security and medicare as they are contributed benefits, in other words, pay forward system.

India is catching up on this EMI culture very quickly and everyone in the middle income group talk about EMI easily. Indian government debt is 81.59% of their GDP but when comparing the Purchase Power Parity, their debt comes down to 50%. At least the government is managing it efficiently.

 

Consumerism at the highest! With purchasing power increasing with many, it is the job of the manufacturing & marketing industries to make that money flow into them.. Only it ends in circulation of wealth among a few repeatedly.