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Related Words, Beliefs, Background

Worldview Theme #45A: 

                Borrowing Mentality

  Worldview Theme #45B: 

        The Pay As You Go Approach 

Contrast Worldview Themes #45A and #45B --   these themes involve orientations, beliefs or behavior that are (more or less) diametrically opposed!           

bankruptcy,  financial or environmental--continued borrowing and the inability to pay the resulting financial or ecological debt leads to bankruptcy.  In seeking relief from monetary debt and associated creditors, bill collectors, etc, declaring financial insolvency and filing for bankruptcy, one is in effect seeking to walk away from a financial mess he or she (to some extent) created.  There is an environmental analog to this: Someone (usually a corporation) in the course of operating a profit making business continually generates waste, which is not immediately treated, but allowed to build up. If the corporation ceases operations and closes, it can walk away and leave behind an environmental mess. After passage in the late 1970s of  legislation, which  also established a Superfund and identified  toxic waste dump sites needing cleanup, finding American companies engaging in such environmental bankruptcy  became the exception rather than the rule. 

credit -- a monetary loan or transfer of capital from a person, business or financial institution to someone (a borrower) who needs it in order to pay for something and thus immediately enjoy its benefits or assume possession of it. Those who extend credit must trust in the borrower’s ability to repay the loan in timely fashion, and, both to compensate them for the risk they incur and build some profit into the arrangement, typically receive not only payments on the loan principal but also interest payments from the borrower based on outstanding loan principal and interest rate. A credit based financial system grew up with developing commerce spurred by the Industrial Revolution. Its spread to millions of consumers was given a boost with the invention of buying things on “the installment plan” in the early 20th century, and still a greater push years later with the proliferation of plastic credit cards.

credit score--a numerical score computed by lenders (credit card companies, banks, etc) based on a person's credit history (history of repaying debts / bills in timely fashion) and believed  to reflect the person's ability to repay future debts and gauge the risk to lenders of their extending credit to this person.

credit union--a member-owned co-operative association that accepts deposits from and loans money to its members.                      

debt bondage--someone's labor is promised as payment for a loan. In the 17th and 18th centuries, the system brought many to the New World as indentured servants.  In its most notorious modern form, a child's labor is pledged by parents as payment for debts they contract.

discounting and net present value -- these are economics terms that provide a way of comparing payments that occur at different times. For example, assuming an annual interest rate of 10%, $100 payable one year from today is worth $91 today; $100 payable two years from today is worth $83 today; $100 payable three years from today is worth $75 today, etc. The reduced value of the future dollars is the result of discounting. The example provides the net present value, which is the present value of a future stream of payments discounted to the present using the appropriate discount (interest) rate. (Note: the above example assumes that the inflation rate is zero.)

discounting the future -- doing or having (consuming) something now, rather than waiting , or rather than investing the money you would have spent and getting a high return on the investment

ecological debt -- refers to irreplaceable resources being consumed or natural cycles disrupted in an impossible or difficult to fix manner by human activities. While people today benefit from the consumption or the activity, the consequences of ecological debt incurred today will be left to future generations to deal with. Examples: hundreds or thousands of years from now people 1) might have to deal with highly radioactive nuclear waste that escapes repositories, a legacy of today’s nuclear generated electricity, 2) will no longer burn fossil fuels to power automobiles or heat homes. The fossil fuel era will be over, the vast quantity of this huge resource, that it took nature millions of years to produce, having been consumed by human beings in a brief few hundred year period; 3) will suffer through uncomfortably hot summers, contend with incredibly strong hurricanes in coastal areas, and have memories of parts of the world long ago flooded by rising sea levels -- all resulting from the global warming , a legacy of long ago massive burning of fossil fuels and associated release of its carbon dioxide gas / greenhouse effect enhancing byproduct.

envy -- painful or resentful awareness of someone who is more fortunate or enjoys some advantage

globalization -- one of those terms that means different things to different people.  Here the term is defined as the acceleration of interaction and integration among the people, businesses and governments of nations. A narrower  definition, the expansion of foreign trade and investment, refers to economic aspects of globalization.  Some build their conception of globalization around the creation of a global village brought about by advances in communications technology and capital that seemingly moves without respect for international boundaries.  Others link it to hot button terms like Americanization, corporate  capitalism, McDonaldization,  free trade, outsourcing, sweatshops, the Internet Revolution, etc.           

guilt -- an emotional state produced by knowing that one has committed a breach of conduct or violated moral standards. If one accepts society’ s version of acceptable behavior, the punishment guilt produces is self administered.

impulse control disorder -- a condition characterized by being unable to rein in impulses or resist temptation to engage in behavior known to be (or potentially be) personally risky or harmful.

instant gratification -- the thrill that comes when you immediately get a desired something. Driving this is a childish “I want that now!” force. For some, this force is powerful enough to overcome the opposing force: a rational, restraining adult attitude that questions whether the desired something is really needed and whether there is money to pay for it.

interest, deduction of--taxpayers in the United States can deduct interest they paid on home mortgages from their income and get a tax break. About half of homeowners (those with mortgages who itemize deductions) claim this deduction. On a median priced home with a 6% mortgage, instead of initially paying around $12,000 / year in interest, those in the 25% tax bracket can use this deduction and effectively save $3,000 and only pay $9,000 / year in interest.

interest rate, annual--what it costs someone to borrow a dollar (or unit of currency in general) for one year. Thus a .07 = 7 % annual interest rate means that it costs $.07 dollars to borrow 1 dollar for one year, or 7 dollars to borrow $100 for one year.

interest, simple vs. compound--interest refers to compensation paid for the loan of money, typically calculated by using an interest rate. Thus the simple interest on a deposit (where the bank is loaned money) of $2000 earning 7% for five years would  be $2000 x .07/yr x 5 yrs = $700.  Compound interest differs from simple interest in that the principal is not fixed--it is compounded or added to by the interest earned. This addition takes place over a specified compounding period.  Thus interest on $2000 earning 7% compounded annually for five years would be ($2000 x .07/yr x 1st year = $140) + ($2140 x .07/yr x 2nd year = $149.80) + ($2289.80 x .07 / yr x 3rd year =$160.29) + (2450.09 x .07 /yr x 4th year = $171.51) + ($2621.60 x .07 / yr x 5th year =$183.51) = $805.11.  Most financial arrangements involving loans or deposits involve compound interest.

investment decisions, basis for--typically the key piece of information behind whether to invest in something or not  is whether the expected annual rate of return on the investment exceeds the annual interest rate charged for the money borrowed to make the investment or finance the project.

leverage—in an economics sense this refers to one’s ability to borrow money based on one’s wealth.  Basically the wealthier one is, the more money one can borrow—or the more assets one can control or leverage.

marginal propensity to consume -- in the economic theory behind consumer spending and disposable income, this term is defined as the fraction of an extra dollar of income that goes to purchase consumer goods.

marginal utility -- the added satisfaction to be had by consuming an additional unit of a commodity. Economic theory suggests that as a person consumes increasingly more of a commodity the marginal utility eventually declines.

mortgage--a  loan to finance the purchase of real estate in which the borrower puts up the title to the real estate as security to the lender--protecting him or her against default (the borrower's failure to repay the loan).

national debt -- the amount of money that a national government owes to its creditors, who can be either its own citizens, corporations, foreign citizens, corporations or other national governments. To finance the debt -- which grows each year that expenditures exceed tax revenues -- the government sells notes, bonds, and other IOUs. By 2008, the U.S. cumulative national debt approached  $9 trillion dollars. Spread over the entire 300 million people population, the U.S. national debt was approaching  $30,000 per person!

obsession -- an idea, feeling or emotion that persistently haunts or disturbs one’s consciousness and leads to what becomes, either through its repetition or otherwise, inappropriate, unreasonable behavior. Many obsessions are beyond willful control, even with the recognition of their inappropriateness.

permissiveness -- a liberal orientation adopted by some in positions of authority in which those who might otherwise be dominated and controlled are instead granted considerable freedom as to how they can behave, and behavior that some might see as a transgression is instead viewed with leniency.

prisoners of consumerism-- a derogatory term referring to those who have unthinkingly succumbed to the all pervasive advertising messages of multinational corporations and adopted a consumerist lifestyle based on wanting, valuing, and continually spending money on things that they don’t really need.

usury -- an archaic term that refers to the lending of money and charging an interest rate for its use

  Contrast Worldview Themes #45A and #45B --   these themes involve orientations, beliefs or behavior that are (more or less) diametrically opposed!           

Confucianism -- an ethical system / agnostic practical philosophy based on the teachings of the 6th century BC Chinese sage, Confucious. Its key teachings include: 1) Ultimately the happiness of society rests on sincere investigation that produces relevant knowledge; 2) Happy societies are built on a foundation of disciplined individuals in disciplined families; 3) Respect for and fidelity to natural obligations, most notably to parents and family, is essential. 4) The right relationship between individuals is important, one based on sympathetic “fellow feeling”, treating those subordinate to you as you would like to be treated if you were the subordinate -- ideas which provide the basis for a Confucian Golden Rule; 5) Avoiding extremes and embracing moderation --finding a Golden Mean--is important.

delaying gratification--the ability to postpone receiving some reward and control impulses pushing for instant gratification.  Those possessing this are believed to be more emotionally mature than those lacking it.

do it yourself approach--rather than pay certain professionals (carpenters, plumbers, electricians, auto mechanics, tax preparers, lawyers, etc.) self reliant people who wish to save money will do the work themselves.  Typically they begin by educating themselves as to the professional details of the task they face.    

free lunch, there is no such thing as a--refers to the belief that neither a person nor a society can truly get something for nothing: even if something appears to be free there are always hidden costs. The costs may have to be paid in the future, someplace far away, by someone else, be distributed over many people, or they may show up in another form (such as an opportunity cost, environmental cost, increased disorder, etc.)  The physical basis for this belief--which becomes a principle for ecologists and others studying closed systems--can be found in the laws of thermodynamics.  Economists link it to opportunity costs being incurred when choices are made. (If something is free, no opportunities are forfeited!)

making do -- instead of giving in to forces urging one to “get what you want now!” and incurring debt to do so, one can instead make do with what one has or one’s current situation. The ability to “make do” depends on several factors, including one’s self restraint, patience, ability to live within a budget, ability to find pleasure in lower cost (i.e. affordable) activities, and do it yourself skills. The latter can be especially valuable in keeping older vehicles, appliances or whatever functioning. With respect to housing costs, some “do it yourselfers” who frugally save their money while renting are eventually able to avoid being tied to a home mortgage by refurbishing a lower cost “fixer upper” house -- or even building from the ground up.

microcredit -- a scheme in which very small loans are made to very poor people who have no collateral. The loans are typically made to boost income generating economic endeavors, and surprisingly they have been repaid with a very low history of nonpayment.  The Grameen Bank in Bangladesh pioneered this type of lending in the mid 1970s.

money--a token or object that is generally accepted (both legally and socially) as a medium of exchange in paying for goods provided, services rendered, or settling debts. It also provides a measure of value or standard for gauging relative worth / wealth. Most economic transactions directly or indirectly involve money--one exception being a barter economy where money is not needed.

opportunity cost--an economics concept that puts the cost of resources used in a certain way at the value of what these resources could have brought in or produced if they had instead been used in some alternative way (deemed to be the best). It represents the most highly valued opportunity forfeited when a choice is made.

pay as you go,  energy and environmental connection -- instead of borrowing in the form of basing an economy on energy from fossil fuels / nonrenewable resources, an economy could be based on renewable energy that is continually being replenished as Earth intercepts solar energy. So no “energy debts” are incurred. Similarly, basing an economy on sustainable, environmentally sound activities would mean that  no “ecological debts” are incurred. 

Protestant work ethic -- an ethic based on self reliance, hard work and frugality being the path to salvation that has been important in shaping post Reformation western (especially American) society of the last five hundred years. Thus, ingrained in my people’s heads, since their earliest childhood, were sayings like “God helps those who help themselves”, “Idle hands are the devil’s workshop”, “A penny saved is a penny earned”, etc. Only recently has a consumption ethic begun to seriously compete with, some would say replace, this work ethic.

renewable resources -- natural resources which are continually being replaced or replenished by natural processes ultimately driven by solar energy. Examples include wind energy, biofuels, hydropower, forest cover, etc.  Using them to meet one's livelihood or other needs is a "pay as you go approach" when compared to meeting such needs by  "borrowing" from the limited non-renewable, fossil fuel resources.  

scarcity--a condition that exists when peoples' "wants" exceed the limited resources available to satisfy them.  The related need to decide how limited resources are allocated leads to rationing and a means for doing so.  Price is one such rationing device. People compete  for what is scarce, and in making choices incur opportunity costs.  

sweat equity--refers to an investment of time and labor in a project rather than a financial investment

thrifty (or frugal) orientation -- making do with less, saving money and resources by finding creative ways to solve practical problems and maintaining one’s current possessions, thereby improving their functional efficiency and extending their useful life.

voluntary simplicity -- a simple, typically environmentally sound and ecologically grounded, non-consumerist lifestyle that people voluntarily choose, typically for ethical, environmental or spiritual reasons


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