SYS-CON MEDIA Authors: Pat Romanski, Liz McMillan, Yeshim Deniz, Elizabeth White, Courtney Abud

Article

Is The World Ready For a Debt-Free Economy?

Could The World Continue to Function Without Debt?

More than 160 million Americans are carrying credit card debt, and the average balance for each household is currently $15,000. Total consumer debt in the U.S. has climbed above $11 trillion, which includes all kinds of debt, from student loans and credit cards to mortgages and car loans.

Looking at these statistics, it’s clear that a majority of citizens are surviving on credit. Maintenance of their lifestyle actually depends on having gone into, and stayed in, a substantial amount of debt.

The economy runs on debt

As much as we might dislike it, the world’s economy runs on debt. In order to sustain business as usual, debt is an inherent piece of the system.

In fact, money itself is created as debt through what’s called the Fractional Reserve System. Under the Fractional Reserve System, banks are only required to keep a small percentage of deposits on hand, and are allowed to loan out the rest.

For example, if a bank is required to keep 10% of all deposits on hand, and you make a $1,000 deposit, that means the bank can loan $900 to another borrower. It sounds legitimate until you consider that if you were to come back the next day to withdraw your $1,000, you might expect to have a problem, but you don’t.

The bank didn’t loan out your $900. They loaned out an imaginary $900.

Credit and debt are two sides of the same coin

When you apply for a new credit card, it’s only technically considered credit until you use it. Once you use some of your credit, it instantly becomes debt: money you owe somebody else.

For this reason, it’s vital to understand that credit and debt are two sides of the same coin, and you can’t have one without the other. If debt is going to be eliminated, then credit will have to be removed as well.

Student loan debt is mainly a US problem

Americans owe $1.3 trillion in student loans and more than 7 million citizens are in default -- with millions more behind on their payments. Students are being forced to consolidate and refinance their loans to avoid going into default.

You might think borrowing money in the first place was the problem, but when you look at Sweden, a different story emerges. In Sweden, it’s common for students to take out loans; not for tuition (because tuition in Sweden is free), but to use for daily living expenses.

About 70% of students take out loans in Sweden, at an average of $20,000 each, and yet there’s no student loan debt crisis in Sweden. This discrepancy could be due in part to the fact that Americans are allowed only ten years to pay back their loans, while students in Sweden get 25 years, German scholars get 20 years, and young people in England have up to 30 years to pay off their loans.

Can the world thrive without debt?

If debt disappeared from our economy, we’d have to change everything about the way we live, work, and do business. Companies that rely on revolving credit and the ability to obtain large loans could no longer operate. The number of firms that depend on credit to stay in operation is vast, and includes many Internet-based businesses.

Without debt and the ability to take out massive loans, the monetary value of goods and services would have to fall substantially. Today, because people can take out a $50,000 loan to purchase a car, manufacturers can price their cars in that range.

If nobody could take out loans that size, the price of cars would have to come down … as would mortgages, student loans, and other big-ticket items that most people require a large loan to purchase.

Without debt, society would have to thrive mostly on systems of trade and barter: either monetary exchanges of equal value, or trading of goods and services. Credit would be a tool of the past.

You can become personally debt-free

So the world is clearly not ready to go debt-free just yet, but you can do something about your personal debt. First, consider refinancing your existing loans in order to arrange a better interest rate. Even if you negotiate only a 2% reduction in interest, you could save thousands of dollars.

If you can’t refinance, or you’re so far behind that you can’t catch up but don’t wish to file for bankruptcy, try consolidating your loans. Debt consolidation is a great option when you owe substantial amounts to various creditors.

When you employ a debt consolidation service, it will negotiate on your behalf and get you at least a 30% discount on your debts. The service combines all your debts into one payment you will henceforth make to that company, which includes a service fee. You’ll have to make only that one monthly payment going forward.

It’s possible to live without credit or debt; many people have done it for years. It would probably demand an adjustment to your lifestyle if you wanted to go that route, but your life will likely involve much less stress once you do.

More Stories By Larry Alton

Larry Alton is an independent business consultant specializing in social media trends, business, and entrepreneurship. Follow him on Twitter and LinkedIn.

Latest Stories
Isomorphic Software is the global leader in high-end, web-based business applications. We develop, market, and support the SmartClient & Smart GWT HTML5/Ajax platform, combining the productivity and performance of traditional desktop software with the simplicity and reach of the open web. With staff in 10 timezones, Isomorphic provides a global network of services related to our technology, with offerings ranging from turnkey application development to SLA-backed enterprise support. Leadin...
With the rise of Docker, Kubernetes, and other container technologies, the growth of microservices has skyrocketed among dev teams looking to innovate on a faster release cycle. This has enabled teams to finally realize their DevOps goals to ship and iterate quickly in a continuous delivery model. Why containers are growing in popularity is no surprise — they’re extremely easy to spin up or down, but come with an unforeseen issue. However, without the right foresight, DevOps and IT teams may lo...
Platform9, the open-source-as-a-service company making cloud infrastructure easy, today announced the general availability of its Managed Kubernetes service, the industry's first infrastructure-agnostic, SaaS-managed offering. Unlike legacy software distribution models, Managed Kubernetes is deployed and managed entirely as a SaaS solution, across on-premises and public cloud infrastructure. The company also introduced Fission, a new, open source, serverless framework built on Kubernetes. These ...
Emil Sayegh is an early pioneer of cloud computing and is recognized as one of the industry's true veterans. A cloud visionary, he is credited with launching and leading the cloud computing and hosting businesses for HP, Rackspace, and Codero. Emil built the Rackspace cloud business while serving as the company's GM of the Cloud Computing Division. Earlier at Rackspace he served as VP of the Product Group and launched the company's private cloud and hosted exchange services. He later moved o...
As you know, enterprise IT conversation over the past year have often centered upon the open-source Kubernetes container orchestration system. In fact, Kubernetes has emerged as the key technology -- and even primary platform -- of cloud migrations for a wide variety of organizations. Kubernetes is critical to forward-looking enterprises that continue to push their IT infrastructures toward maximum functionality, scalability, and flexibility. As they do so, IT professionals are also embr...
Kubernetes is a new and revolutionary open-sourced system for managing containers across multiple hosts in a cluster. Ansible is a simple IT automation tool for just about any requirement for reproducible environments. In his session at @DevOpsSummit at 18th Cloud Expo, Patrick Galbraith, a principal engineer at HPE, will discuss how to build a fully functional Kubernetes cluster on a number of virtual machines or bare-metal hosts. Also included will be a brief demonstration of running a Galer...
DevOps is under attack because developers don’t want to mess with infrastructure. They will happily own their code into production, but want to use platforms instead of raw automation. That’s changing the landscape that we understand as DevOps with both architecture concepts (CloudNative) and process redefinition (SRE). Rob Hirschfeld’s recent work in Kubernetes operations has led to the conclusion that containers and related platforms have changed the way we should be thinking about DevOps and...
Cloud-Native thinking and Serverless Computing are now the norm in financial services, manufacturing, telco, healthcare, transportation, energy, media, entertainment, retail and other consumer industries, as well as the public sector. The widespread success of cloud computing is driving the DevOps revolution in enterprise IT. Now as never before, development teams must communicate and collaborate in a dynamic, 24/7/365 environment. There is no time to wait for long development cycles that pro...
Docker is sweeping across startups and enterprises alike, changing the way we build and ship applications. It's the most prominent and widely known software container platform, and it's particularly useful for eliminating common challenges when collaborating on code (like the "it works on my machine" phenomenon that most devs know all too well). With Docker, you can run and manage apps side-by-side - in isolated containers - resulting in better compute density. It's something that many developer...
Technology has changed tremendously in the last 20 years. From onion architectures to APIs to microservices to cloud and containers, the technology artifacts shipped by teams has changed. And that's not all - roles have changed too. Functional silos have been replaced by cross-functional teams, the skill sets people need to have has been redefined and the tools and approaches for how software is developed and delivered has transformed. When we move from highly defined rigid roles and systems to ...
In a recent survey, Sumo Logic surveyed 1,500 customers who employ cloud services such as Amazon Web Services (AWS), Microsoft Azure, and Google Cloud Platform (GCP). According to the survey, a quarter of the respondents have already deployed Docker containers and nearly as many (23 percent) are employing the AWS Lambda serverless computing framework. It's clear: serverless is here to stay. The adoption does come with some needed changes, within both application development and operations. Th...
xMatters helps enterprises prevent, manage and resolve IT incidents. xMatters industry-leading Service Availability platform prevents IT issues from becoming big business problems. Large enterprises, small workgroups, and innovative DevOps teams rely on its proactive issue resolution service to maintain operational visibility and control in today's highly-fragmented IT environment. xMatters provides toolchain integrations to hundreds of IT management, security and DevOps tools. xMatters is the ...
Kubernetes is an open source system for automating deployment, scaling, and management of containerized applications. Kubernetes was originally built by Google, leveraging years of experience with managing container workloads, and is now a Cloud Native Compute Foundation (CNCF) project. Kubernetes has been widely adopted by the community, supported on all major public and private cloud providers, and is gaining rapid adoption in enterprises. However, Kubernetes may seem intimidating and complex ...
If you are part of the cloud development community, you certainly know about “serverless computing,” almost a misnomer. Because it implies there are no servers which is untrue. However the servers are hidden from the developers. This model eliminates operational complexity and increases developer productivity. We came from monolithic computing to client-server to services to microservices to the serverless model. In other words, our systems have slowly “dissolved” from monolithic to function-...
CoreOS extends CoreOS Tectonic, the enterprise Kubernetes solution, from AWS and bare metal to more environments, including preview availability for Microsoft Azure and OpenStack. CoreOS has also extended its container image registry, Quay, so that it can manage and store complete Kubernetes applications, which are composed of images along with configuration files. Quay now delivers a first-of-its-kind Kubernetes Application Registry that with this release is also integrated with Kubernetes Helm...