The Borrowing Loop Theory
Recently, when I was wandering around the Economics and it’s theories, I made a theory myself after a lot of reviews and considerations. I don’t know if it’s purely unique and if it’s legit. I actually liked the concept as it fitted quite right in both theoretical as well as practical world. Also, when I thought about my real life experience and applied this theory, it was actually explaining.
The Theory of Borrowing Loop
Basically, the borrowing loop (as the title explains) is the theory about the loop that we get stuck in after we borrow money. When we Borrow ‘n’ amount of money from someone (‘n’ being the amount that burdens an Individual) and gets a time limit to return it, the Individual gets stuck in a loop’s burden, tension of which stays attached for a long period of time.
Example (real life): If ‘A’ borrows 10,000 bucks from ‘B’ and promises to return it after 10–15 days when he will receive his next month’s salary of 30,000, therefore, initiating the Borrowing Loop’s Burden. ‘A’ being an honest person somehow saves the money and returns it to ‘B’ on the 30th day. So here the Borrowing Loop’s Tension has been initiated. The tension of the burden of 10000 bucks doesn’t end while the actual burden has ended.
This month’s salary was 30000 bucks whereas, only 20000 is left with him for this month. Say ‘A’ spents 10000 of 30000 bucks every 10 days, and the month is of 30. For 20 days he uses the 20000 bucks and when the last 10 days came he had nothing left. So again to fill that up he will borrow 10000 bucks from ‘B’, ‘C’ or ‘D’. Again he promises to return it after 10–15 days when he receives his salary. Same thing happens and the loop keeps on going.
Will try to keep it as brief and clear as possible. Do the Thinking stuff, please.
Impact on Countries
Understood the Borrowing Loop using the example above? Now try putting that for a whole country economically. When a Country borrows the money from IMF or the World Bank. It might not be perfect but upto some extent it proves the loop and how, many developing and under developed countries get stuck in it.
How India got stuck in the same loop for around 60 years when Congress Government was in the centre and the Fiscal Deficit was constantly increasing. Increasing Fiscal Deficit clearly indicates that the Borrowing was still going on (not considering and getting involved in the discussion about black money).
Impact on Indian Farmers
As we all are hearing news about how, daily farmers are committing suicide in India. They are unable to return the borrowed money is the main and basic reason for their suicides. Here also, it can be seen that this borrowing loop might be the reason for their problems.
It is not the perfect theory, it might also need some changes and updates, that’s true! Comment your thoughts on it and what is wrong with it. Will be glad to hear the suggestions.
