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03 From the Editor’s Pod

24 Essays Re-ModelledCheck out our essays on budget deficit—a common starting sign of a more long-term problem of debt, as well as a microeconomic essay on banks—the conduit for this whole concern over debt. Reinforce your understanding on the debt problem by putting content you have read to essays written by top students and re-vamped by our teachers to improve your own essay writing skills.

32 Chains of DebtDebt clearly has its costs, but are the costs of debt really so dear that all countries will begin a downward spiral once debt is accumulated? We look at the relationship of debt on the economic growth of a country and learn how debt, if allowed to fester, works like a leech, sucking away the GDP of the country in debt and sparking a domino effect among other faltering economies.

04 Microdebt Though sounding similar to the term MicroFinancing—a program targeted at offering loans to the poor to get a better life—we look at the topic of borrowing and debt from the bottom up through the perspective of the entities that take out the loans, firms. Why do they take out loans, which firms tend to take on more debt, and what happens when loans can’t be repaid? Are there exit paths similar to those available to countries on a macro level? We’ll look at the problem of debt from a bottom-up approach!

10 Debt-FreeA word that brings smiles to many, but a word that seems highly elusive in today’s world, where debt seems to be the norm. Is being free from debt a dream that can’t

be reached or can it really be attained? If so, how can it be done? What about past economies that have been paralyzed by debt? What was the final remedy, and can these cures be used to solve today’s debt problems?

18 Counting and Assessing DebtA problem isn’t a real problem until it’s been studied and examined. Data and statistics are useful, but we have to use them with caution. Though data sets can be used to tell one story, they can sometimes tell different stories if used correctly. Such is the situation when we try to understand the world’s debt problem. Is it really that bad? Are there economies that are seem to in a bad debt situation but could have a rosier outlook through the numbers? Learn the skill of interpreting data with care.

38 Debtflation or In-Debted?Debt has a direct outcome on economic growth, but what about on inflation or general price levels? Is there a clear relationship between debt and inflation, or the other way around? We take a different perspective to the debt problem by focusing on aspects other than growth.

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REGULARS

FEATURESOn the Cover

Printer KHL Printing Co Pte LtdInsights Magazine is published by MindLever Education Centre Pte. Ltd. All rights reserved. No part of this magazine may be reproduced without the written permission of MindLever Education Centre Pte. Ltd.MICA 128/08/2010

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Editor-In-Chief Juliana Foo juliana@mindlevereducation.com

Design Director Mark Jason Vargas

Contributing Writers Juliana Foo Jaclyn Wee Tricia Wong

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ECONOMICS BROUGHT ALIVE!

We are living in a time whereby the past is catching up with us. Past eras of profligacy and unchecked spending are

starting to weigh down on the present. Well, the good thing about a debt

problem is that it seems as if countries that have allowed such excessive spending to take place are paying a high price for allowing such a debt amount to add up. The countries that are the source of the debt problems are seeing a situation that has been allowed to brew and then manifest its full negative consequences in the past few years. Those countries are

counting the costs of past excesses and are experiencing prolonged unemployment and sluggish growth like never before. The price of wanton profligacy?

The cost, however, isn’t confined to the countries with debt. Given the close integration of countries in this age of globalization and given that these economies together make up a huge portion of global GDP, their problems become a shared world problem. Debt in today’s era turns into a global crisis, affecting all nations. The damage is done and the world is now looking at how to contain the problem with the least damage to the world economy.

Being able to witness such a grand scale economics problem of a debt crisis could be a once-in-a-lifetime experience. Let’s just hope we don’t bear too much of the economic pain from the potentially damaging economic costs if such a problem does get out of hand. For all the negative headlines and negative outlook

associated with debt, we’ll present them to you in this issue on debt.

We count the costs on the economies of those with debt in the two articles: “The Chains of Debt” (pg. 32) and “Debtflation or In-Debted” (pg. 38). We also want to understand just how bad the situation really is—on an absolute scale and also on a relative comparison level between countries. We also look at how realistic it is to think that a country can be debt-free in

“Counting and Assessing Debt” (pg. 18). In the article “Debt Free” (pg. 10), we

look at the present day problem of debt relative to past debt crises to gain a better understanding of the severity of today’s debt crisis. Finally, we take a micro-perspective look at debt by looking at firms, borrowing, and debt in “MicroDebt” (pg. 4).

Your Editor-In-Chief,Juliana Foo

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FROM THE EDITOR’S POD