Loan for survival of a state - Good or bad?
Money is humanity’s past, present and is most likely to be our future.
In today’s world, it is possible to loan money more or less everywhere, no matter where you are. This is an advantage since we can borrow money now, and pay back later. So if your intention is to buy a house tomorrow, you can acquire a loan from a lender and then you pay back the dept when you are able to afford it again.
However, is it always an advantage to be able to borrow money? Are there any disadvantages with a loan?
My answer to those questions is that there are many disadvantages with a loan. A good example of a scenario where it went quite wrong did occur in France during the 18th century. The king Louis XV of France had severe financial problems and so did his country. The war in America had been costly and when France finally lost all American colonies, the situation was not likely to improve. The important resources France usually imported from the colonies were lost. To solve all this, Louis XV tried to borrow money from other countries and his desperate need for money led to an extremely high rate. Finally, France borrowed money to pay the other debts, and an evil circle was formed. These foolish financial policies of his damaged the power of France and weakened the treasury and the monarchy. And when he died, his grandson Louis XVI became the new king of France, although not for a long period. Thanks to these severe problems Louis XV had given France, the French Revolution was imminent and Louis XVI was going to be the first and the last French king to be executed.
If you look at the present-day, you might see that the history has repeated itself more than once when it comes to economical problems. Many countries have, just like France, borrowed more money than they were able to repay. I think it is possible to draw parallels to the great country in the west, USA. President Barack Obama and his government have deep problems now because of USA’s loans from other countries. This kind of problem has also occurred in Greece, Portugal, and Spain etc. so the economic situation for a country is extremely fragile if trouble with loans occurs.
Considering the trouble earlier in history with loans, I think that it is quite unwise, as a leader of a country, to take a loan if you are uncertain whether your country will be able to repay or not. I believe that to be greedy as a leader is only one thing, and that is certainty of collapse and possible of downfall for the country.
What do you folks think? Is it acceptable for a country to take loans?
For more info, check out these links:
http://www.bbc.co.uk/history/historic_figures/louis_xv.shtml
http://www.bbc.co.uk/history/historic_figures/louis_xvi.shtml
//Olof
