Be Missing You

Score!

While I met my colleagues at the train station, I didn't book my ticket in a group like they did, so I am sitting in a mass of strangers, not having to talk to anyone, but able to write for a bit.

My wife and Smallsteps dropped me off at the train station and for the first time ever, Smallsteps was crying after she said goodbye in the back of the car. We will video chat and sends clips of course while I am away, but I think she is now of the age that these things affect her and it tends to translate into her being more difficult to handle and less willing to do as she is told. It actually started yesterday, as while we had a lovely day together just the two of us, once home, that deadline of me leaving was real and she started getting whiny.

I will miss her a lot.

My wife too of course, but it is easier to handle as adults.

Next week, the cards will be turned for a few days, while my wife goes away for a work trip. Smallsteps is going to like that even less, as they are very close and do a lot of everyday things together. Luckily, it is at the end of the week and through to Saturday, so I will be able to spend a lot more time with her and have some special adventures to keep her mind off of it. I might take a few extra hours off also, since I am travelling on a Sunday and working the evening today.

But on another note, I was reading how the debt interest payments of Finland are set to triple, as interest rates on borrowing increase this year. Finland is in "pretty good" shape in general in this area, with the 150B government debt being about a70% of GDP, but in a relatively small economy, those interest repayments take away from other spending, so adding around 2B in interest payments per year is significant.

As you can see, the debt level was in decline until the Global Financial Crisis where in the years following, massive government spending was added to bailout banks and companies, as well as other EU countries. But since then, it has steadily climbed, like the loosening of the purse strings meant they couldn't be closed again. A decline started about six years ago, but 2020 saw a massive increase to the highest level Finland has ever seen.

With the change in interest rates and the weakening economy, the outlook looks bleak, as the ability to export declines and spending keeps increasing, especially on aid for Ukraine and domestic military. This means that the debt to GDP ration will likely worsen further, increased austerity measures taken and more services get cut, or less spending gets made in places like healthcare and schooling.

One of the problems with a social democracy like Finland is that the country isn't set up for privatized schooling and healthcare, but with more and more globalized business extracting value outside of the country, there is decreasing potential to cover these things internally, no matter how high the tax gets.

In 2022, the Finnish Tax Office took in 81 billion euros. 35B individual tax and 21 billion in VAT. And the majority of the tax was paid by individuals, not corporations, as businesses don't incur the VAT, as they can claim it back as a tax deduction. That is 56 billion from people, but that doesn't mean the rest came from corporations it seems, as while I couldn't find the data in English and it wasn't explicitly said in the article I was reading, corporate taxes increased by 29% in 2022, but that was only an increase of 1.8B euros, which means that the corporate takes were around 8 billion. The rest mostly comes down to social security contributions.

But, as you can see, that isn't a huge amount of tax income coming in, so an increase of 2 billion a year to service government debt is going to make an impact, as the debt accounts for 3.2% of the tax revenue, rather than the ~1% it was earlier. What this means is that there will likely be cuts, but there will also likely be debt extension, which will exacerbate the situation further, setting up a spiraling debt cycle, similar to an individual who spend over their income, maxes credit cards and then moves to buy now pay later services to pay for essentials - until their credit rating is screwed and they can't secure any additional funding, but still have to service the debt portfolio.

The easiest way to manage debt, is not having any. However, Finland seems to be taking the US approach to debt more and more - just keep borrowing. This might be okay when interest rates are low on loans like they have been the last decade, but now that they are rising, these obligations are getting more expensive, as larger. As more income is going out of the country through a multitude of ways, the potential to pay back lowers and everything becomes more difficult for everyone, since there is only way for the governments to make ends meet - increased taxes and lowering of spending on services.

Debt really does make the world go around, and it affects us all, as we have seen in the last15 years since the global financial crisis, which was driven by debts and the inability to pay them back - sub-prime mortgage lending - loans to those with poor credit ratings with a higher interest. The low credit rating is for a reason, because they have decreased opportunity to pay obligations and, the higher interest rate increases the chances they will default. It is very much like a desperate spot from a loan shark, the difference being that when there is a default, the heavies break our legs.

Governments seems to be like the rest of us - the more money they have access to, the more they are going to spend. And like the rest of us, they predict that the future will see more income than the present, so they take loans under the guise of "I will pay it back next month". And once the cycle starts, it continues until when conditions degrade, the cost to lifestyle and wellbeing can be extreme.

I can't do much to fix the financial processes of a country, but what I can do is work myself out of debt so that when times get hard, my family and I don't have to be impacted quite as heavily as we could have been, had we extended our debt to the outer limits, as so many people seem to have done in the last decade and especially, through the pandemic.

Smallsteps might miss me through the week and the amount of work my wife and I do might not be ideal at times, but it also isn't ideal to not have the financial room to navigate troubled economies. Sacrifices need to be made as there is always an opportunity cost to every action and at least in my opinion, it is better to make constant small sacrifices, than get into debt and have to pay a very large cost.

Debt won't be missed - by those who pay heirs off, or by those who have it owing to them.

Taraz [ Gen1: Hive ]