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Sure, we need to change the devils cycle of debts and interests. But austerity measures trigger a series of other devil cycles so in my opinion it is not austerity but more intelligent spending that is needed. Here is a very small model on this. The model already contains 22 feedback loops. Have a look ...

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Kai Neumann

Consideo

That's an intersting one. Though, I have at least two questions:
1.) you assume that austerity leads to more depts - with the same weight as economical growth and economical confidence
2.) and austerity leads to more instead to less dept
Naturally, I would have given a small negative, delayed impact of austerity on depts...

Anyway, you can really nicely see, that (blind) economical confidence and economical growth are the main trigger for new depts. And the biggest "puller" is the interest rate... that's weired: on one hand it is understandeable, that more interes rate more expensive credits and so on... on the other hand, more interest rate automatically increases the existing dept... I think, this effect is only partly in the model. Very often, credits are necessary to pay the interest without having any smart investment. So interest should also be connected to new depts...

The changes can be seen...

The main difference come with role of the interest. The interest rate remains as a puller... food for thought...
Thanks, Kai, nice inspiration!!

Ahhh, great reply. My mistake was: I didn't explain that I had the current crisis and the troubled countries in mind. Here other countries, mainly Germany and China, demand austerity measures to vouch for NEW credits and hence debts. That leads to at least two devil cycles and just one benefit through the decrease of interests.
And as you pointed out, interests play a key role in here.
And it is a system that runs on the hope for economic growth - not on a steady state of the economy. Nor would it survive a shrinking economy. Sure, it would become a bigger model to include this, but it would be very interesting. For a further modeling we would also have to include the foreseeable barriers to economic growth: the depletion of resources. Few people grasp this, though even conservative studies show how the prices for resources will for sure increase exponentially while the availability of alternatives due to their short-term uncompetitiveness won't be sufficiently developed. That will trigger a series of catastrophes that could only be managed by a kind of world government. Currently Republicans in the US are threatening to invade Iran and some resource-richt countries like Afghanistan or Russia would not agree on a global solution as long as they are benefitting from this major shifts. Well, more of this in my upcoming book
Hmm, personally I am eager to know whether really few people know this or whether some suspicious cycles (Bilderberger etc.) are running this system to increase the gap between poor and rich as long as possible. What would be worse: few people understanding the world or that they understand it but misuse the system?
Well, let us see, what others think of our models.
Thanks and happy modeling
Kai

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Kai Neumann

Consideo