In sales, there are loser-winners and there are loser-losers

On a sales call/meeting, there are loser-winners and there are loser-losers. We’ve been both, and we learned the lesson the hard way.

 

Sales is a game that’s played in multiple rounds. Like with board games, not every round is positive for our advance to the endgame. Losing a round, in no way implies we lost the game.

 

Losing a round can either be messy or graceful. Opting for the latter, is what differentiates loser-winners, from loser-losers.

 

We can’t recover from a messy loss. It’s usually the result of uneducated sales processes, detachment from the product/service we sell, more push to our agenda than prospect discovery, aggressive pitches and empty promises that don’t lead anywhere.

 

How can we lose gracefully? We start by expecting/accepting the possibility of a loss.

 

Expecting that not everyone is positioned to accept our product/service is the first step. Our job in sales, is to calibrate the prospect into accepting our product/service. The faster the better, but it doesn’t have to be today. In many cases, this calibration is done by the company’s marketing efforts. Sales in these cases are immediate, even automatic with no real handling.

 

In every other case, the prospects’ mind is nowhere near where you need it to be, to close the sale. If you have no need for a new TV, then you’re not open to discuss about TVs, or buy another one for that matter.

 

A loser-loser’s mindset can’t accept that prospects are not ready to buy. With no relationship buildup, no prospect calibration and no reason to be heard, the push is unconditional and prospects shut down with no turning back.

 

Be a loser in your own terms, and you will never lose a sale.

In sales, there is no such thing as playing dress up. Or is there?

On a sales call/meeting, there is no such thing as playing dress up. A good product/service will always be good and a bad one, will always be bad. Or is it?

 

Dressing our product/service with tactics like building rapport, transparent frameworks, emotional impact and handling objections, don’t make it a good product/service.

 

We’re strong advocates of all that encompass sales including all of the above, as long as they complement a “good product”. But the product is what it is, and we still have to sell it. What if it’s not a good product?

 

“Good” is a subjective term. Every person defines things, people, emotions as “good” or “bad” based on preference. Based on taste. What’s good for one person, might be bad for another.

 

Accepting a position as a sales rep, comes with only one requirement. A buy-into the product/service so we can remove labels of “good” and “bad” from the situation. There’s no better time than the early days, to do a thorough due diligence:

 

  • Learn all about the company and its products/services
  • Understand the industry as a whole
  • Follow the company’s online history (no surprise is a good surprise)
  • Find the value and the added-value (comparatively) of the product/service we’ll sell
  • Buy into the product/service and into the workload that comes with promoting it

 

If we’re still of the opinion that the product/service is “bad”, should we really be in the front line selling it? We’ re not doing anyone a favour (including ourselves), to be promoting something we don’t have strong opinions of.

 

Secure your position with a “good” product/service, and you might never really have to sell again.

In sales, a “contract” is struck before exchanging information

On a sales call/meeting, a “contract” is struck before exchanging information. It’s not a legally binding contract, but it’s as important (or even more).

 

Clauses of this contract can include permission to take the prospect’s time, openly laying our cards on the table, acceptance of negative feedback, respecting the rules of engagement and more.

 

And all of the above, just to get the conversation started – how is it even possible?

 

Sales in its core is a game. Can you play a game, without agreeing to its set of rules? Without rules, stakes are high, confrontations take more time than playing the game itself, it turns into being our word against our opponent’s word.

 

A “contract” is required to create a low-pressure environment since both parties understand the rules of the game, they know each other’s intentions and they have a clear exit plan (“I need 30 seconds to explain why I’m calling, if not relevant, I’ll be on my way”), should things go south.

 

Sales come with ulterior motives (not referring to dishonest ones). Disarming the fight or flight mode of prospects is our number one priority.

 

Prospects have no reason to disarm. Their natural defense is to just not engage.

 

Consider this funnel:

 

  • The “contract”. Politeness, gratitude, appreciation, humour, can all work in our favour when laying our cards on the table.
  • The conversation. Less is more when not enough information is provided. We can be more active in getting this information, than pushing our agenda.
  • The challenge. Picture an environment where our product/service is not around. Problems can’t be solved, pains persist, prospects get left behind, opportunities are lost.

 

A successful result doesn’t mean we hang up our boots.

 

Buyer’s remorse is more common than we think. It’s in our nature to second guess every time we part with our money. Post sale service can be more valuable than getting new customers sometimes.

Retention is not a tool that jumps in out of nowhere. It’s part of the process.

Secure the invisible handshake early on. Trial and error will fine tune the rest.

Prospect ghosting – what’s going on here?

On a sales call/meeting, we can be well on our way to a close, and then the dreaded “ghosting” happens.

What’s going on here?

For sales reps, the thrill of a great conversation can many times, feel better than a closed sale. That’s because the possibilities are endless to where the deal could go, and most of the work has already been done.

Appointments are set, action items are locked in, the follow up time is there, but the prospect is nowhere to be found.

Here’s the catch;

A good conversation most of the times is full of buying signals. If we don’t capitalize on these signals on the spot, chances of a close will start thinning out fast.

Outside our conversation, prospects have one-too-many options to consider. We just sold them the pain, the solution to this pain but not our product.

When the call ends, this great conversation will be discussed with other people who also have an opinion on the matter. They might say things like “hold on, I know a guy that knows a guy, that works for a company that knows a company, that can do this a lot cheaper and better”.

And before we know it, our prospects end up buying elsewhere, a cheaper but definitely not better product/service, and we haven’t done anyone a favor. We set our prospects on a path of bad service that will deter them from ever looking at their pain the same way again.

It wasn’t our fault that they chose a different/cheaper solution and got themselves in a mess. But it was definitely our fault that we didn’t:

➡️ Read the buying signals
➡️ Capitalize on them
➡️ Set a fearless closing in motion before our chances thin out

“Fearless” doesn’t mean extravagant or aggressive sales. It means:

✔️ Value our time spent to outline a pain
✔️ Value our time spent to outline the solution to the pain
✔️ Removing the “threat” of saying yes, with a sensible win-win value proposition

We have more winning chances if we create them ourselves, instead of leaving them to chance.

Controlling the narrative – there can be only one leader

On a sales call/meeting, there can be only one leader. If we don’t take control, it will be taken from us and the rest is history.

Prospects are emotional creatures. We’re all prospects for someone, so we can relate to the emotions that are being channeled through the other side of the conversation. And as such, we don’t like being bullied into decision making, but we also choose to ignore weak positions of people who can’t stand their ground or have no thoughts of their own.

To have thoughts/opinions, renders us knowledgeable and up to date with current challenges and solutions. Our thoughts can be confronted, and that’s the beauty of it. If prospects become confrontational, they are by default engaged and we have won half the battle.

We’ve won because everyone is ready to jump on the opportunity to prove us wrong, and no one is ready to admit we’re right. Both cases open a door that will prove so important going forward, that a simple sale (even though successful) will mean very little.

This door holds a new relationship built on mutual understandings, common grounds, shared beliefs, open communication, respect and accountability. It elevates both sides to a level of commitment, far from corporate names and marketing gimmicks.

Challenging a prospect should be part of any call. The first call, the second, and all the relentless follow ups until the decision making. Yet, reps don’t challenge/provoke enough to ascertain strength.

How to challenge? Never arrogantly, and almost always by asking questions. Questions that allow us to control the narrative and gain the necessary authority. Authority is earned. It cannot be demanded.

If we ask the right questions, we will get the right answers and the conversation can lead to gaining authority. If we ask the wrong questions, we will get the wrong answers and we will both end up rambling. Fighting for authority past this point is futile.

Controlling the narrative is binary. It either puts the buyer in our sales process, or us in the buyer’s buying process.

There can be only one winner.

In sales, fear and hesitation are usually personal stemming from our training

On a sales call/meeting, fear and hesitation are usually personal, and both stem from weak self-discovery during our training/probation period.

Occasionally, reps can overcome gaps created during probation, but as the workload grows⬆️ combined with a disengaged⬇️ audience, the clock starts ticking backwards.

Prospects smell fear & although they might tolerate it, they penalize it by being unreceptive, passive, aggressive, full of objections and worse, rejection.

All of the above are manageable on their own, but not if we’re overrun by FEAR.

What fuels fear and hesitation? Here’s a quick breakdown:

Failure 

Without failure we don’t evolve. We should be searching for failure, not be afraid of it.

✔️ Failure lights up our weak spots, it’s a better teacher than the most expensive universities.

❌ Failure should not put us down, or stop us from pushing harder.

Rejection

With real effort, we’re going to get rejections. It comes with the role and it should never get personal.

✔️Rejection can recalibrate us, ground our push & help us learn from our mistakes.

❌ Rejection should not dictate our emotions, or our willingness to continue.

Performance

Sales positions are always accompanied by hovering targets. If targets become the reason we sell, any success is short lived.

✔️Targets can help us prioritize, maximize efforts & maintain the feeling of urgency.

❌Targets should not dictate our approach or our conversations.

Labels

Some sales reps are on top of their game, while others do it for all the wrong reasons. This negative stigma, can stain everyone’s efforts i.e. “sales reps are dishonest, pushy, insincere.”

✔️Labels are there to be proven wrong, and if we do our job well, they can be rewritten in our image.

❌Labels don’t define anyone. Our work defines us and gives back the relevant results.

Training

When soldiers are uncomfortable during operations, they trust their training to get them through.

✔️Proper training takes 80% credit for our success. Contrary to popular belief “if the person has it in them, they will succeed”, numbers speak louder than words.

❌Incorrect training burns time, leads, clients. It discourages, internalizes failures and hinders growth.

Character

There’s an inert discomfort while selling, relative to whom we’re selling to, and also who’s in the room listening in to our work.

✔️Sales are all about spreading the word of the product we already bought into, and how it can solve pains, problems, add value.

❌Sales are not about us, they are not about our prospect, and they’re definitely not about the people listening in while we pitch.

There’s no bypassing fear. The only way around it, is through. It may be as simple as dealing with only one of the points above, or as complicated as all of them and then some.

Self-discovery is about finding our own pains, and working to resolve them.

Only be afraid of being afraid. Everything else will follow.

A good sales bet? Sell as if we’re selling the product/service to ourselves.

On a sales call/meeting, all bets are on. A good sales bet? Sell as if we’re selling the product/service to ourselves.

💡If we are not convinced to buy our own product, why would anyone else be?

In every other conversation 🗣️, we do exactly that. Whether discussing politics, social, with our inner circle, casual, formal, business or other, our strong opinions reflect our personality and our belief in what we consider true.

If we don’t have a strong opinion, we normally concede or stay quiet. Conceding or staying quiet in sales is not an option ❌.

We are the first and last defense of a product/service so valuable that:

1. It solves painful problems, whether superficial or deep
2. It compliments existing solutions and adds value through competitive advantages
3. It boosts growth (potential and realized growth)

Before creating our script, we should ask ourselves:

👉What pains does my product/service solve❓
– Start by the abstract/superficial pains and dig deeper to find the serious ones.
– Do we relate with these pains❓
– Make them personal and challenge our product/service to solve them all.

👉What added value does my product/service provide❓
– Start by looking at similar providers and what they offer. Compare our product/service to theirs and find our advantage 🤓.
– If there is none, discuss our value proposition with the management. Find true value and not regurgitated online material.
– Don’t stop until we personally (not the company) buy into this value ✅.

👉How does my product/service encourage growth❓
– Start by picturing an environment where our product/service is NOT available.
– The pains discovered above and the added value, are all real and they are now also personal. If they are not solved, we miss valuable opportunities, we concede to weaker options, we stay behind.
– This is the opposite of growth📈. Would we knowingly not choose growth over stagnation?

💡We bought into our product? Why keep this knowledge to ourselves?

Instead of looking at sales as the repeating chore🥱 we have to do day-in-day-out, the purpose becomes clearer. It’s about sharing this discovery, with the intention to inform📢, educate📖 & support🤲 others who just don’t know about it yet.

Don’t sell – reach out to as many #prospects as you can, and spread the love❤️.

Seconds to determine if we close on the spot, or continue with follow ups.

On a sales call/meeting, we have seconds⏱️ to determine if we’ll get a close on the spot, or fix the agenda for further follow ups.

Too soon and we get nothing. Too late and we get less than optimal results.
To make things worse, targets cloud judgements and the line blurs even more.

So, what do we do?🤔

To begin with, here’s the hat-trick mindset of winners:

👉 Paint the right picture🖼️ – the prospect willing to close today, will do so if the right conditions are met (we’ll get to these conditions in a second).
👉Accept to lose the battle but never the war – the correct #relationship 🤝 with a prospect, will feed #targets for longer. Pushing to close today, will destroy tomorrow’s opportunities.
👉Realize that today’s win🏆, won’t be there tomorrow but targets will – Build the relationship, and gauge the possibilities. If it’s there, go for it. If not, live to fight another day.

What conditions must be met for the prospect to buy (today or later)❓

✅Our product/service is in line with the prospect’s needs.
✅Our product/service is better than what the prospect is currently using.
✅Not using our product/service is causing some type of “loss”
✅Risk factors are minimal to non-existent, mainly because of the relationship we have built.

Experienced prospects don’t need much to make a decision if their conditions are met. New comers might need that extra TLC 🩷to see how they fit in the picture.

Different people, have different standards. For some, assessing risk is number one while for others, the fear of missing out is enough to take a leap of faith. Are we worth taking that leap of faith with?

Nothing beats a properly structured pitch💫. One that engages, informs, picks up from where it left off prior and finally resonates in an unscripted and mechanical way.

It takes practice – We won’t get it right the first time. We won’t get it right the second time. With practice, we will definitely get there and that’s all that matters.

Keep your eyes on the prize. And it’s not today’s payout.

It’s getting the pitch right consistently ✔️ ✔️✔️…

We interview our prospects and we are being interviewed every time

On a sales call/meeting, we interview our prospects and we are being interviewed every single time.

Which side of the table are you sitting at? And does it really matter?

Here’s the thing. There’s a nervousness clouding every sales attempt. It’s unavoidable but manageable.

This nervousness kickstarts our defense mechanisms, and instead of prepping the ground to listen (which is what better sales people do), we prep the ground to talk – so we can be vetted.

We are inevitably prepping the ground to be interviewed. This is followed by a more passive/reactive attempt that hardly ticks any of the sales mechanics, and we end up answering questions instead of asking them.

Do we leave room to find out:

– How our product/service fits into the prospect’s current environment?
– If they already have what we offer, and what they are missing from the solution?
– What their biggest pain points are?
– If there are budgets in place for what we’re promoting?

➡️ How easy do you find your way, with your eyes closed?
➡️ How do you hear the music, with your ears covered?
➡️ How can you navigate a conversation, when you don’t have enough information?

✔️Just like that – the tables turn. Our mindset from an interviewee is turned into an interviewer.
✔️Just like that – the nervousness, awkwardness, uncertainty, all disappear.
✔️Just like that – confidence, security, attention, all kick in.
✔️Just like that – the prospect is the one being vetted.

Bottom line:

It’s not about you. It’s not about the prospect.

💫 It’s about the results that you can help them realize.
💫 It’s about the progress you can help them achieve, and how fast you can get them there.

Take a breather and start again.

Debt – Could modern monetary theorists (MMT) be our ladder out of the pit? We’ll look into it, but not before we take you through the traditional schools of thought

 

“Debt is the slavery of the free” said Publilius Syrus. Depending on whom you ask i suppose. Modern monetary theorists believe we can print our way through any obligation as long as certain conditions are met. We’ll get there eventually but not before we go through older schools of thought and how economics evolved through the years.

Great debates (that are not searching for a winner but the truth), make people, well… better people. In our search for arguments to support an idea, we end up revealing so much about ourselves and others. A real search also paints a more pragmatic picture of what’s happening around us, without restraints and blinkers of orthodox or unorthodox statements. In a nutshell, just because someone says something is true and everyone goes along with it, it doesn’t have to be the one and only correct statement.

A friend asked the other day if economics is a science. And there you have it… we ended up rolling up our sleeves and debating some fascinating subjects that made a nice salad, interesting enough to put in today’s topic.

 

So what is science?

For a field of study to fit the framework of science, it needs to collect and analyze data, present objective hypothesis and theories that can be tested in controlled environments, and finally come up with agreed and irrefutable true/false results.

 

Does this apply with economics?

Every economic model was founded on solving a fundamental problem. The problem is that there is a finite (limited) amount of resources for product output, while the demand for human consumption of goods/services is essentially limitless.

By nature the problem has no solution. New economic theories cannot be tested in controlled environments. They would need to be applied in everyday life, but it they go bad, they can go really bad. Imagine the implications of a newly applied economic theory that plays with debt, income and spend, with all of them impacting directly everyone’s daily life.

For this reason, economics have always been regarded as a social science more than anything.

 

Social science and the evolution of economics.

 

In the old days, people produced what they needed to produce, then they collectively produced and shared the benefits, then they produced what was needed and desired, all within a framework believed to be a free market. This free market set its own prices and rules of trade, without external intervention.

Then along came hard recessions a.k.a. depressions, and intervention was needed to contain an out-of-control spiral of business cycles (from boom to recession and back to boom again).

The evolution took place in a world where nations didn’t know economics and all they knew was hoarding precious metals i.e. silver/gold, to the creation of schools of thought that studied how the world operated to increase the wealth of nations – which was the foundation of economics – and finally with governments intervening through their policies to smooth out these business cycles.

These schools of thought from Smith’s Classical, to Menger’s Austrian, and Keynes’s Keynesian, played their role in how we approach economics today. There’s a new school of thought, very interesting to look into as well called the Modern Monetary Theorists (MMT). More on MMT below.

 

The economic schools in a nutshell

 

Adam Smith’s classical view, studied how nations operated to increase their wealth. This view argues that we can make the world a better place by being extremely selfish. By making the best decision for yourself, you create and trade with another to meet your needs. In a large scale, these selfish transactions help the system as a whole. Consumers make decisions to maximize own utility, firms for profits, governments for wealth and strength.

Price fluctuations set the equilibriums through voluntary exchange, without government intervention (free market). The problem that persisted with this, is the continuous creation of an immense amount of products and a free market that would decide where these products went, leading to either shortages or excesses.

Division of labor was one of the strongest points of the process. Think of one person having to mine the material needed for a craft, mix the materials required to make the end product, craft the item and prepare it for final use. Now think of many people, taking individual roles in the process, specialized in doing their part and sharing the outcome. Instead of hoarding gold, nations would distribute and create specialties, increase production and trade with other nations to maximize wealth.

Now instead of looking at this from the perspective of production, think of it from the perspective of the people. Think of the economy as a collection of individuals that place a value on things they purchase, based on the satisfaction these provide, rather than a random production line that does just that… produce.

 

Menger’s Austrian school, brought forward the theory of marginal utility. In essence, how much of an item, consumers are willing to purchase. For example, you can buy a toaster once, and be satisfied with its utility as many times as it can be of service. If you buy a second toaster, the satisfaction will not be the same as the first one, since you already have one that works. So how many toasters would need to be produced, depends on the importance of the toaster itself and how many people would purchase it.

Value therefore is not placed on the material, labor and costs but on how important the product is. Not only was the free market specializing people and produced more stuff, but since the same people in the free market bought the stuff, they were also deciding what’s important and needed to be produced. All without government intervention again, same as with the classical view.

And the economic cycles kept rising and falling, until the early 20th century, 1929 to be exact, when the great depression hit the world. And the cycles needed to be tamed, as they were spiraling out of control.

John Maynard Keynes (Keynesian) introduces measures to counteract the extreme effects and in 1936 writes the book “The General Theory of employment, interest and money”. And although the Austrian school debated that these measures tampered with the free market, the consumer’s sentiment became the priority. Who would have a positive sentiment to invest in a company, knowing that a recession is around the corner, about every 10 years more or less? The answer is nobody, but since companies still needed funding to produce and support the economy, why don’t we try to influence the consumer’s feelings (spending) by policies that tax them (take money out of their hands) when the economy is booming, and tax less (leave money in their hands) to spend during economic downturns and troughs.

The aim was to reduce the severity of excess and lack of, by smoothing the effects of each economic cycle through fiscal policy.

Monetary intervention, also known as Quantitative Easing/tightening became mainstream in 1995 when Richard Werner proposed it for the Bank of Japan, to help with the banking crisis and depression the country was going through at the time. Though proposed to increase the total transactions in Japan by encouraging banks to issue more loans (so for productive purposes), it was taken out of context encouraging purchase of securities and real estate. Meddling with the money supply in an economy is the basis of monetary policy, further seen in the 2008 Great Recession and every cycle that required interest rate hikes/cuts to reign down inflation.

The Japanese state of economy is a very interesting subject on its own. When you look at case studies of world economies, you consider developed economies, under-developed economies, Argentina (see last article) and Japan.

 

So what is Modern Monetary Theory?

 

If you ask any central banker, they will either not know what this is, or refrain from talking about it altogether. Why is that? Before we dive into the intricacies of the concept, the general idea defies the traditional ways of a government book keeping i.e. earn more than you spend, collect money through taxes, work for budget surpluses, increase economic output/growth/GDP and pay back your debts with what you have. Not doing so, exacerbates national debt, makes you dependable on foreign and domestic creditors, bears the risk of default, eliminates credibility.

The easy way out, if possible and if you are monetary sovereign, is issuing bonds and printing new money to pay for debts and/or fund economic growth and/or pay for social programs, relief programs (like the pandemic relief programs) and so on.

Traditional economics (and past experience with Germany, Zimbabwe, Venezuela, Argentina) tell us that this “easy way out” leads to inflation and even worse hyperinflation. It leads to an exchange rate collapse due to the devaluation of the currency. To restructure your debts, you seek help from foreign lenders who will give you a loan – but in their currency. So your currency is devalued, its worth much less than the currency you’re borrowing, you have to pay back in that foreign currency, you need reserves to do that which you don’t have and the situation worsens, leading to defaults.

 

How does Modern Monetary Theory look into the above?

 

Imagine if the so called “easy way out” of printing money and taking care of all the issues, wasn’t as bad as you thought. Yes, there are examples of the demonized consequences actually materializing, but what if these consequences don’t apply to every nation, especially a nation with the size and influence of the US?

So in a nutshell, if you’re able and it serves your needs* you can print/create money out of thin air, you don’t need to worry about national debt, its ok to have budget deficits, all because you can afford it. You just print more of it and its all good. There’s no need of a collateral (bond) same as there was no need for gold peg, when Nixon took the US off the gold standard.

*by being able, we’re referring to sovereigns that have their own currency and can print at will. Eurozone countries for example can’t increase money circulation by printing more since the ECB mandates dictate circulation and it affects not just one country, but all of them.

*by serves your needs, we’re referring to the printing of new money servicing your debt and growth. Argentina borrowed from the IMF in dollars and needs to pay back in dollars. Since it prints pesos, it can’t really serve its debt needs that need to be repaid in dollars.

 

More on MMT

 

In essence, a government that issues its own fiat currency (not linked to a commodity), doesn’t have to rely on tax revenues to spend, it cannot be forced to default on debt issued in its currency (since it can print and pay it off), it is constrained only by inflation created when the economy is at full capacity/employment, it uses strengthened stabilizers like income taxes and social welfare to control aggregate demand, it issues bonds as a place for investors/other countries to place their money rather than funding itself.

Dr. Stephanie Kelton is a professor of economics, former Chief Economist to the US Senate Budget Committee and a big advocate of Modern Monetary Theory. She is regarded as a “heterodox economist”, a term that describes an economist who’s theories contrast with traditional schools of economics. Author of the book “The Deficit Myth”, Dr. Kelton circles around 6 myths regarding deficit.

  • The myth that the Fed should bookkeep like a household
    • Where did the Fed find the billions (close to trillion) dollars to bail out Wall Street in 2008? Where did the Fed find the 9 trillion since the beginning of pandemic (not just for covid but also for infrastructure and green projects) that brought US debt from 21 trillion to 30 trillion? Where did you see the effects other than a number of many zeros increasing next to the label “national debt”?
  • The myth that deficits are evidence of overspending
    • Inflation in the real economy is evidence of overspending, being the only constraint of MMT
  • The myth that deficits will burden the next generation
    • The national debt burdens no one. The government can print and pay back at will (on conditions that debt is in its own currency)
  • The myth that deficits undermine long term growth
    • Fiscal deficits increase people’s wealth and savings
  • The myth that deficits make the US government dependent on foreigners
    • US trade deficit is also its “product piling” surplus
  • The myth that entitlement propels the US government toward a long-term fiscal crisis
    • As long as the capacity of the economy allows it to produce needed items, it will always be able to support its welfare and social security programs.

Although the book received controversial feedback and commendations for its radical approach to modern economics, there is no right or wrong approach when dealing with unprecedented events.

 

Final thought on debt.

 

We cannot look into debt individually by ignoring a country’s capacity to pay it back. If I use my credit card and borrow $60,000 but only make $40,000, my capacity to pay back is very low. If I make $100,000, I can pay back easy and I can borrow more. That’s why debt to GDP ratios are important indicators of a nation’s ability to pay back its debts.

On our article on the slippery road of national debt, we gave some studies of good and bad ratios, of limits not to be crossed (like 90%) and the reasons why. Bottom line is that passing a critical threshold (say its 90% for the sake of argument), the growth output for every dollar I borrow is hindered, to the point of making no difference. For example, at 30% debt/GDP, for every $1 dollar I borrow, I could have a hypothetical output of $1.30. So my borrowed dollar has been put to good use. For every percentage increase in the debt/GDP (40,50,60%) this output goes down to $1.20, $1,10, $1.00. Passed 90%, the $1 I borrow produces $0.95 (less than what I borrowed) and it doesn’t get any better moving forward. You see where this is going with debt-to-GDP ratios of  Japan, Australia and Venezuela at 260%, Singapore at 170%, Greece at 166%, Italy at 140%, the US at 124%, France at 110% and many more above the 90% threshold (as of the time writing this article).

Productive spend and growth, rather than inflating the bank accounts of the wealthy that only hoard and don’t put back into the system, will always balance nations irrespective of whether economics is a science or not. A laughing matter for those who consider themselves “real scientists” but a matter debated to date nonetheless.

 

The information provided is strictly for informational use and is not meant in any way to be construed as investment advice. One should seek expert advice, as all investment strategies involve risk of loss.

 

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More interesting topics to look into:

 

Capital Markets Training – for corporations and individuals

Forex White Label – Discover it all, requirements and options

EU Tied Agent – Should you consider it or not?

Forex jurisdictions – EU and Offshore with country stats and listed brokers

 

Start your Brokerage business by:

 

Connecting offshore: With our clients in Belize, Seychelles, the Caymans, Martial Islands and St. Vincent offering the most flexible IB and White Label solutions.

Connecting in the EU: With our clients in 15 out of the 28 member states offering strong partnerships to individuals and corporations with existing client base, looking to connect.

Contact us for a private conversation to discuss your case through the contact form or one of our emails at info@allfx–consult.compartners@allfx-consult.com.

 

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