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Shifts in the Economic System from Building Real Capital to Building Credit - Research Paper Example

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This paper talks about the major shift in values inherent in the economic system from the accumulation or building of real capital or wealth to building credit. The society is rapidly becoming dependent on using credit to fulfill and accomplish a vast majority of economic needs and requirements…
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Shifts in the Economic System from Building Real Capital to Building Credit
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Shifts in the Economic System from Building Real Capital to Building Credit

Download file to see previous pages... This paper demonstrates how the values of the economic system have shifted from amassing real capital or wealth to building credit. Building credit is presently revered in all sectors and industries, areas including transportation, entrepreneurship and real estate. This is primarily because good credit good credit is essential, not only to getting loans and credit cards, but more and more firms and societies are making the case that individuals must possess good credit prior to extending products and services to their customers. The issue of the shifting values, in the economic system, towards building credit is an important topic of discussion since it not only demonstrates the evolution of economic rhetoric, but also helps anticipate future trends in economic system. The modern economic environment is such that credit is a greater determiner of wealth accumulation than real capital
The accumulation of real capital, which encompasses both financial capital and wealth essentially, refers to the accrual of ownership claims on labor and other forms of capital.
Real capital can be epitomized in financial terms, for instance, having financial securities characterized by the ownership of massive funds to get hold of wealth and capital. Therefore, accumulating capital encompasses amassing objects of value by concentrating wealth or capital, for instance, financial capital, natural capital, social capital and human capital. However, in the modern day, credit is what dictates the wellbeing of the financial world.

This is the case, not only among first-time home buyers, but Fortune 500 companies that significantly affect national economies (Guseva, 2005). Lenders, whether local, national, regional or global make decisions concerning the credit worthiness of their borrowers on the basis of their credit histories or scores. At present, having a strong credit history is a major determining factor for one’s access to wealth, for instance, homes and cars since credit scores and histories influence access to loans, mortgages and other forms of financial investments. The shift in economic value from building real capital to building credit has been influenced by the microeconomic environment in which organizations and individuals are increasingly shunning physical money in favor of credit. Today, one does not require physical money to make purchases since credit cards allow for exchange of goods and services by swiping credit cards. This occurrence in the microeconomic environment has, in turn, resulted in the shifts in economic values and ideologies in the macroeconomic environment. The real meaning of building credit is to meet the requirements lenders establish. The macroeconomic theory presently integrates credit and banking by appreciating the role of both banking and credit in shaping the overall economy (Heijdra & Ploeg, 2002). The present economic system appreciates the macro mechanisms that link the real economy to variables inherent in the environment, for instance, climatic changes and ...Download file to see next pagesRead More
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