Compendium: Domestic and Foreign Schuld Accounts

This Compendium entry deals with the Sovereign Schuld of the Socialist nation. Unlike the previous entries in this Section, the only thing that needs to be done here is to find the sum of Sovereign Schuld by determining how much of it is Domestic Schuld and how much of it is Foreign Schuld.

The role of Schuld in Command-Obedience Account Bookkeeping is derived from how it is intended to operate under the Work-Standard according to earlier Sections of SMP Compendium entries. Its presence is serves as a deterrent against the Socialist nation trying to live beyond its own means of production. If the Socialist nation can afford to live within its own means of production, it will never have to worry about being on the receiving end of Schuld. This of course depends on whether the Totality and the State are determined to achieve a balanced budget and avoid spending more than the Socialist nation is capable of producing with Arbeit and Geld. Usually, Schuld does not appear until the State begins to operate at a fiscal deficit, but there is another way for Schuld to manifest its presence in Command-Obedience Account Bookkeeping. To understand why, we need to review everything discussed over the past thirteen Compendium entries within this Section.

In each preceding Compendium entry, I demonstrated how the Socialist nation accounts for the contributions of Arbeit and the generations of Geld from every aspect of economic life. Everyone who does any form of Vocation is also contributing Arbeit to be converted into Geld. The most important consideration about the manner in which every equation and procedure discussed previously is how the “State Expenses” for everything was also meant to be included. This means that as long as the State Revenues are continuing to surpass the State Expenses, the State Budget will be spared from the onset of a fiscal deficit.  

Another noteworthy fact about Command-Obedience Account Bookkeeping is how the State Expenses will lower the State Revenues whenever they begin to rise. If one perceives the Quality of Arbeit and Quality of Geld for any Enterprise is beginning to fall, and there are no indications that somebody is embezzling or forging anything to abscond with Arbeit and Geld, it can be interpreted that its State Expenses is beginning to outpace the State Revenues. However, if the State Revenues rise, it is tenable to argue that either the State Revenues of one Enterprise has grown or else its State Expenses has fallen. The economic planners and their retinue of accountants will not know which one of the two possibilities happens to be the case unless they actually audit the Enterprise’s Quality of Arbeit and Quality of Geld. By starting with Quality of Arbeit and then moving on to Quality of Geld, the economic planners and their accountants can detect emerging problems sooner and react more quickly.    

But suppose for a moment that the State Expenses have finally outpaced the State Revenues. How does an economic planner and their accountants register this? They are to jot down the final values of the Quality of Arbeit (QW) and the Quality of Geld (QM) as negative numbers. This in turn affects the manner in which the Total Economic Potential and Total Financial Potential Formulas are also done because the result is obviously going to be a diminishing TEP value commensurate with a similarly lower TFP value. No competent economic planner under the VCS Economy wants to let such a scenario happen because not only does it look poorly on their Service Record, the State can reprimand them and even hold them criminally liable if there is real evidence of theft.

Regardless of how its own State Expenses managed to surpass its State Revenues, the Enterprise will begin to accumulate Schuld. The State is automatically forced to intervene and must spend Geld from its own Budget to balance the account of the Enterprise. Such a scenario can be avoided if the economic planner and their retinue of accountants take the initiative before the State does, figure what is causing the negative TEP and TFP values and spending the Geld that their Enterprise already has.  

If something such as this can happen to an Economic Enterprise, it can also happen to the rest of the Socialist nation. Everything depends on whether the State Budget is able to avoid going into negative values. Only when the State Budget goes below “0.00” will the State begin accumulating Schuld. Should that happen to the State, the Central Bank has to print additional Geld to pay for the State Expenses incurred on the State Budget. This type of Schuld is given the designation of “Sovereign Schuld” in Command-Obedience Account Bookkeeping.   

The State’s ability to sustain Sovereign Schuld is limited to its ability to prevent the TPP equation from reaching negative values. As the Sovereign Schuld rises, the TPP equation drops. The State’s ability to sustain the national Currency pegged to the Work-Standard is brought into question by both the Totality and any foreign observers who are aware of these economic and financial difficulties. For if the TPP equation goes below “0.00,” a Sovereign Default is imminent. And even though the Work-Standard will continue to exist in spite of a Sovereign Default, the catastrophic effects that result from one can bring about the undoing of the Socialist nation.

The Sovereign Schuld Account contains the sum of “Domestic Schuld” and “Foreign Schuld.” Do note that even if the equation is just a simple arithmetic equation, always make sure that all Domestic Schuld and Foreign Schuld have been calculated based on the current Attrition Rate:

Sovereign Schuld = Domestic Schuld + Foreign Schuld

There are plenty of contexts where the Socialist nation can potentially find itself indebted. Wars, natural disasters, civil wars, famines, pandemics, national emergencies, and other crises that involve the State spending obscene amounts of Geld in order to confront. This is why it is important for the State and the Totality in particular to strive toward living within their own means of production. The last problem that the Socialist nation wants to be dealing with is for the State Budget to suddenly run a fiscal budget all because the State and the Totality have never been able to exercise fiscal discipline prior to the crisis. Any Sovereign Schuld that appears from such foolishness must be quickly extinguished as soon as it is physically possible to do so.

Moreover, it would be best that all of the Sovereign Schuld is predominantly Domestic Schuld that the Totality owes to the State or the State owes to the Totality. Foreign Schuld can be problematic because the State has to contend with Exchange Rates in addition to the same aforementioned level of urgency. The accumulation of Foreign Schuld will make the effects of Sovereign Schuld more painful for any Socialist nation, as the experiences of historical and existing Socialist nation in the world can attest since the 20th century. At least with Domestic Schuld, the State is capable of quickly paying it down without having to go through the hurdles of Exchange Rates.   



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