Thursday, 31 October 2013

The evil of debt

The dominant feature of 21st century world politics, both nationally and personally, is debt. It didn't have to be that way, only a decade earlier some countries were in surplus, and as social needs do not vary drastically over that period, one can only assume the politicians and individuals changed their behaviour and while the politicians are known to borrow huge amounts as a form of wealth redistribution, from the tax payers to bankers and business, personal borrowing is totally avoidable, and besides buying a house which needs too long to save for and is something you can't wait to use till you can, everything else is totally unnecessary.

There are two types of personal borrowing, luxuries which is simply greedy and pointless, while for essentials demonstrates a total inability to budget. There is a very simple example to illustrate this. Bankers hardly ever use credit cards. They are insiders and they know they are a con. Why anyone needs to pay extra just to have something a month, year or even decade sooner when they really don't need it is sheer greed, and either you can save and afford something when you have enough or you simply can't have it now. That's a training children need to stop them getting into debt in future, and there is no guarantee you will continue the regular income you need to buy a new car or holiday when you can buy an old one or go away when you are rich enough to do so.

People borrowing for essentials in countries with a welfare state must be doing something wrong. There are many debt experts on the radio, and when one after another these poor saps call in, often owing four to five figure amounts, and are kind enough to explain how they got there the answers are nearly always similar. They have wasted the little money they had on addictions or luxuries. Smoking, gambling, you know the usual vices, and when they nearly all had a regular albeit paltry income, it was always enough for essentials but they spent it on junk first and then borrowed. Of course poor people borrowing has only one consequence unless they become rich, they can't afford it. How it is possible for people with almost nothing to create a massive multi billion pound business for wise individuals, bearing in mind not only do these people have no money to start with, so are barely able to repay the amount itself, let alone the thousands of percent interest on top, is a mystery to me.  Somehow they often do, by sacrificing food and heating, often for their entire families, to often pay far more in interest than the loan itself. Had it been impossible to borrow at all then after a week or so in total penury it may have sorted their attitude out, and if anyone gets to that position it should be the state that helps them for no extra charge, not a predatory business.

The bottom line is besides a house there is no genuine reason for personal borrowing, whether short term on a credit card, as you can never guarantee the income that month as anything can and usually does happen sooner or later, or long term as you can't be arsed to wait. If you have enough to repay three years for a new car you can keep the old one and save up for it. They both go the same speed in heavy traffic anyway so who needs the added expense? By definition anyone able to borrow are not children, so should not act like children and want it now before they can pay for it. It is habitual and once someone has set a precedent for a £1000 three piece suite at zero interest and managed to pay for it, like a gambler who wins on their first bet, they then get a £2000 holiday at 15%, a £5000 car at 7% and after a year or two suddenly find they can't manage a payment. Then the interest rises and we all know the end result. If you hadn't ever done it in the first place it wouldn't have happened, and you'd still have got a three piece suite, car and waited till you had enough spare for the holiday which is a privilege and not a right.

I cannot stop governments borrowing to oblivion but you can vote against it knowing they are spending our money on the repayments, but don't need to spend that much in the first place as they are there to look after us, not spend our money on personal projects and worse. There is no precedent for running at more than a minimal loss unless in a deep depression, yet the entire western world has debts running up to over 100% of GDP now and rising. Obama alone has added trillions, where exactly has it all gone?

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