|The Money-lender and His Wife, by Quentin Metsys, 1514. Louvre Museum|
For centuries a moneylender has existed in South Asian villages. He tells you that you can take any amount of money you need for anything you wish; only there shall be small monthly interest. They must remember to pay the interest regularly or with compounding, it would become huge, but they can take their time to pay back the original amount. Just in case they cannot pay that back too; they shall just hold the land as collateral. Since needs arise often, villagers take loans often. For centuries the money lender has become richer while the villagers impoverished. Money lenders who became very rich moved to cities and then the world and some of the richest persons in the world such as the steel tycoon Mittal are from among such communities.
The modern version of the village moneylender is banks that have pushed individuals and nations into a life of debt from the monthly credit card loan to huge ones on their homes or nations. But there is a day of reckoning for loans and the end result impoverishment that Greece is facing presently and the much of the world shall likely face down the line.
As against the backdrop of villagers in debt in South Asia are also some families that have seen through the game and have it as a family rule not to take debt ever unless it is interest free within the family or among close friends and such families have prospered. One just saves for whatever one needs and acquires it only if one can without a loan. This author belongs to one such family and recalls how shocked his parents were when he subscribed to a credit card and made him surrender it.
It may be mentioned that some loans are worse than others. A loan that is put to productive use such as a business may not harm or a loan for an asset that appreciates with time such as land or home may not turn to be a bad deal. However a loan for another asset such as a car that depreciates with time may be a road to the cleaners.
Debt is the frequent cause of financial crisis in the lives of individuals or nations. Nations or individuals that have a great time on debt, end up with much suffering later on and it feels all the more painful since it follows a good time. Those who run their life sans debt sleep in peace.