Friday, January 8, 2016

Debt leads to Impoverishment



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.

3 comments:

Vinod Khurana said...

Yes,so true indeed.Debt should be avoided at all costs. But I am so highly indebted to you
for your invaluable guidance,help,compassion and advice full of wisdom without which I would have been completely lost. Thank you so much indeed for everything:

Hold my hand

Who am I
I know not
what I look for
I know not
but when my hand is in your hand
things begin to make sense.
You take me there where I have never gone
I protest and resist but you pull me along
you know my mind and feel my heart
and I find precisely what I was looking far.
I feel at home who was ever lost
pray hold my hand lest again I am lost!

with warmest regards
Vinod



Ashok said...

Thank you for your kind and flattering words even if I deserve a small fraction of them. Yes you indeed are the best person to comment on this note having been one of the senior most revenue officers of India, you likely understand all this much better than I do. Great to see your twitter presence developing fast.

Vinod Khurana said...

Thanks a lot,Dear Ashok ji. You truly deserve it and even much more.I am truly blessed to have such a mentor and guide.