Is Borrowing an Irreversible Act?
Unitythoughts
- Posted:
2/12/2009
The lending and borrowing or the banking system has brought much suffering to humanity. This may be an overstatement, but that which I could infer based on the misery people are going through around the world today, mainly the Americans. How many contributors to this site will agree with me, that it is the credit borrowing that got them into all that trouble? If America is in trouble, the whole world will follow suit. Therefore, it is indeed a problem of the world.
What was the initial concept? Initially, the banking system was a very simple idea. It involves deposits and withdrawals and an agent taking care of them. The agent lends his money to A, using the deposit of B and both being charged and conferred ‘interests’. This mechanism snowballed into many depositors and borrowers and the circulation of funds in the society.
What happened next? The politician realized the power of money. He took control of the financial system and made lending compulsory and regulated to uphold the economy on the pretense that if the public can be made dependent on the financial system then they can be made to support the government of that time.
The grand decoration of the system That simple idea of deposits, withdrawals, lending and borrowing went to support a variety of mechanisms. They evolved from mortgages to commercial lending, to the support of fictitious mechanism like equities, foreign exchange and financial derivatives to the whims of the so called ‘financial engineers’ and ‘money managers’. Counters were given values far from their fundamental values, out of the greed of people who try to profit from the difference.
The failure of the System This propaganda has resulted in the collapse of both small and large corporations which became the victims of the turmoil of the system. This further led to the misery of the dependants.
Why is the risk of failure far greater now compared to before? It is none other than the situation of going astray from its initial concept. The more credit is given out, the more dependency it makes out of people. Banks competed and advertised credit packages. People were coaxed into accepting more credit cards as if they were free.
The concept of lending being wrong from day one A borrower is lent a sum of money at a calculated interest and the repayment amount spread over a few years. This is based on his income at the moment of borrowing and
his ability to pay for the long term.
Now the question is who can guarantee the future? Today, one’s husband can be fine. Tomorrow or the next moment, he can meet with a stroke and become paralyzed. One can lose one’s job. One’s business may fail. One can lose one’s family in an accident.
None anticipated that Katrina could cause the devastating ruins of New Orleans, Louisiana that will take years of recovery. None ever dreamt that a prosperous, peaceful country like Kuwait can be invaded and taken control by another.
What is the guarantee that things will go on fine for the next decade in this unpredictable world? On what basis is one guaranteed an income to make the next payment? Credit can create dependency. Credit can make one stuck with one’s job, losing those enterprising moments of creativity. In total credit can indeed ruin one’s life.
Can borrowing be abolished? Not that I can think of how. It runs in the blood of the system and society. We, probably have to call back Marx, Keynes or Heidagger, the great economists and philosophers to the discussion table. They would see the urgency of matter after looking at the present plight of humanity.
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