The taste of debt

Firo forwarded an article today. To make sure his "To:" list reads it, he gave this quote from the article

"My rich dad often reminded me that money doesn't make a person who he or she is (or isn't). Applying this logic, money also doesn't make a person greedy. Rich dad's point was that money has the power only to reveal a person's true nature

The problem I see is that the businesses aren't being acquired with money or equity --they're being acquired with debt. And as far as I know, somebody will have to pay that money back "

Go on and read the full article at
http://finance.yahoo.com/columnist/article/richricher/11429

When more and more Americans go into the debt cycle, Corporate America make sure that the circle is extended to third world to pay them back. Militant America will come as saviors of the world against the "vogue" nations sitting on resources and take control of them. These debts keep the wars alive and active, with a reason.

This need not stay at the corporate level alone. This is affecting the daily lives of you and me. In Bangalore there was an eye-catching bill board on the Airport road. A romantic couple on a country boat enjoying a secluded honeymoon. And the caption - When you can afford such a vacation today, why delay - or something like that. And what does afford mean? ABC bank's Personal Loan. When you can go on debt, that means you can afford that! And these personal loans are against what? Your education, your job, your future salary.

Mark that - your future salary. You are selling that for a silly holiday that you cannot really afford. You are becoming a slave of your future job and salary. You are supposed to be the master of your job, not the slave. And where did your job and education came from? Because your parents saved those small amounts they got, for your well being. Because they never bothered to take personal loans (than those PF loans from their own money) to enjoy the secluded country boats. The only loans they might have taken are for the house (on real earth) and may be your education. Now you are selling them for the so called real estate (which sells the same piece of earth to 100 people and give you a portion on the air) and for the glittering fake afford-ability.

Well, some might ask, does it really matter. If this collapses, the bank loses, I do not. True. If only you collapse, the goondas / yakuzas of the bank could beat you up. May be you can declare yourself as bankrupt and save from legal issues. If the industry collapses and the whole vicious cycle collapses, I do not think banks can even afford to pay those goondas / yakuzas. Does not mean you are safe! Everything will start falling down. The piece of air you bought might value nothing. No one will buy your car. Your entire lifestyle changes.

The bubble burst is not just a fiction. It happened in Japan after almost a decade of bustling economy. A couple of banks failed. Many lives ended on a piece of rope, with insurance policies - many to save their companies and very few their families. The risk calculations of insurance companies failed and they too collapse. A huge collapse at the end. People became cautious and started spending less. Less consumption started driving Japanese economy down. 15 years later, it is slightly getting better. Real estate has not even reached 50% of that even now.

Japan could afford that. They had a huge savings in hand. All the money they earned with hard work and tight life paid them off to come back. What if this happens in India. The savings of our parents is not that high. We do not know how to spell savings. We only know loans. All the jobs we have are daily wage type. One lock on the front door - ends it all. When we get into more and more debt, our Government might not be able to spread out and create a fourth world to save us.

With more and more call centers and more and more teenagers getting into the spending world, I think its time we put some real world economics in the school curriculum. Like we had the biological ecosystem covered in high school, there should be some small coverage on the economic ecosystem too. How all the jobs are related. How the chaayakkada on the corner is important in the village economic activity. Why jobs cannot be created - only scout for opportunities. Why you have to work hard if we want to prosper. Why we are not yet in a position to behave American.

When I was in my second year of employment, my father told me that he always was able to keep a balance of two months salary with all the expenses for his three children and no loans. Born as the second son of a wealthy man, he did not have the luxury to enjoy the love and care of his parents, whom he lost when he was 9 and 11, forget about the wealth. He had to tighten his belt to acquire education, take care of his younger ones, manage his job and save for all of us. Thank God for He has supported me thus far. From the day I left to Bangalore with CDOT appointment order and Rs.800 in my pocket, much has changed. I always try to make sure that I do not spend based on what I have - base it on what I really need and then what I really can afford. I can does not mean I should.