How are you going to pay for a new car and your daughters wedding I asked?
Credit is the obvious answer. The new car can be repaid over the next 5 years with a very hefty residual at the end of the lease period rather than having to find a deposit at the beginning.
The dealers giving me cash for my old car, I can scarcely believe the trade in amount which will more than cover my daughters wedding. It’s the best thing since sliced bread. The future can only be blue sky.
And communities living in sparkling new houses can be created from land and house packages that don’t need a deposit either.
The financiers work with the devolopers to make all those dreams come true with the magic of credit. And all of the new furniture purchased doesn’t require any repayment until 2 years hence. The credit cards they have will look after the honeymoon. It’s incredible. I think they may all be in love, with the credit system I mean.
But that only represents the first blush of this affair. Established home owners who had equity in their homes were chastised for allowing this credit to lay idle, rather to take advantage of the opportunity to make more serious money by becoming a property investor and buying other houses, or maybe to suitably reward themselves with a decent holiday or to buy a more prestigious car or just about anything at all. In fact these equity loans were designed to make people feel good, to do what they liked with the money. Sure enough many fell in love with the idea all over the western world; and so began the golden age of love of credit.
Society itself is also benefitting in this golden age since some governments are also discovering the beauty of credit. They can spend far more than receive and promise a whole lot more than would have been possible, should that have been restricted to that which represented the sum total of all of their receipts less expenditure. If the figures add up to huge amounts in borrowings it wont matter either, since it’s making the world so happy they will always want to keep increasing their lending by increasing credit limits.
Alas sometimes balloons burst but there will always be people willing to chip in few extra dollars to buy some more and blow them up again. Besides the extra spending is creating employment. When the repayment becomes unsustainable you simply sell off your national assets to the creditors.
Credit helps make the world go around only so long as it can be repaid from savings.
At the end of the day the only real wealth ever to exist is that which is sustainable and capable of sustaining us in perpetuity.