Wednesday 24th January
Debt is the name of the game. And now everyone is almost obliged to play it. It started with Kings who needed money for wars, and they went to the Barons to borrow it. Then as Capitalism took off with the Slave Trade, merchants started to borrow money to hire a ship and crew to bring Spices from the Indies and take slaves from Africa to the New World. They often went to moneylenders for these debts. But pretty soon a market was established both for the debts themselves and to gain shareholders to help finance these ventures; of course the money for those shares was mostly borrowed too. The City of London started as a place to borrow money or to exchange shares. Banks sprung up, happy to lend money they didn’t even have to lend to “entrepreneurs”, borrowing this at a cheaper rate than they lent it at.
And so the whole machine started. Imagine it as a gigantic mincer. At one end, raw materials and people’s labour are shoved in, the handle is powered by debt and as it turns so products come out the other end. The whole idea of a small businessman who maybe started a Restaurant or a tailor’s and made a small profit, employed a couple of people and made even more money, saved this profit and after a few years opened a second establishment – is sooooo old-fashioned. Nobody does that these days. No, you have an idea, you pay some firm to create a business plan showing ever-growing sales and profits, you go to a bank, or more likely a hedge fund, borrow a pile of money, pay yourself and you advisers consultancy fees and eventually start the business. Which might or might not make money. As long as you can pay the monthly loan repayments you can carry on paying yourself a big salary. And if things go badly you can try to re-negotiate the loan, or borrow from someone else. After all it is all someone else’s money isn’t it. And the banks make so much money from borrowing cheaply and lending expensively. And even if the company goes bust, well you put it into administration and your suppliers are chumped. You walk away and start another business – always with someone else’s money mind you. Debt is the name of the game.
Then they invented Mortgages as the only way to buy a house, and car finance deals for that new car, and credit cards for the foreign holiday, and for the poor people payday loans. And the bigger the debt the better for everyone. Even Governments now almost all run huge deficits – far easier to borrow some more money than slam the electorate with taxes – well, you can’t blame them, they might not get re-elected if they actually tried to balance the books.
And so we all play the debt game; the numbers keep getting higher – but, hey it is someone else’s money isn’t it.