Friday, January 19, 2007

Borrowing Peter to Pay Paul who borrowed from Michael who happened to borrow from Ah Seng, Ah Beng, Ah Hong, Ah Mu, Kupu and Mutu

I'm no economist but it seems to me that the modern capitalist system would collapse without debt. Everywhere you go, you see people dealing in debt. Individuals have debts and so do corporations. Even nations have debts.

In one of the biggest ironies of modern times, the world's best and largest economy, the USA, is the world's biggest debter. Thanks to a prodigeous appittite for spending, the US government simply needs to borrow money on the bond market to keep running and people have made fortunes out of the market for the USA's debts.

 Lower down the scale, corporations and individuals are not much better. Businesses have an ocean of reasons to get into debts. Having been self-employed for the past 6-years, I've learnt about this nasty little thing called 'Credit Terms' and having to wait something like 60-100 days to get paid. In the mean time the bills pile up and since you don't have the cash to pay your running cost - you borrow money to tide you over.

As if that were not bad enough, we're being sold the benefits of being in debt. The banks drive a good portion of their business from hawking credit cards of all colours to get you to buy the things they tell you that you need to feel good so that they can charge you interest rates of some 24% a month.

 I should know. I was one of those kids who was given Daddy's sub-card and felt like king of the world because I could happily make myself feel "Cool" by signing off on all sorts of things like videos I barely watched and restaurants I could barely afford on my National Service allowance. It feels good to spend money and spending is all that easy when you just have sign a piece of paper that you end up throwing away at night. It took exactly eight-years for me to learn the evils of credit cards - The Bank encouraged me to take out yet another credit card ontop of the one I had from Daddy and guess what -  I couldn't make payment and so I ended up taking a year to pay off debts (Daddy had of course wised up, stopped giving me money and took back his credit card)  

The experience of being chased by a lawyer from the bank's credit division was actually very sweet but the lesson of being chased was learnt. Stay away from things that make spending money look all so easy. Not having a credit card stops me from doing business on the net but hey, how much business do I really do on the net and these days there's Pay Pal. I've recently gone back to having a card - it is convenient when you want to pay certain bills and don't want to run off to the ATM. On the other hand, I've kept my card to being a mere debit card - so I can't use it unless I really do have the money in the bank.

I'll be honest here. I do fall into debt from time to time and I do what I can to pay small debts fast. There was a joke in BANG PR amongst the consultants and associates that we were rather like the World Bank. Everyone would borrow from everyone until pay day and then there would be a flurry of activity of paying back loans. People do fall into hard times and cash flow problems do occur. I'm in one at the moment and for once I have this thing called savings to tide me through. - Of course, I need to discipline myself into regarding living off savings as being in debt - to myself and therefore highly important to pay off. In short, I need to think of myself as my own biggest creditor.

For myself, I find being in debt to be quite stressful . The obligation to pay a debt is more than just a monetary thing. It's moral and legal obligation (I once had to appear in the Small Claims Court on behalf on a company I worked for - trust me - the experience is no fun). Relationships can be ruined by debt. So what's one to do? I guess, the trick is to learn to accept occasional debts as part and parcel of life but to be disciplined about paying debts and building a cash position. I'm not as good as I want to be in this department but I'm better than I was two-years ago.

Anyway, debts, debts, debts! They're rather like farts. We have the odd one but nobody wants to admit to them.

There are, however, some people who don't fart when it comes to debts. They have diohrea when it comes to their pocket book and somehow, instead of getting better at dealing with their debts-they become worse!

One of the characters that I know is Michael G. The man has been a feature in some of my previous postings as the pub manager who only owes (By today's admission) a mere seven or eight loan sharks.

The funny thing about Michael, is the fact that he is seemingly brilliant at making money. Somehow he pops up in all sorts of places and wheels and deals like nobody's business. His official job is of course as a bar manager. However, he helps his wife (a lovely and very patient lady) sell a few insurance policies here and there, finds car and property deals which he gets a cut of and so on and so on. Run into Michael G on any given day and he'll be on the phone to someone or other talking about this or that deal and the figures he spews are incredible - by right, I should be on welfare.

Somehow, in spite of all his super wheeling and dealing, Michael has a debt problem. Not sure how he achieves it. He's got no major commitments as far as I can see. Cars he drives usually belong to someone else. House is paid for - I think. His major vice seems to be Filipino girls. This short-tubby and bald character cannot resist long-legged Filipinos and the way they call him " Mahal" (Tagalog for dear)  If Michael is not on the phone dealing in who knows what, he's on the phone to some cute chick - who of course loves the attention he showers upon her (not to mention the presents).

But can women really be that expensive? I know girls like to con guys into spending money on them but how expensive can a woman get?

For Michael, it seems - the answer is lethal. The man owes loan sharks, nice friendly people who enjoy throwing paint at your front door if you owe them money. How does he do it? It's simple he says! Just start by borrowing from one loan shark. The payments (inclusive of interest) are made on a weekly basis and if you default you start from zero. So, for example, you borrow $10,000. Every week you're supposed to pay $200 for the next 75 weeks. But if you default in week 70 (After paying $14,000) your payment starts from zero and you still owe these guys the original $10,000 plus the very high interest rates they charge.

Of course, the loan sharks are at the end of it, business people who have entered into a business transaction. If you think you can't make it for the week, talk to them. Arrange a settlement. Don't look for another loan shark to pay off the old loan shark you owe! Well, Mr G disagrees and so at tea time today kept telling us that a mere $10,000 would solve all his problems (His wife has unfortunately remained loyal to him but has since decided that bailing him out is a futile excercise). The $10,000 he needs today was caused by his desire to meet another savoury loan shark a mere five months ago (His debt servicing is around $2,000 - A WEEK)

The man is drug addict! Even a heart attack (wouldn't surprise me if stress was part of it) can't get him out of this perpetual habit of swimming with the sharks. - It's sad! He's actually a nice guy - but he can't seem to get out of the thrill of almost caught by the sharks!


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