We are living in historical times as far as the global economy is concerned. We are re-learning the ills of high risk finance deals, outcome of wrong valuations and the ills of greed.
Now who causes such crisis? If you do a root-cause analysis, this is what you’ll get (assuming ofcourse, that you have the same twisted logic as I do):
Financial institutions act as intermediary between people who have excess money and hence want to invest and people who need money, hence want to borrow.
People who have excess money – the want to invest only because they know there are others who are ready to borrow and pay interest on it, had such people not been there, the people with excess money would have simply stashed the cash in their pillow.
In the Garden of Eden, the snake offered Eve a fruit from the tree of knowledge of good and evil, an apple if we believe Milton. Now was this offer a 1. Gift? 2. Offer for outright sale? 3. A financed sale?
- Considering the heavy price that has been paid, it certainly was not a gift.
- If it was an outright sale, it would have been a bullet or one shot payment. Not exactly the case here as we continue to pay the price. Now when the price is paid over a long period of time and the payout amount fluctuates based on systemic changes eg: times of war, disease, famine (you know same way how changes in PLR caused by repo rate changes, changes your EMI), it was certainly not an outright sale.
- If you ask me, it was a financed deal, financed by the snake itself (Satan in an appropriate disguise).
The book of Genesis makes it clear that Eve had no idea of the valuation of this item she was financing. In-fact it was not even an asset, it was more a consumable, so at best it would have qualified for short-term WIP financing. However, what Eve got, appears to be to involve regular payout of only the interest accrued amount, floating rate, till perpetuity.
Such payment terms appear very attractive as the periodic payout is very low (no principal component) but if you see the cumulative payout over a period of time, you’ll realise how you big a ride you have been taken on....all your payout has not reduced your principal liability one bit.
So Eve was the first person to be offered and avail a credit…and she did pay a heavy price…and all mankind is paying till today!!! What’s worse, we are continuing to do similar deals. .
We are buying or financing assets whose valuations are in question at interest rates that increase regularly but with terms and conditions that appear attractive initially but bleed us for a long time to come!!!
By the way, the various pictures you see in this post are totally unnecessary, but I am hoping the nudity will attract more visitors!!!