Financial Independence v/s Credit

I have grown up in a family where our elders have always taught us to live within our means - चादर के हिसाब से पैर पसारो - and this has been the basic doctrine that many families in this country have followed.

Given the stress on the use of credit in today's society, many a times I used to think whether we follow the right path by exercising financial independence. Our polical leaders and the financial wizards around us have been promoting of easy credit in a big way and are almost advocating a luxurious life on borrowed money.

Today, I can confidently say, that my elders were not wrong.

I strongly believe that the international monetary crisis is due to easy credit available to the consumers of the developed nations. Credit and more credit - this is the single major factor that has lead the world into the financial mess it is presently witnessing.

The way I see it the entire western economy, including the United States of America, European Union, Japan etc., depends heavily on credit. Both the providers and the consumers of services and goods are up to the necks in credit - in many instances over their heads. An average citizen of these developed economies is heavily burdened with debt. He has already pledged his estimated income for many years to come to repay the loans that have financed their luxurious life-styles.

The level of credit has risen to disastrous proportions.

The inability to pay back the loans is visible from the high levels of foreclosures witnessed in recent times. The number of foreclosures have been so high that the lending institutions themselves have collapsed under its burden. Insitutions with a balance sheet of over $500 billion are being taken over by others for less than $50 billion - phew! less than 10% its value.

It is high time these economies learn from their mistakes and ensure that credit does not become a way of life. Credit should only be availabled and used to meet out some emergency.

I am alarmed and somewhat personally disturbed by the way our government leaders are trying to promote the use credit to increase productivity. I, surely, hope they know what they are doing and do not lead us into an even bigger financial mess compared to the one currently being witnessed by the world.

But, then I am not surprised. In fact, the very same people responsible for distributing easy credit are in position to influence policy decisions. They doing all in their power to influence policymakers to find newer ways to mobilize and deliver credit.

If we hand out more credit, to the already troubled debtors, we may come out of the recession for a short period, but rest assured we will be inviting an even bigger crash the next time round.

I belong to the school that believes that life on borrowed money never be pleasant in the long run. Most Indians have lived by the doctrine of financial independence - living within their means - and are relatively unaffected by the credit crises around the globe.