I was talking to a close friend yesterday on a wide range of topics ranging from the debt market pain to Japanese design ethos. One of questions that popped out was how debt has led to turmoil on every scale.
“Debt” – the origins of the word dates back to 1300, the French word ‘dette’ and the Latin word ‘debitum’ meaning ‘thing owed’. Interestingly, Merriam-Webster offers Sin as one of the definitions for debt. The concept of debt is much older that its etymology. Merchants in Mesopotamia inscribed debts on clay tablets as early as 3500 BC. The owner of the debt would posses the tablet and the borrower would inscribe his seal on it. In the 18th Century BC, the code of Hammurabi in Babylon inscribed the first known laws about debt. Some of this debt even carried an interest component. You’d wonder – something as old as 5000 years must have imprinted itself on human genes.
More recently, economies of liberalisation and easy money led to reduction in interest rates. Combined with ill-advised advertising, people began to borrow well beyond their means. As a consequence borrowing sky-rocketed. These institutions are only doing what they’re built to do – to sell loans. Taking it or leaving it is your choice. The magnitude and multitude of problems that debt causes is amazing. The underlying catch to owning accumulated debt over a period of time is this – You are borrowing time from your future for your present. No one tells you this. A concept like debt is unique – it doesn’t appear anywhere in the universe where you forsake a little bit of the future to indulge in the present. Almost all physical, chemical and biological phenomena operate on the concept of moving to a system of stable entropy. Debt flows in the opposite direction but we don’t realise it immediately as small parts of time are eaten away. It is only in the end that we realise, then what?
You may have to own a debt for a buying home – as long as this is within the limits of your income this appears okay. But, many a time, debt is like small winnings at a casino/ lottery. After the initial high wears off you push the limits and take in some more, and soon you’ve accumulated a mountain of debt. You have borrowed money but you have lent your time to the owner of the debt. The borrowed money will have to be repaid with interest whether your income keeps coming in or not – but borrowed time, there’s no option there. This is another debilitating feature of debt – it appears at your doorstep every month unlike your income.
Alternatively, reducing your debt gives you unimaginable control over your most precious resource – Your Time. This is a wonderful way to use money – as a tool to build control over your time to do things you enjoy, to do the things that make you truly happy. Miles Davis, one of the most influential Jazz musicians, put it best – “Time isn’t the main thing. It’s the only thing.”