Simone Wapler – La Chronique Agora (France) –
Credit has replaced savings with credit. A priori, nothing changes, except when things go wrong …
Just before I left for Congo, one of my sons told me that he had obtained a 0.96% fixed rate credit over 15 years for a real estate purchase in Paris.
Nowadays, in the developed countries, no one thinks in capacity of savings: “I am able to put X aside per month”.
Everyone thinks in terms of debt capacity: “I am able to borrow Y and pay X monthly installments”. Obviously, the lower the interest rates, the more you can take on a big loan.
Much of the steady rise in real estate over the last few decades is due to lower interest rates. When the rates are low, all you want to buy becomes more expensive … Everything you bought goes up without you doing anything. [Editor’s note: The IFI will replace the ISF. How to evaluate as accurately your real estate, know the methods opposable to the fisc? Everything is in our Special Report. Click here to learn more .]
But let’s talk about Congo.
Our Airbus for Pointe-Noire is only a quarter full. Congo Brazzaville is suffering from the decline in oil and expatriates are no longer legion. After the SNCF strikes, the weather was one of the most discussed topics on board.
In Congo, the rainy season is unusually hot this year and the showers are rarer than usual. At the flyby approach, however, nothing seems to have changed. The exuberant forest dominates. From time to time, a few rare ocher spots of laterite burst the dark green enameled by small green gaps. Clouds scroll under the wings. The stormy rain of the evening is at the rendezvous at the landing. The drought in Congo will wait until the hens have teeth.
The rain is also at the rendezvous this morning, to the delight of parrot beaks.
<img src=”https://cdn.publications-agora.com/elements/lca/newsletter/images/contenu/180320-lca-congo2.jpg” alt=”La pluie est aussi au rendez-vous de ce matin pour le plus grand bonheur des becs de perroquets.” width=”416″ height=”557″ />
In countries where credit is not developed, there is still reason for savings.
As a result, real estate moves forward. The construction sites are not abandoned, as one might think. They expect the savings to be created by the owner so that he can commit the next tranche of work.
During this time, everything is immobilized without the said owner being bankrupt or ill. You just have to consider a construction site as a stock of savings already committed.
<img src=”https://cdn.publications-agora.com/elements/lca/newsletter/images/contenu/180320-lca-congo.jpg” alt=”Un chantier arrêté de Pointe Noire” width=”550″ height=”412″ />
A stopped yard of Pointe Noire
Credit versus savings, what does it change?
At first glance, there is not really any difference between savings and credit and yet …
In the first case, with a credit, if something goes wrong, the future is clouded. If the borrower can not repay, the lender will be in trouble, that is, a bank that has been granted the privilege of lending money that does not yet exist. The problem is that this same bank also keeps the deposits and savings of people.
In the second case, with savings, if something goes wrong, the future is not compromised. It is the money of the past, that the saver had decided not to consume which will eventually prove wasted. The future remains intact.
With savings we take in the past, with credit, we take the future.
“Credit” – which substitutes credit for savings – is based on a fractional reserve banking system, the myth that your money in the bank is 100% available, and a manipulation of rates down.
It is simply a method of enslavement that destroys our future. By multiplying the phony capital, the creditism contributed to increase multiple goods but devalued the most precious good of each one: the working time, as Bill Bonner demonstrates it .
Banks sick of the plague of credit
On Monday, 19 March, the European Central Bank announced that it will postpone the application of its new guidelines on bad debts or non-performing loans from 2018 to 2021. Italian banks were reportedly unable to fund the requested capital and risked collapse.
After 10 years of quantitative easing and negative interest rates for sovereign debt, we must face the obvious: the future will not be bright. It has no chance of improving until bad debts are declared irrecoverable, once and for all.