Fareed Zakaria; The high-earning poor; a rejoinder.

 

The GPS the global public square is one of the few programmes on the television one would not like to miss. It topics for discuss usually cut across politics, science, humanity and of course liberal education for which the anchor has published a book in defense of.

Going through his write up on the above subject, America as his reference drew out some thoughts I had expressed at different time on the financial assets and the accumulation of wealth especially as it concerns savings.

It is normal to save for the raining day as they say. But when and how will the raining day be. If you have an emergency and money is required your response will be quick to it because you have the likely requisite to tackle the problem. But if it is such that you have insured for you are equally good to face the problem or have it resolved on your behalf by your insurer. And if you go by the thinking of my people ( Ailowo lowo baba ijaya-Yoruba language) or go by Hadley Chase –You are dead without money.

However many of the yester year thinking are not relevant to today’s life. The probability of getting money to lend, that is having credit facility and credibility to lend more has become a measure of financial wellbeing. America, Japan and China are in great debt but are still able to borrow more. The same applies to individuals and organizations. The banks only borrow you more when you are already a debtor. Very reluctant to lend once you haven’t borrowed before.

But should this be the norm or the revise is better. The creditors rely on the gross domestic product (GDP) relate it to total debt of the country, use a favorable balance as the basis to agree or disagree further borrowing. Where the corporate companies or individuals are concerned the assets in it total form, liquid and disposable are considered. And if the loan is personal the goodwill and societal status of the personality becomes part of this consideration. These parameters influence lending more than any other factors like the sovereign fund or your savings account balance.

Financial assets is very important to every life and every entity be it countries or corporate establishment. Everyone must be part of the provision for tomorrow; our savings is an assurance of our belief in the future. However credit expands our ability and also our capacity. But alas! It depletes the future if not properly utilized.

Today Americans live on credit cards consuming incomes not yet earned. What has this done to their society. When in 1946 John Biggins Brooklyn banker introduced the first bank card called “charg-it. It was made payable based on cash available to holder in His account with Biggins.  As time went by this has expanded to outright payment outside of account balance to become a buy now pay later card. This has resulted in overspending and because of the ease to use consumption has increased tremendously since the use of plastic payments. This payment mode made credit possible without collateral expanded the buying power of the ordinary American who would not have been able to access credit from the bank.

What is the effect on the economy? The American economy became better in relative terms. The products made in America where consumed locally and the producers were able to improve on their products because the funds to do so were available. Financially empowered citizens are the energy source of production. No matter how good or required a product is the consumers ability to purchase will determine it survival.  One of the problems confronts our country and many other developing or underdeveloped countries is the huge financially impotent population that cannot pay their bills much less consume large.

It is also save to say that the American society has in place enough social services and aids to assure life in case of some financial emergencies. Thanks to Obama for the Obamacare which also has expanded this assurance. Therefore the need for financial assets in such society as America and some European countries may be of mere necessity and not much of a determinant of future occurrences.

We of the developing world are court in the financial assets syndrome such that corrupt politicians and civil servants corner state resources and keep so much money in the bank until the banks can no longer take; they keep under mattress, cupboard, kettles etc.

 

Olanrewaju Adedoyin 1115

 

 

 

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