If the freedom of speech is taken away then dumb and silent we may be led, like sheep to the slaughter.

- George Washington

Monday, 17 January 2011

Debt explained

If you owe the bank £1000 and you can't pay it back, you've got a problem.

If you owe the bank £100,000 and you can't pay it back, the bank's got a problem.

I don't know if, or how, that is relevant at the moment, but it might be.


  1. Not quite right IMHO.
    If you borrowed £1000 from a friend and cannot pay it back you and they both have a problem.
    Banks only ever lend a person 'credits'. Define a credit.

  2. It encompasses the problem facing the UK. Our banks are owed billions by various countries and companies around the world. There's no way these countries and companies can ever repay their debts ( Eire, Dubai World , Iceland etc) so our banks must keep them all sweet and not ask for too much in case they default and end up paying nothing back at all. This isn't enough to keep our banks afloat so the government ( ie taxpayers) are having to keep our banks afloat so that they don't collapse. It's a never ending circle that will eventually topple over and take us all down together.
    Like something out of 'Reservoir Dogs' where everyone is pointing a gun at everyone elses head. Each person scared to pull the trigger in case they get the timing wrong. Fatigue will take over though and the guns will go off. And soon.

  3. Credit, like money, is merely a promise to pay at some later date. It's all fresh air, although based on either trust or some simulacrum of trust that the market considers sufficient.

  4. And if you owe the bank £1,000,000 and you can't pay it back, a different bank will lend it to you at a higher rate of interest, "'cos you must be credit worthy, because the 1st bank lent you so much."

  5. Joe, just remembered my accountant has always said it is much easier to raise a million pounds (credits) from a bank than it is to raise a thousand!


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