Hoe goedkoop geld enkel de rijken helpt


Volgens Charles Hugh Smith is goedkoop krediet de reden waarom ons systeem kapot is. De conventionele economische redenering gaat als volgt: goedkoop krediet stelt consumenten in staat om meer goederen en diensten te kopen. In werkelijkheid, argumenteert Smith, stelt goedkoop krediet de rijken in staat om nog veel rijker te worden, zonder iets van waarde te produceren.

Here's an example of the perverse incentives and unintended consequences this unlimited credit unleashes in the real economy. Let's say I'm a financier who is close to the credit spigot. I borrow $100 million at 1.25% (or sell $100 million in bonds yielding 1.25%) to buy a company that yields 4.25% in after-tax profits.

Buying the $100 million company costs me nothing but the monthly interest payments. Since the company yields 4.25%, I am already netting a 3% return.

But why settle for a meager annual income of $3 million for doing absolutely nothing? If sell 80% of the company to pension funds and other institutions for $100 million, I can pay off the $100 million I borrowed to buy the company and keep the 20% I now own free and clear.

This transaction nets me $20 million profit for doing nothing but leveraging my access to cheap credit to buy real assets. If I hold my $20 million stake, it earns a hefty $850,000 annually--once again, for doing nothing but accessing cheap unlimited credit.

In other words--anyone who can borrow $100 million at low rates of interest is instantly wealthy because they can outbid everyone who has to pay higher rates to buy productive real assets