Hi guys, I am sparking this thread to enable us share wisdoms. This thread will serve to consistently aggregate day to day wisdoms to stay afloat and succeed in career, business and studentship. these areas are key areas and If you'll like to focus your energy on improving these department of lives, Join me and others on this thread welcome.

let me start with this opinion article...
it dissects the argument between borrowing or saving.

THE BIG ARGUMENT BETWEEN BORROWING OR SAVING
1 month ago Guest Writer
BY Tope Fasua
There are two interesting write-ups that have been circulating on the Internet and on WhatsApp lately. Both of them basically analyse whether it is wise to save or borrow money. Both started out from positions of bias and, I believe, deliberately did half-analysis to justify their points. Now, as we live in an age where a lot of information is obtained online, it is important to clarify and examine some of the issues raised by a number of these random interventions, lest they become received wisdom. I have encountered these write-ups in a number of WhatsApp groups I belong to, especially those populated by present and former bank workers.
Whereas the first write-up merely pooh-poohs the wisdom of developing a saving culture in the first place, and concluded that people who save at all do so because they have no ideas to invest in, while those who borrow are the smart people with a lot of great ideas, the second one took the argument further by emphasising that people should just borrow to spend – not necessarily to invest as the first one had argued. The second writeup looked at the debate from a national perspective, criticising the Japanese savings culture (a factor that naturally translates into a country which saves and invests and hardly relies on foreign loans), and concluded that the economy was suffering because of that. The writer went on to praise the most-borrowed/leveraged country on earth – the USA, for the culture whereby everyone lives on credit and is able to enjoy tomorrow today. No, it is not a satire. From the calibre of those I saw who shared and liked those articles, and defended them, it is evident that we are on a slippery slope. I am therefore taking time to demystify the article or at least put up a strong argument against what the articles are preaching.
A profound analysis of this issue – whether it its wise to borrow or save – would actually entail looking at decisions and motivations across each spending unit – the individual, household, company and government.
We all know the kind of life they live in the Western world, where almost everyone is hooked on loans which become oppressive after a while. Most people work through life just servicing loans. The biggest worry for most people living in those countries is about their credit scores. I have friends there who believe that this is a huge conspiracy and who envy the system we run here. The idea that makes it easy for a person to borrow to enjoy tomorrow today also creates hordes of purposeless individuals who live for immediate thrills, and are at the centre of the kind of advertisements that drive consumerism and objectify people. This is being extended to us here too, when we hear that Africa is a big MARKET. Personally I’m not sure that’s what we need here at our stage of development. The U.S. may be able to cope with this, given their achievements over centuries. That branch of economics that proffers that people must be kept spending and buying has taken a hold in the U.S.A and a few other countries around the world and is gaining grounds in countries like Nigeria, albeit foolishly. But that brand is not accepted globally. Whenever banks get comfortable here in Nigeria, just as elsewhere, they start pushing high-priced consumer loans into the hands of the people. Almost everyone I know has got into trouble with such loans.
For instance in Germany, they don’t have such a culture and are much like the Japanese. The German person does not understand why you need to spend what you haven’t earned and many shops just don’t take credit cards. In some parts, it’s still cash they want. To the same extent, consumption is not growing in Germany because people hardly binge on fleeting acquisitions; Germany is not a consumerist nation, but a producing one. They are quite efficient and understand sustainability. In fact most Germans don’t bother to ever buy or own houses and they are a damn sight happier than many of us who acquire chattel all over the place. The economy is lucky for it though because the stability has allowed it to effectively produce everything cheaper for exports better than any other European country where consumerism usually leads to demand for higher wages and longer holidays. Wages are stable for one. But places like Greece, Spain, France, and even U.K. present the opposite picture.
What obtains for individuals will obtain for households. I personally think we (households) should borrow in moderation just to enjoy our life. I believe we should rather try to be more productive and be generators of wealth. To that extent, I humbly disagree with the neo-liberalist bent of the Indian professor, author of one of the articles, who seems to be gushing praises at what the Americans themselves know to be a dysfunctional system. My apologies for not being able to provide a reference to both articles as they merely moved through WhatsApp like rapid fire with no attributions, but I’m sure many of my readers would have seen them. I will reproduce one of them below however.
For a company, I believe it is OK to borrow funds for stability or expansion when you can access such. For accountability and resilience though, it is good for a company to know what it truly owns and not overborrow and overtrade just because it has access to funds.
Before we discuss Nigeria, it must be said that we are in the era where losses are socialised and profits privatised, what with the many huge bailouts to private companies where the CEOs are close to politicians. That cannot be fair can it? In Nigeria this is standard practice but we should remember that we are not the U.S. where they have all their infrastructure at an advanced stage. When you use money that should otherwise be applied to infrastructure, education or health to bail out your ‘smart’ friends (via AMCON) who has taken advantage of our loose and corrupt credit system which favours a few who never repay, then you too can never know peace in your own country.
Banks here are known to have this affinity for borrowers who never repay. That is why after cleaning out the books in 2009, we are hearing from CBN that non-performing loans are again on the bound. Being a bad debtor or being a collaborator on the other side of the table, ensuring that loans go bad, does not make anyone smarter than a honest saver. This is the real issue with Nigeria. Most so called big boys are tanked out on loans that they don’t intend to repay. Maybe we can say they are smart in the Nigerian way but I hope the country changes.
As for countries, it depends on what ideologies and philosophies drive them. I wouldn’t deride Japan the way the professor did. That country is technologically ahead of the U.S. and it is dangerous to judge one country with the standards and way of life of another. Japan and Germany, among a few others, have chosen a path. China is like that too. There is nothing wrong in moderating national debt and tying them strictly to projects. There is also nothing wrong for a nation to be debt free. There is a difference as well, in the type of debts racked up by the U.S.A and that racked up by most other countries. I recall watching a movie titled The International where a top global banker confessed that the essence of war is to create national debt, and the essence of national debt is to control countries. Other intellectual sources also reiterate this. Countries like ours, which go a-borrowing, will soon go a-sorrowing when our hardboiled creditors come calling and demanding for what is not inside the terms of agreement. What the professor didn’t say is that there are other factors responsible for where the U.S. is today; sitting atop the pile, and that these same factors will continue to be deployed to maintain the status quo. Some of these is based on military power and intelligence. Also, the global reserve currency is the U.S. dollar, and that country can as well print currency to repay its creditors if need be. However, its military power is what hovers around the necks of dissenting troublemaker countries like the sword of Damocles.
So I’d say from a research evidential empirical and holistic perspective that the articles are simplistic and presumptive. There is still value in saving – for those it works for. And we should be careful of an unsustainable credit culture across the board. If we want to have a honest discussion about who is smarter between borrowers and savers, we must first ensure that the game is not rigged. We must be sure that people can get access to credit on a level playing field before saying some are foolish and others are smart. We should be sure that credit is given on the basis of professional parameters and not based on ‘man-knows-man’. And finally, we should all note that the concept of credit is a recent phenomenon. The idea of borrowing through life to live big has not been tested across generations, especially in places like Nigeria. Not many generations have handed over the baton of debt to their children, so that we can see how it pans out. On a few occasions, we have seen situations where people lived big on debts, and died leaving their families in pandemonium. Even mortgage is a recent phenomenon in foreign countries that we try to emulate. I have studied the history of housing in the U.K. and U.S.A to confirm this. In about 20 years, new problems will emerge and people have to reorder their priorities and spending patterns. We must be careful not to fall into deep ditches in the developing world.
I believe there should be caveats around that branch of economics that proffers that a people should just spend, spend, spend. I believe countries that have a strong productive base can indulge in the luxury of consumerism, but countries – like ours – which have nothing and are gross importers of everything, should not buy that ideology. I know this is the economics that we have been practicing since the return of democracy, but it can only get us into trouble. The idea of reckless borrowing – whether as individuals, households, companies or governments – is bad enough but ours is made worse by the fact that our credit process is corrupted and everything is rigged; those who merit credit never get it. And those who get it, hardly repay. The taxpayers bail them all out in the end. Multiple tragedy.
I reproduce one of the pieces below:
Article written by an Indian economist about world economy. Amazing logic indeed. This is a crazy world! How valid is it? I leave it to you!
Japanese save a lot. They do not spend much. Also, Japan exports far more than it imports. Has an annual trade surplus of over 100 billion. Yet Japanese economy is considered weak, even collapsing.
Americans spend, save little. Also US imports more than it exports… Has an annual trade deficit of over $400 billion. Yet, the American economy is considered strong and trusted to get stronger.
But where do Americans get money to spend? They borrow from Japan, China and even India.
Virtually others save for the Americans to spend. Global savings are mostly invested in US, in dollars.
India itself keeps its foreign currency assets of over $50 billion in US securities. China has sunk over $160 billion in US securities.
Japan’s stakes in US securities is in trillions.
Result:
The US has taken over $5 trillion from the world. So, as the world saves for the US – It’s The Americans who spend freely. Today, to keep the US consumption going, that is for the US economy to work, other countries have to remit $180 billion every quarter, which is $2billion a day, to the US!
A Chinese economist asked a neat question. Who has invested more, US in China, or China in US? The US has invested in China less than half of what China has invested in US.
The same is the case with India. It have invested in US over $50 billion. But the US has invested less than $20 billion in India.
Why the world is after US?
The secret lies in the American spending, that they hardly save. In fact they use their credit cards to spend their future income. That the US spends is what makes it attractive to export to the US. So US imports more than what it exports year after year.
The result:
The world is dependent on US consumption for its growth. By its deepening culture of consumption, the US has habituated the world to feed on US consumption. But as the US needs money to finance its consumption, the world provides the money.
It’s like a shopkeeper providing the money to a customer so that the customer keeps buying from the shop. If the customer will not buy, the shop won’t have business, unless the shopkeeper funds him. The US is like the lucky customer. And the world is like the helpless shopkeeper financier.
Who is America’s biggest shopkeeper financier? Japan of course. Yet it’s Japan which is regarded as weak. Modern economists complain that Japanese do not spend, so they do not grow. To force the Japanese to spend, the Japanese government exerted itself, reduced the savings rates, even charged the savers. Even then the Japanese did not spend (habits don’t change, even with taxes, do they?). Their traditional postal savings alone is over $1.2 trillion. Thus, savings, far from being the strength of Japan, has become its pain.
Hence, what is the lesson?
That is, a nation cannot grow unless the people spend, not save. Not just spend, but borrow and spend.
Dr. Jagdish Bhagwati, the famous Indian-born economist in the US, told Manmohan Singh that Indians wastefully save. Ask them to spend, on imported cars and, seriously, even on cosmetics! This will put India on a growth curve. This is one of the reason for MNC’s coming down to India, seeing the consumer spending.
‘Saving is sin, and spending is virtue.’
But before you follow this Neo Economics, get some fools to save so that you can borrow from them and spend!!!
Tope Fasua
Tope Kolade Fasua is a Nigerian businessman, economist and writer. He is the founder and CEO of Global Analytics Consulting Limited, an international consulting firm with its headquarters in Abuja, Nigeria. He is also running the race for presidency, for the 2019 general elections in Nigeria, He has authored 6 books.