Tuesday, October 21, 2008

Living Beyond Our Means

I do not like to be in debt. I have never taken a loan to buy a car. When I take our a mortgage to buy a house I do my best to pay off the mortgage, even though it may make “financial sense” to invest the money elsewhere. That makes me, and people who think in the same way, a kind of dinosaur in this world of debt financing. I feel uncomfortable spending money that I do not own.

Innovative financial services allow people to “leverage”. It means essentially to borrow money to invest, hoping to achieve a higher return for the money that is actually owned.

It is supposedly a smart way to invest. Indeed many of the people who work in finances graduated from some of the best universities, and have been making obscene amounts of money. Yet it is also these same people who got the whole world into this mess. Now we are counting on them to get us out of it. Forgive me for not holding out a lot of hope on them.

Another way to describe this way of living is the old fashioned “living beyond our means.”

The photo is of Central at night, as seen from an airplane just before landing. It is the heart of financial services in Hong Kong and it is glitteringly beautiful. Everybody wants a piece of it - and now we are in a mess. But what is it that we really want in life? Is it really just the glitter that we want? Or something that is not so glamorous but ultimately more satisfying?

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