May.
10
2018

MY TIME MACHINE, THE LOAN

A surprising quote, especially because I did not find it in the Camel Shepherd, but in the Time magazine. I remember, as a college student, I often had the problem that I had no money with me. Actually, the ‘with me’ part is a strong euphemism; more accurately: ‘I had no money at all’. If I was lucky, then I found some hot dogs and a rolls in the freezer that I saved for the lean season. There were times when I was not so lucky.

One way or another, but it was always a great relief when in such times someone supported me with some thousands of forints. Usually, it was my parents, but how evident it would have been if I could have borrowed the money from my current self, who is relatively better off. Of course, a time machine is required for such a plan… fortunately, there is one.

It is called the loan. It is a little slow, a little expensive, but if we think about that it executes the rather complex function of a time machine…

Of course, it is ‘expensive’. The bank has to secure the rate of inflation and the risk that it might never see that money again. Such a time machine has an operating/transaction cost and it also has to be profitable, otherwise what would ensure that its depositors’ money is in safe hands?
The main problem is that people start to make enough money in the second half their life, while they would spend a lot (or even more) on food, travelling, entertainment or on housing and raising a family in the first half. We can see a loan as a reallocation of funds from my future and richer self to my young and broke self. Today, feeding that college student would not be a financial burden, and if I had been granted a credit for it, I would have gladly taken it. Of course, what I spend that money on is not irrelevant and what price, what interest rate I have to pay so that the bank makes all of this possible. Getting a mortgage in the current interest rate environment could be a particularly smart move. Taking a consumer loan for a plasma TV is not.

A company does not like either if it has too many loans (a company working well in the long-term, could have short-term liquidity issues, which can make it vulnerable to its creditors) or if it has too little. We do not like it, especially now, in the zero interest rate environment, in the cheap credit period. It simply is not efficient if a company gives up on this form of raising of capital. Financial resources that are useful for a company can also help a family. To say that a loan is ‘bad’…

Sara Quin quoted above is a singer. She refers to herself primarily as a businesswoman and only secondarily as an artist. If this is true, I would rather not listen to her music.

Original date of Hungarian publication: 21 November 2017