Anupam- The Dreamer

Vikram is an ambitious man. He is doing great in his small business of manufacturing shoes with an annual turnover of Rs. 20 crores and earnings of about Rs. 2 crores per annum. But, Vikram wants to grow his business and doesn’t have enough capital for that. So, he goes for taking loans from the bank to the tune of Rs. 5 crores. Till here, there is no issue. The loan is also not an issue, infact Vikram loves to take loan every now and then to expand his business. But, as you know Vikram is an ambitious man, so he loves reading the philosophy of Charvaka. He is particularly inspired by the Charvaka philiosophy– यावज्जीवेत सुखं जीवेद ऋणं कृत्वा घृतं पिवेत (Till you live, you must enjoy fully, even if you have to borrow money, then borrow and drink ghee/butter). Therefore, he believes in living lavish lifestyle even beyond his means. So, Vikram decides to siphon of his loan amount into personal expenses. He books a ticket to the USA for a week-long trip and spends Rs. 50 lakhs there. Then, he buys a BMW worth Rs. 1.5 crore. He spends Rs. 1 crore on his lifestyle and spends rest of the amount on miscellaneous expenses, and has just Rs. 1 crore left which he invests in his business.

Due to his financial profligacy, Vikram does not focus on his business much. As a result, he starts making losses in his business as he no more makes quality shoes. The sales plummets, the balance sheet dwindles, and he is burning huge cash to stay afloat. But, as his cash flow suffers, his worst fears come true. He defaults on his loan! And guess what, he didn’t pledge enough collateral with the bank against his loans, as he greased the hands of a bank official who used his power to misrepresent the actual facts. So, who is the ultimate sufferer in this scenario? Vikram, no! Because the loans were not his income/earning in the first place. The banks? No! Because the money which funded the loan came from the honest taxpayers in the form of small savings/deposits. So, the actual sufferer in this case is the people who make deposits in the banks. In case, this issue of “loan defaults” spiral out of control (as it did in 2008 mortgage crisis that led to the fall of Lehman Brothers), the actual burden falls on the people who save little money to deposit in the banks. So, effectively, the lavish spenders like Vikram live off the money of small middle class and poor people.

Everyone is not a Lannister, who always pays off his/her debt! Vikram here is certainly not like a Lannister! So, this chain system of giving debt which can again be pledged to buy another debt instrument, which can again be converted into other debt instrument and so on, goes well only until no one defaults on his/her debt. Till this point everyone loves a debt. Because common people get interest on their savings, banks make money through interest on loans, businessmen make money by debt financing and so on. But, as soon as anyone in this link defaults, the chain gets broken, and the actual hit is taken by the person who funds this debt in the first place, generally the person who believes in “Savings” and lives off within his means. In a nutshell, the people who are ethical followers of the principles of hardwork and propriety, fund the lavish lifestyle of the followers of Charvaka.

This is a simplistic scenario of what is happening in the world at present. The 2008 mortgage crisis is a complex version of the same. Then, the debt-trap diplomacy practiced by nations like China and the US is again an example of the same, with just a difference that they are practitioners of realpolitik wherein if the borrower nation defaults, they acquire the assets of other nations like mines, ports, airports etc. This is done through a carefully crafted design of “agreements” which hide more than they reveal. These wealthy nations love debts because debt for them is an instrument of neo-colonialism.

So, all in all, the choice is yours-

1. To live life like an ardent follower of Charvaka and squander whatever you borrow and live life king/queen size, or

2. To live like a poor commoner who believes in savings and hates taking debts, and doesn’t even know that the hard earned savings can be wiped off in just one market crash, or

3. Live like the astute sahukaar or realpolitik who possesses the ability to take back every pie that he lends, or

4. Live like a Lannister who always repays his debts and upholds the faith in the money circulation system.

But, alas! I see only the descendants of Charvaka all around and Lannisters are nowhere to be found!