Who is creditworthy?
October 31, 2011 Leave a comment
The word “credit” has it sources ranging back to Latin’s credo, creditus & credere. Translations can be read as “to believe, trust or confide”.
Once again, there is complacency in risk taking, but this time it has a better twist.
In 2008, the saving mantra was that government’s were the “lenders of last resort”. Governments “back-stopped” failing organisations. They were deemed to be the most creditworthy of all.
I think most of us are more creditworthy than many governments. If that is the case, who do you “believe”?
If I borrowed $10 from you, I am “good for it”. In other words, you would “believe” that I can borrow the money, pay an interest for this service and that I’d return the funds within an agreed or understood timeframe.
In a real commercial sense, the lender would ask to secure the debt by taking a “charge” or “lien” over an asset that I own, which is sufficient in value that covers their loan. If I can’t return the borrowed monies, the lender or I, sell an asset to clear the debt, sometimes at a loss.
Governments today aren’t selling assets. They are solving debt problems with more debt.
Laurel & Hardy should attend all government crisis meetings from hereon, at least to remind them “of another fine mess you have got us into”.