Friday, 7 October 2011

Never A Borrower or Lender Be

Letter from Littlemore – No. 24
8th October 2011

Never a Borrower or Lender Be

What fun the meeja types have been having with Mr Cameron’s speech this week! Apparently, his first intention was to tell us all off for not paying off our credit cards and getting out of debt. Then, oh no, this wouldn’t do, so it was changed to “well done, you little people, for trying to pay off your credit cards and get out of debt”. There were two prices that had to be paid for this – he had to blame his scriptwriters for getting it wrong, and his flunkeys for releasing it too soon; and he had to bear the terrible burden of the “Tory millionaire toff realises that life might actually be financially harder for most other people than himself” storyline. Given that Messrs Miliband and Clegg have equally never had to bear the burden of poverty, benefits, and not knowing where the money was coming from to pay for the heating, that wasn’t a huge sacrifice.

But I wonder if the true story might have been a little different. After all, since the Great Bail-Out, Britain’s banks have been castigated for not lending enough money to businesses. This, supposedly, will create work and growth. Not least for the banks. Not that the banks have anything to worry about because, unlike all other businesses, they know that they can ask the taxpayer to foot the bill when they screw up. The Government line seems to be that credit is good. Which, put another way, means debt is good. So, telling the ignorant masses to pay off their credit cards at the exorbitant rates of interest they charge, is actually bad for the economy, not good for it. And what does it matter if a few small people go to the wall, when the big people are so lovingly financially upholstered by their friends in Parliament? Imagine the whispering spin doctors - “So, The People’s Dave, think again – if the little people don’t stay in debt, the big people might have to find new jobs themselves, and there’s a recession on, in case you hadn’t noticed, and just imagine how embarrassing it would be to see fellow members of the ruling class out of work? And in any case, there are people in the Cayman Islands, and Belize, and Switzerland, who badly need that money, so really, it’s a case of international development.”

But actually, The People’s Dave was right first time, and Mother was right a lot longer before that – “never a borrower or lender be”. Live within your means, cut your coat according to your cloth, and so on. Ebenezer Brewer in the Dictionary of Phrase and Fable has this cute little rhyme:

“Little barks must keep near shore,
Larger ones may venture more.”

There is an allure in credit – we always call it that, not debt – that somehow we have been found worthy to spend money we don’t have on things we shall soon forget. I’ve fallen for it myself, and got into several right old tangles, thinking that the good times would continue to be around the corner, when they weren’t. And then the debt-collector comes along, making his demands with menaces. One of the snags of the tuition-fees hike for universities is that it pushes more and more young people into Plasticville. After all, if you’re going to be £30,000 in debt when you end your course, what difference is another little dinner for eight at the Randolph Hotel going to make anyway? When I was a student, sometime after Noah’s coming-of-age (about 500 in those days) and before the Ark sailed (but “larger ones may venture more”) none of my friends had credit cards. We went out to dinner sometimes, and we went armed with cash. And we calculated who’d had what, too. In plusher times I’d have found that vulgar; then it was a necessity – it would have been absurd for my friend Elizabeth, who doesn’t drink, to subsidise my wine, or for me, not keen on puddings, to pay for her ice-cream. It may have lacked panache as a way of living, but it was fair. We lived within our means.

And most of us had limited means. We came from relatively comfortable families, and we wanted for no necessity. Our parents took the government’s maintenance grant as an indicator of how much money we might realistically need, and didn’t far exceed it. One of the saddest and most salutary experiences of our time at Christ Church was seeing the ambulance that took away Olivia Channon’s body from Count Gottfried von Bismarck’s room in Blue Boar Quad (she was the daughter of Paul Channon, then a Cabinet minister, and a descendant of Guinness money and he of the same family as the more famous Otto). I had been at Mattins and the early Holy Communion that morning, and seeing the ambulance parked outside the Deanery I thought it must be Dean Heaton, who had had major heart surgery a little before our time. But no, it was a young woman our own age, dead of drugs and alcohol. When the rest of us lived comfortably on £2,400 a year, her personal allowance was £22,000 a year. Small wonder that there was nothing else to do with it but invest it in things that proved fatal for her.

Easy money is easily wasted. When I was a child, we saved up for things; sometimes for months on end. When I collected coins (it’s a phase; you grow out of it) I wanted to own a gold sovereign – and not any sovereign, an Edward VII 1902 sovereign. Every penny I was given for birthday or Christmas, and other gifts, was saved up for this, and finally I hit my target - £29.50. Off we went to the bullion department of Johnson Matthey, later disgraced, and there it was – but! £31.50! The price had gone up in the time it had taken to me save it. My father dipped into his pocket for the last £2, thinking I’d done well to be patient for so long, and probably also thinking that he didn’t want to waste another Saturday morning driving into the centre of London at a later date. I still have the receipt somewhere. And the sovereign. That was over thirty years ago.

But shouldn’t it be the case that what is true of small boys saving up for their coin collections, is also true of adults and businesses? Is it such a bad idea to save up, instead of borrowing? I know the economic theory behind “credit creation”, but when “creation” turns to “crunch” it seems less appealing, the pound that everyone could share, turns into the pound that everyone owes. One thing an enlightened government might do, though, is to make those glittering sovereigns just a little less expensive, to cut down the waiting time for an impatient “want it now” generation, until we have re-learnt the ways of thrift our mothers taught us.


With love
Richard
Littlemore, Oxford
January 2011

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