Rich Debt, Poor Debt

My father, may he rest in peace, and my uncle, his brother, provided me with a real life "rich dad, poor dad" situation while growing up. My uncle became a rich man, well, rich compared to my father that is, while my father always worked at least as hard, but had never finished school. Later in life he did finish a university degree in law, but he never "made it," like his brother had.

_{source: Max Pixel}

I remember one day my uncle told something that really surprised me back then, something I now recognize as one of our economy's many paradoxes. He was a successful psychiatrist who traveled the world (he's retired now), giving lectures about the research he had done, mainly on the use of drugs in relationship to participating in traffic, and one day he told me about a significant raise in income he just enjoyed. He also told me that now that he got the raise, he would not only be able, but be obliged to loan a lot of money from the bank; he soon mesmerized about the nice little house he would build with that money in our native country in South America, Suriname, so I had to raise my voice to ask him WHY he would be OBLIGED to take on debt.

As everyone else, I had always learned that debt = bad. A simple blanket statement that's always true in the real world; debt creates a power structure, dependence, and also it is using wealth you don't have. For normal people debt is a weight around the neck to be carried around, hoping it won't get so heavy as to prevent you from walking upright, or worse, fall flat on your face on the delicate ground that is the fabric of social cohesion; people with debts are leeches of society who'd rather borrow than work for their money. So why, I asked my uncle, would rich people NEED to take on debt? You have enough money now to buy what you want, why borrow even more?

My uncle then introduced me to the world of progressive tax systems. He explained to me that the more money one earns per year, more taxes are to be payed over the amount earned over a certain limit. Something like 0% over the first 10,000 dollar, 30% over everything between 10,000 and 35,000 dollar, 40% over everything between 35,000 and 70,000 dollar and a premium of almost 50% over everything earned above 70,000 dollar. The numbers here are fictional, just trying to make clear how this works. This is a system I personally can agree with in principle though; it's just a matter of fact that no one person can earn a brick house with running water and a computer by the sweat of their own brows, so it's good to have something worked into the economy to represent the simple fact that rich people earn most of their money by exploiting the labor of many people, and to have the rich people give something back to the communities that made them rich.

But my uncles explanation about taxes and debt displays perfectly how the modern western mindset is geared toward the ego almost exclusively... You see, it's a simple calculation to make when all you're told is that striving for personal gain and individual betterment ALONE is the right thing to do; for rich people debt isn't a weight around their necks, but a clever way to lower their annual income, as to not have to pay the higher rates at all, or at the very least minimize the amount of money over which these rates have to be payed. So for my uncle this was a win-win situation; he got to pay less taxes while borrowing the money to build a second home abroad, the value of which will most certainly rise with the interest to be payed on the loan. And when he doesn't live in it, he can rent it out...

This is just one small and personal example of a greater phenomenon, namely that it's easier to make money when you have money, that common folks pay 10% interest on a small credit card debt, while large multi billion corporations and their owners can borrow money for free. Rich debt is worlds apart from poor debt, only because of this broken economy. In real life though, debt is dependency and power when not accompanied by trust, and a sign of healthy relationships when it is. So, the writer of the book "Rich dad, poor dad" has a very different view on this and explains what, according to him, is "good debt" versus "bad debt"... Watch it, listen to it, but don't fall for it...

_{HOW DEBT CAN GENERATE INCOME -ROBERT KIYOSAKI}

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