Swimming Naked
Many moons ago, humans created a time machine. It’s not a time machine like we see in the movies. Instead, the time machine looks like a contract, plastic card, or metal card, if you’re fancy. Humans named the time machine “Credit”. Credit allowed humans to take their money from the future and bring it to the present.
Credit can make everyone’s lives better because people generally earn more money over time. The 22-year-old Amazon software engineer is probably broke today, but we can assume she won’t always be broke. With her time machine, she can bring some future dollars to the present and buy things such as a house. She will buy the home with money taken from her 52-year-old self and pay it back over time. If she played her cards well, she will have an asset that is worth more than the amount she originally borrowed.
1. 22-year-old borrows $500k from 52-year-old self
2. Pays down the $500k over 30 years
3. At age 52, she has a home worth $1.5 Million and she only paid $500k
When credit works, it’s magical! If everyone pulls money from the future, the present can grow faster than it normally would. It also provides a level of safety for the entire system. If we lose our job today, we can use credit to fill our gaps until we get back on our feet. The problem is that people can get carried away with credit. Sometimes people use their future money to go drink and party. Some people are also too optimistic about their future earnings potential. This is where time travel gets dangerous.
If a life event changes someone’s future earning potential, it’s possible that they have taken out too big of a loan. When this happens, someone has to pay up and most of the time it will be society/tax payers or a bank. We have seen many financial crises throughout human history and they generally come from the credit market. In good times, money flows and no one even questions whether you can pay them back. “Only when the tide goes out, do you discover who’s been swimming naked.”
People make mistakes. It’s not anyone’s fault and there is a lot of pressure on us to abuse our magical tool. When we see everyone swimming, we don’t want to be left out, even if we didn’t bring our swimsuit. So, we jump in. The problem is that when too many people are jumping in naked and corporations are doing it too, hard decisions will have to be made. Lifeguards will have to decide who they save and most of us won’t be on that list of people. So, it is our duty to act responsibly. Be mindful of how much we borrow from our future selves, spend it wisely, don’t be pressured into swimming naked, and remember to sell towels when the tide goes out.
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