- The mitigating circumstances which surround it, making the dream almost impossible to be attained, and an ever receding destination to be pursued but very infrequently reached.
Ah! The lure of gold, rubies, diamond, and dollars has got us wishing on stars. Who but the meekest among us can claim immunity from the temptation to become rich? But amidst this glitter and desire for fast cars, private jets, and the big mansions, there is the hurdle of the strange, illusive nature of riches:
The mitigating circumstances which surround it, making the dream almost impossible to be attained, and an ever receding destination to be pursued but very infrequently reached.
Why is wealth so hard to attain? Why wealth, though it is all around, flows mostly within a certain class? Is it magic? The answer lies in the nature of money and wealth creation. The first thing to consider is that wealth is finite, there is a fixed amount of money in the economy and the government controls its increase.
In the past, money was backed by gold, until the world shifted to Fiat currency, which is simply the decree to say “Let there be money.” To understand this principle better let us consider the following scenario.
Baraka needs a loan of Sh10 million to buy a car and approaches his local bank. The manager assesses Baraka’s credit worthiness for the loan; and due to Baraka’s working history, good credit rating, and the value of the offered collateral, which adequately covers the value of the loan, Baraka receives the funds. Now what does the bank do? Does the manager go into the vault, retrieve the money and place it into Baraka’s account?
No, instead through its internal operations, the local bank simply notifies the central bank, among a few other obligations based on the government’s monetary policy at the time of Baraka’s request for the loan, then it writes the transaction into a computer system to say that there is now Sh10 million in Baraka’s account.
The money came out of thin air. Yet the bank is allowed to charge interest on that loan and therefore the owners of the bank become wealthier through net interest income earned, based upon their position in the economy and the banking services which they provide.
The general citizenry cannot do this. They have no right to print money, nor can they operate an unregulated bank. How then can the poor become rich? Can getting a job make them rich? Not often, for most workers receive just enough money to take care of living and family expenses; to buy a house, a car, and put away money for the future. If people are wise, however, they could purchase assets through sacrifice and by deferring the desire to consume. Later, those wise people could leverage their assets and slowly build wealth for themselves. In developed countries, it may take a generation or two before there is sufficient asset to do something big. Therefore, the matter of building wealth should have a long horizon in mind, with an exit strategy.
But such thought of delayed gratification is not very common among the present generation who view entertainment showing music moguls driving expensive cars, wearing priceless jewels, and flocked by beautiful women in expensive “cribs”. We should also consider that obtaining riches takes time, thought, good planning and hard work. For example, owning a business is among the surest way to get rich, but that business must have a sound plan and a good strategy. It requires capital, though not in all cases is there a need to “break the bank” in order to obtain capital, many businesses may become successful on a very small budget. Often it may also require that two or three people may need to pool their resources in order to start a business.
In the end, getting rich is a matter of conserving and not of spending, earning and not losing money. In fact, more often than not, those people who drive expensive cars, wear the finest clothes are not always the richest people. It is often that person living a modus lifestyle while steadily operating a small business for many years at a profit, and having a single wife and few children who is often the millionaire.
Patrick O. Creary is the chief executive officer of Grand Africa Literary Initiative Limited