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Greece is safer than me

With QE and the race to the bottom, there is so much money all around us, that it looks like it is worth nothing. Well, to be exact, in some quarters it is worth nothing, in others it is still costly. One would expect that after the 2008-2018 Greek debacle, at a time when the country had to pay up to 37% interest to borrow money, it would still be very costly for Greece to raise money in 2019. Mind you, they have been in austerity mode for a decade and still have debt repayment scheduled until 2060. And who knows if they will not default a few more times before? Well well, the world has changed: Greece is a safe bet! Time to assess if I am safe too...

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Greece currently lends money over 10 years at 1.44%. But last month, they sold a short 3 months debt at -0.02%. You read well, you now have to pay the Greek government to lend them money! After Apple raising a billion Euro for free last month, now Greece raised nearly half a billion for less than free.

If free money is all around, and even given to Greece, what could I get in this environment? I decided it is time to ask for free money too. I paid a visit to a few Spanish banks this week to see if they would lend me for some property-related finance. Unlike Greece being in debt to over 175% of GDP, I only asked for 50-60% loan to value. A safe request for a safe project. Well, that is what I thought...

It is fair to say that Spanish banks see me as a far greater risk than Greece. My first meeting got me a 5.7% interest offer with conditions attached. My second one a 3.2% interest with more conditions attached. And my last one a "not finance-able" stamp (no job, no finance). As I explained in Out of the Rat Race, if there is a good reason for a job, it is the leverage it gives you over financing your projects.

In a world where bricks and mortar is getting too costly, by going online it looks like I can get closer to a 2% variable interest over 10 or 15 years. Of course, with fees and conditions attached. Clearly, they see me and my project as a risk!

I know I have bored some of you with my reviews of the potential risk of recession and the fragile economic system we are in, but all this is related. While Central Banks are printing money and give it to the too big to fail (countries and humongous companies alike), commercial banks are tightening their criteria for individuals. They are preparing for the recession... Mind you, nearly all of the German Banking system got downgraded last week. But this is too important a news to be a small print here. I will come back to this German story very soon.

I leave you with this to think about: a recent study has shown that after so much austerity, Greek people have gone both offshore and underground. Their black economy is estimated at 21.5% of GDP. That leaves a hole in the tax revenue that they will never fill again. For Greece, the only hope is to slowly replace money borrowed at 10 or 20% by money borrowed at 0%. They will never get their amount of debt on a sustainable level. They can only manage the damage, with the complicity of the money printing ECB.

Somehow, we are all in similar situations. Our goal should not be to attain debt freedom. Our goal is to ensure that our income is recurring and increasing while our costly debt is replaced by less costly debt. Bizarrely, in the low interest world we live in, the cost of the debt matters far more than the amount of the debt itself. I am still undecided if I take or not this 2% Spanish mortgage... Two percent is not much, but in a world of zero percent, it is 2% too much!

To your journey!

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