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Like some eccentric Lehman brother the family don’t like to talk about, he traded in debt – his own – and he actually made it work.
'A CREDIT TO HIMSELF' is a recession parable, the memoir of a classic British eccentric, and the story of our recent obsession with credit.
This entire document is Copyrighted 2014. All Rights Reserved. No unauthorized copying of any section of this document is permitted. If you wish to use any part of this document contact the originator Paul Hughes.
It started like any ordinary Monday. I woke up, made coffee and flicked on the TV while I waited for my laptop to boot up. The clock in the corner of the screen read 9:45. Rolling news – a 24-hr crisis channel.
The camera showed the outside of a skyscraper somewhere. New York, I guessed from the yellow taxis that occasionally flashed by in the foreground. Ticker tape scrolled before my bleary eyes. Crisis… bankruptcy… collapse.
I took a sip of coffee and turned my attention back to the laptop. Windows had finished loading, so I clicked on the browser icon and opened the Lloyds TSB online banking site.
“For those of you who are just joining us, this morning’s top story: American financial giant Lehman Brothers has filed for bankruptcy. We now go to our economics editor.”
I glanced up at the TV, then shrugged and returned to my Lloyds account. Wall Street was 3,000 miles away across the Atlantic.
“Good morning, Jean. Yes, it’s official. Lehman Brothers is no more. What started as a sub-prime mortgage scandal has ballooned into a major crisis. All across America, bankers and politicians are in a state of panic, and markets across the globe are watching carefully to see how events pan out…”
I tore off a mouthful of supermarket croissant and allowed my brain to tune out. It was too early in the morning for hysteria. Someone in authority would step in soon, and the whole affair would blow over. By the time Watercolour Challenge came on, the news would have moved on to some other catastrophe.
I logged onto my account, and saw that I was overdrawn by £4,000. Combined with my £10,000 of credit card debt, and the money I owed to other banks, I was in the hole for nearly £80,000. Nothing out of the ordinary, and certainly no reason to panic.
I clicked on the button that said ‘Request a Loan.’ There was a box where you could enter the amount you wanted to borrow. I pondered for a couple of seconds, and typed in £5,000. Then I deleted the figure, and entered £10,000 instead. That should cover it, I thought. It was good to have a little extra lying around for emergencies.
I clicked ‘Confirm’ and a window popped up telling me my request was being processed. I imagined a little man in an office somewhere phoning up my various bank managers. Running the security checks, chatting to the bloke from Experian. Although these days it was probably all done by computers.
I took another sip of coffee and plodded over to my yoga mat to perform a few stretches. I was barely halfway through ‘Salute to the Sun’ when I heard a ping from my laptop. I craned my neck and saw that another little box had appeared on screen. “Your loan has been approved.”
I yawned and returned to my stretches.
My name is Paul Hughes, and I am a stoozer.
You’ve probably never heard that word before. It’s not a common one – and for that I’m glad, otherwise I wouldn’t have been as successful as I was.
Basically, a stoozer is someone who juggles with debt. Someone who borrows vast sums from banks and lenders, and then plays one creditor off against another, making money at the banks’ expense. It’s a kind of alchemy, which allows you to turn toxic crap into gold.
Stoozing is simple in essence. You borrow money from one bank or credit card company at a low rate of interest, and then ‘reinvest’ the money in a high interest account. When the repayment deadline starts looming, you pay the first bank’s money back and keep the difference. There are a hundred other little tricks you can use, but the basic rule is ‘borrow low, save high’. The key factor is knowing the market – finding out where the best deals are and figuring out how to exploit them.
Lehman Brothers would have understood, as would those respectable folks at Goldman Sachs. Before the crash, they were all at it. Borrowing and lending to their hearts’ content, fiddling the figures, robbing Peter to pay Paul. The difference is that I did it on my own, from the comfort of my sofa. I was a lone ranger: if not exactly Robin Hood, then a sort of modern-day Dick Turpin.
It was the system itself that made stoozing possible. Banks profit from debt. Your debt. That unpaid credit card bill, that mortgage with twenty years of repayments left on it – these are bread and butter to your friendly neighbourhood bank manager, because without your interest payments he would go bust.
The trouble was that by the mid-noughties, the banks had already lent so much money that everyone and his grandma was up to their eyeballs in debt. We were living a lavish lifestyle funded by borrowed money, but the loan-sharks were running out of people to prey on.
So they started offering incentives. Tasty-looking bait to lure customers onto the hook. 12 months interest-free, a hundred quid in your hand when you transfer to us from another provider. Minimal background checks, no collateral required. The money was there for the taking. No questions asked.