The power of creditor

“Give me control of a nation’s money supply, and I care not who makes its law”.

(Mayer Amschel Rothschild, German banker of the 18th century, founder of the Rothschild banking institution)

bank

In the 18th century it was already clear that the economy based on capital (and now on loans) plays a crucial role for the definition of the “creditor”; in this case Rothschild explicitly states that the obligation arising from an economic relation is more important than any political manoeuvre within a Country.

This scenario is particularly evident today: the control of the money supply in the EU Countries has been exported and the domestic politics is not able to bear the weight of the monetary debt.

The only instruments at the disposal of the state executive bodies are the austerity measures. In fact, they effectively apply to short-term indicators, although they exert a negative impact on economic growth, generating a negative knock-on effect.

Basically, those who control the debt of a Country and its self-indebtedness capacity hold a greater power than the ruler of the same Country. It is as if within a company the creditors and the banks were more important than the CEO. Will it always be true?

It is statistically true as the debt impacts on the company economy. The greater the debt in proportion to the turnover, the stronger the contractual and “political” power of the creditor. This sounds reasonable: interestingly, the modern case-law has provided us with administrative tools allowing us to turn loans into equity or into the ownership of an asset.

For example, according to the bankruptcy agreement with the assignee (art. 124 and 137 of the tax law), the subject can bear the burden resulting from the agreement, which means that the subject may discount his/her loans (or the third-party loans) in exchange for the ownership of the assets included in the procedure.

In case of private individuals and an executive procedure, the creditor may ask for the assignment of a property (art. 588 of the Italian Civil Procedure Code) or, to be agreed with the auction assignee, for the assumption of the debt (art. 508 of the Italian Civil Procedure Code), postponing the collection after the enhancement of the property.

Nowadays, within the economic downturn and a liquidity shortage in the consumer market, the comprehension of the mechanism that turns loans into assets leads to great competitive advantages for those who are in the right place at the right time.

Emanuele Grassi