When I was young and naive, I once read a story and believed it wholeheartedly:

Buffett said he could make a poor young man the vice governor of the Federal Reserve of the United States and marry Bill Gates' daughter. How did he do it? He first went to Gates and said the young man was the vice governor of the central bank, you should marry your daughter to him, Gates thought it was great, and quickly gave his daughter to him;

Then Buffett went to Clinton and said the young man was Gates' son-in-law, can you arrange a job for him? Clinton thought it was great, being able to marry Gates' daughter, and made him the vice governor of the central bank.

I once firmly believed in this little story, but later found out that this story is simply "though the mouse is small, all the disgusting things are complete", expressing all the garbage in the Chinese people's thinking at once, such as the author thinks Gates can sell his daughter like a stock, and he also thinks Clinton can appoint the vice governor of the central bank at will, in fact, the United States doesn't even have such a thing as the central bank, what's more, the author is like a primary school student, completely don't understand why Buffett can do this, if he understood, he would know that Buffett would rather eat a mouse alive than do this.

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Buffett does have a terrifying influence, in 2008, when the century-old Lehman Brothers was about to go bankrupt, the big guys in Lehman said let's go to the finance minister and see what to do? The finance minister gave them advice, saying to go to Buffett, as long as Buffett is willing to take over, you should be able to survive, but later it didn't come to fruition, Buffett wanted too much money, Lehman disagreed, and then Lehman was gone.

But the Chinese have never really understood where Buffett's terrifying influence comes from, is it from fraud and deception?

Of course not, it is formed by his countless transactions and judgments in the past half century, which has made everyone convinced of his influence, he never abuses this influence, so this influence is like a dam that is blocked, and a little bit of water can be released to generate electricity.

This also connects with what we have repeatedly said in the previous text, that the modern Europe has produced a credit system, which allows countries to borrow money to fight or build, to operate in debt, this is the biggest difference between the East and the West, and also allows the West to enter the fast lane in modern times. It is precisely because of credit that the great powers of Europe can mobilize several times the additional funds of their own national strength to fight and build, China has always been poor in this regard, and only learned it very late, for example, Zuo Zongtang led the troops to pacify the northwest, the money was borrowed from the bank, if waiting for the country to raise money for him to fight, the cucumbers and dishes would be cold.Credit is an intangible thing, yet it possesses the power to turn the world upside down. On a small scale, an individual can borrow money through credit, then use that borrowed money to start a small shop, and gradually embark on the path of business management. On a large scale, it can be like Prussia, borrowing money from Jewish financial groups, and then using the borrowed money to fight three wars and establish a nation. It is not an exaggeration to say that the establishment of Germany was "founded on borrowed money."

When the United States was founded and had to go to war with Britain, the Continental Congress had no money. What to do? Borrow money from the people, so they issued a bunch of government bonds to raise funds from the public. After the Revolutionary War was won, there was no money to repay the original bonds, and there were people urging to repay the debts every day. The unfortunate Federal Congress (there was no federal government at the time) wandered around everywhere, hiding from debt collectors.

Later, a constitutional convention was held to discuss what to do next. The first Secretary of the Treasury of the United States, Alexander Hamilton, said that the money must be repaid. If it cannot be repaid now, it can be repaid slowly, but as long as it is repaid continuously, people will see sincerity, and credit will rise. With credit, more money can be borrowed.

At that time, the American people thought that these bonds had become toilet paper and would never be redeemed in their lifetime. They sold them at the price of waste paper to a few big capitalists. The spokespersons of these capitalists were attending the American Constitutional Convention, so they were very fond of Hamilton's view and passed it smoothly. After the establishment of the federal government, there was also a Ministry of Finance, and the treasury of the Ministry of Finance was filled with a pile of IOUs.

Comrade Hamilton not only revealed the essence of credit on one hand, but also made some people become super-rich as soon as the country was founded. The wealth of these people has continued to this day, exerting a huge influence. Therefore, Hamilton later appeared on the portrait of the American 10-dollar bill. Let's put a picture for everyone to feel it. Hamilton was killed in a duel with someone in his forties, so he looks very young. Impulsiveness is the devil, and everyone should not learn from him.

What Hamilton said also clarified the deep meaning of "credit": it doesn't matter if you owe money, you must repay it, and every time you repay the money, your credit will improve. With good credit, you can borrow more money. With more money, you can do small things like running a small shop in the village, or large things like opening a trade route, establishing a company, and fighting a war to establish a nation.

Columbus discovered the New World, and then a large number of bankers funded adventurers to explore. Credit financing new discoveries, new discoveries bringing colonies, colonies bringing profits, profits establishing trust, and trust transforming into more credit. This is capitalism, and the core of capitalism is credit, and the core of credit is credit. Therefore, Marx said, "National debt and the international credit system are the starting point of the capitalist mode of production."

For example, the Opium War, the United Kingdom relied on the Second Opium War to get out of the economic crisis, and the funds for that war were borrowed from the Bank of Scotland. After winning, they used the Qing Dynasty's compensation to repay the debt, expanded the overseas market, and the British products could be sold, thus solving the economic crisis.

Here is a question, what if you borrow money and don't repay it? If everyone does this, how does the credit system operate? Or in the case of the establishment of Germany we mentioned above, what if Germany doesn't repay the money, what should the banking group do? This is also one of the most frequently asked questions in my articles recently.In fact, answering these questions will also lead us to the root of credit issues. Only by resolving the problem of borrowing without repaying can the power of credit be unleashed in a terrifying way. Let's talk about it from small to large scale.

For example, if you owe credit card debt for more than three months, it will become overdue. In this case, you will have a credit blemish. Banks may lower your rating, reduce the amount of loans you can get, or simply not lend to you at all.

If you continue not to repay, restrictions will be imposed for another five years. If you still don't repay after five years, people may do some terrible things to you, such as not allowing you to take the train. In severe cases, your ID card may be displayed on the square. However, it's worth mentioning that these operations are still considered decent, after all, public enterprises need to maintain their image. What will be said next is not so decent.

Everyone has heard of those less regular companies, right? They are the loan companies that promise high-interest rates to attract deposits and then lend out money like usury, with no money but envious of the social people, small kids may fall into the trap of borrowing to consume, and then they are trapped.

If you can't repay that kind of money, the general loan company will call the people around you to make you stink, or upload your photos to the Internet. I learned a debt collection trick from a debt collection professional before, saying that people who often owe money have already had a bad reputation and are not afraid of you calling the people around them. However, he said that you must try to call the debtor's mother-in-law, and the effect is enhanced. If the mother-in-law is not useful, then think of other ways.

If the loan company goes bankrupt or confirms that the debt cannot be recovered, it will simply package your debt and sell it at a discount to others, and let others collect the money from you. If you owe a company 100 yuan, and they sell your 100 yuan IOU to others for 10 yuan, after a while, more professional people will come to collect the debt. How professional it is, you can imagine it yourself.

If the IOU is bought by the underworld, the underworld may come to collect the money in a violent way. In a legal society, this should not happen, but you all understand that there are many things that should not happen in a legal society but are still happening.

After talking about the folk, let's talk about the international situation, because the international routine is also similar, or it is an extension of the folk play, but the play is more advanced, and the amount is larger and more terrifying.

However, it must be emphasized first that many countries can also default on other people's money by luck.

For example, the Nationalist government has been in debt since its establishment. Many people don't understand, why should the Beiyang government repay the money owed by Empress Dowager Cixi?This is not difficult to explain. The Qing Dynasty's favorable trade treaties with the West must be inherited by the Beiyang government, and the West recognized Tibet and Mongolia as territories of the Qing Dynasty. Now, they are recognized as territories of the Beiyang government, and these recognitions must continue. Having taken over the good treaties, the debts must also be inherited. Therefore, the Qing Dynasty's debts to the powers were all taken over by the Beiyang government. Not only did they take over the debts, but the Beiyang government also borrowed 1.5 billion silver yuan from foreign banking groups in just over a decade, which is also a large number.

However, in 1917, a revolution occurred in Tsarist Russia. Comrade Lenin announced that all Russian foreign debts would not be repaid, and those who owed Russia did not have to repay either. As a result, the Beiyang government also stopped repaying the debts.

In 1918, Germany and Austria-Hungary were defeated in World War I. Austria-Hungary ceased to exist, and Germany transformed from an empire to a republic. The debts owed to these two countries were no longer needed to be repaid.

In 1941, China declared war on Japan, and the debts were no longer repaid. Yes, the war against Japan started in 1937, but the Nationalist government continued to repay the debts until 1941, without declaring war. Once the United States declared war on Japan, the Nationalist government immediately became more assertive, quickly declared war, and announced that the debts would no longer be repaid. If you don't agree, come and fight me.

This was quite fortunate, as it coincided with the progress of history. However, the Beiyang government was also disappointing. They borrowed so much money but hardly invested in industry, instead, they all spent it on fighting each other. Now everyone knows why the salaries of intellectuals in the early Republic of China were outrageously high. On one hand, they borrowed from overseas, and on the other hand, they had to support intellectuals to increase their legitimacy. After the Northern Expedition in 1927, Chairman Chiang Kai-shek did not give them so much money anymore because the money was mostly used to win over other warlords and prepare for war.

The country with the most debt evasion in human history should be the old Spanish Empire. As we mentioned earlier, after Spain discovered the New World in the Americas, they started digging for gold and trafficking tobacco, acting like a nouveau riche, causing trouble everywhere, and fighting against neighboring countries. At the same time, to support the war and high consumption, they borrowed money everywhere.

At that time, they borrowed the most money from German and Dutch bankers. They borrowed money to fight wars, and if they won, they could use the spoils of war to repay the debts. However, Spain's wars were very unsuccessful, and almost no war achieved its purpose. Soon, Spain's finances could not even repay the interest. What should they do?

The strategy of the Spanish king was to arrest the creditors, not only to arrest them but also to extort ransom from banking families. Bankers are not a country and do not have an army, so they had to let him manipulate them, pay the ransom, and leave, running to other countries that Spain could not conquer, and continue to lend money to support Spain's opponents.

Spain's wars were costly, and they also arrested creditors, so naturally, no one would lend them money. They had to offer sky-high interest rates, with interest rates as high as over 30%. High-interest loans, of course, someone would take the risk to try, and such high-interest rates would naturally lead to further inability to repay the interest. Now the creditors could not be arrested, and they had to default. After defaulting, it would be even more difficult to borrow money next time, and gradually, they would completely decline.

Spain is a big country, and most people can't afford to provoke it. But for small countries, it's much more convenient.For instance, take Greece. Early on, Greece was occupied by the Ottoman Empire. Later, in 1821, they declared their desire for independence. To achieve independence, they had to wage war, which naturally required funds. Thus, they borrowed money from Britain, France, and Russia, signing agreements and promising to repay the loans. After a brutal war, Greece finally gained independence but was left with a heavy burden of foreign debt that they could not repay. Britain, indifferent to their plight, sent warships to blockade their ports and embargo rice, driving Greece to the brink of economic collapse, with people starving to death daily. At one point, even as Greece fought alongside Britain against Turkey, their ports remained under British naval blockade. Despite being allies, debts had to be settled separately. It wasn't until more than half a century later, after Greece had seized a considerable amount of wealth from Turkey, that they were able to repay their creditors, and Britain finally forgave them.

The British Foreign Secretary stated publicly at the time, "We are not targeting Greece, but rather showing the rest of the world what happens when a country fails to repay its debts."

Another example is Argentina, a country that has achieved the remarkable feat of transitioning from a developed to a developing nation through democratic processes. Over the span of a hundred years, Argentina defaulted on its debts seven times. Since 1982, they have experienced three debt defaults, essentially declaring that they would not repay their debts. Naturally, this led to sanctions.

Starting in 1982, powerful nations began imposing sanctions on Argentina, and the cost of international financing soared to astronomical levels, ten times higher than that of other countries. Their credit rating plummeted year after year. Argentina attempted several times to hold a national referendum to decide on defaulting on their debts, but each time they were met with harsh retaliation from the powerful nations.

Modern states have different methods of exerting pressure compared to the past. In the past, Britain had to send warships to blockade ports. Now, by lowering credit ratings, they can cause the Argentine currency to devalue. With a devalued currency, Argentina, a country heavily reliant on international trade, struggles to purchase goods internationally. For example, cars that used to cost 200,000 now cost 500,000, and fuel that used to cost 10 now costs 30. If Argentina dares to print more currency, it will experience rapid devaluation. For reference, one can look at the situation in Venezuela.

The sharp increase in the prices of raw materials and production resources led to a surge in domestic production and transportation costs, making everything extremely expensive. During those years, Argentina experienced an annual inflation rate of up to 200%, causing immense suffering for its people. To this day, the country has not fully recovered, with unemployment rates still hovering around 30%. Furthermore, in a humiliating turn of events in 2012, an Argentine warship was seized by a creditor and had to be redeemed by paying a substantial sum.

Some might wonder, what if a country is unable to repay its debts despite sanctions? The more they are sanctioned, the poorer they become, and the less capable they are of repaying their debts. What can be done?

In fact, there are many solutions, but it depends on whether a country is willing to bear the consequences. For example, they could lease their ports for a hundred years or auction off islands. One might argue that this is tantamount to selling out their country. Indeed, it is clear that they are being forced to do so.

Additionally, there was the infamous 1998 Russian financial crisis. At the time, Russia was heavily in debt and, unable to repay, announced a temporary halt to debt repayments, causing a global shock. As a seasoned and influential member of the international community, the Russian Prime Minister visited their nuclear missile silos, and the message was clear to everyone.The great powers would certainly not blockade Russian ports, but there are many ways to control it, just like Argentina. The Russian currency plummeted by 70%. Are you still arrogant? You can't buy anything with your money internationally. Russia suffered huge losses and didn't recover until the economic crisis came again in 2008. This also disrupted the entire modern industrial layout of Russia, unable to buy necessary industrial equipment internationally, and unable to transform, so they had to sell oil.

The more oil is sold, the more single the industry becomes. However, the West can't push it to the brink of death. On the one hand, it's hard to kill it, and on the other hand, Europe needs Russia to transport natural gas in winter, so the relationship between Europe and Russia shows seasonal changes. When everything revives in spring, conflicts begin, escalate in summer, and intensify in autumn. In winter, Western Europe is weak, and Russia always moves from one victory to another, becoming more and more unscrupulous. The country has become a "perpetual victory gas station."

After talking about the above, everyone also understands why Greece was so noisy in the last financial crisis, wanting to default, but not daring to, and even initiating a national referendum to default in the name of democracy. Later, Greece, as a light industry country, if it is jointly sanctioned, the people will have to eat grass in a few years.

Some students may ask, what happened to the money owed to the West after the Russian Revolution mentioned above?

During the Tsarist period, the construction of the Trans-Siberian Railway, the expansion of military equipment, industrialization, etc., were basically high-interest loans from France. France had the reputation of "usury imperialism" among the great powers. According to the French estimate, it is said that it owed 18 billion gold rubles, which is a huge amount.

After the Russian Revolution, it was extremely poor, and there was no money to repay France. It simply didn't repay it. This is also why France was the most hardline against the Soviet Union when it was just established, because it owed it money! So, they organized an armed intervention against the Soviet Union by 14 countries, but nothing was interfered with. Then they started to sanction the Soviet Union, hoping to make the Soviet Union pay the money through sanctions. Later, the Soviet Union became good friends with the United States. Yes, you are right. When the Soviet Union was just established, it had a very good relationship with the United States, breaking through the blockade of Britain and France, and one after another, the five-year plan was carried out. Then came World War II, followed by the Cold War, and the money was never recovered, but it has always been surrounded to this day.

There has been a lot of talk about international debts, but what about domestic debts? In other words, what if the government owes money to the people and doesn't repay it?

The model of financing domestically has appeared very early, and it was the British who started it first. They established the Bank of England to absorb deposits and then lend to the government to fight wars. The British government is also very powerful, and it has never defaulted on national debt in hundreds of years. This long-term non-default has an effect: the interest on British national debt is very low, and the risk is low, so the interest is low. It's a bit like the current US Treasury bonds, and I'll add one more sentence. Most of the holders of US Treasury bonds are also the American people, not China. China is just a small part, about 5%.

In this way, the British have an advantage. Fighting and so on must cost money. Other countries, such as France, have financing costs several times higher than the UK. For example, if they borrow 100 million, the UK may only need to pay 2 million in interest, 2%. They have never defaulted in history, and this time everyone also believes they will not default, so the public debt is basically sold out as soon as it is issued. It's like the Lannisters in the TV series "Game of Thrones". Their family's "pay the debt" means: my family's loan interest is low.France is different; it often defaults on its obligations. As we've mentioned before, the French king was a cunning monarch, and the common people were shrewd as well. The king would rather go to the guillotine than repay his debts, and the people, in their resistance to taxes, would not even have a single window in their homes (since French property tax is based on the number of windows). As a result, France had to pay interest rates of over 6% to borrow money. To borrow one hundred million, they had to spend six million.

This was also one of the reasons why Britain could always defeat France in wars throughout history, due to the lower cost of financing. Later, France made a big effort to borrow a large sum of money and gave it to the Americans to support their resistance against the British. Eventually, the United States succeeded in gaining independence, which left the British in a difficult position. The French king could not repay the money owed to the common people, and both the king and queen were pushed to the guillotine, along with hundreds of thousands of French nobles, which marked the French Revolution. So, it can be said that King Louis XVI of France is the true founding father of the United States, and Americans don't really disagree with this notion.

After all this talk, everyone will gradually realize that once credit is damaged, it is very difficult to restore, because the cost of future financing will soar, and it will be frustrating to do anything, especially in modern society where interdependence is high, and there are many ways to deal with you. In the past, everyone was independent, and it was okay not to interact with each other, but now it's not possible. No country can survive alone without other countries.

The same goes for individuals. Many villages borrow high-interest loans together because they can basically rely on themselves without depending on the outside world. Credit checks or blacklists have no impact, and even the underworld trembles when they enter the village, who is afraid of whom? But as soon as you leave the village, you can immediately feel the trouble, and even implicate other people. For example, many students who have applied for loans know that if your ID card is from certain places, banks won't approve your loan at all, regardless of whether you have defaulted on loans in the past.

In general, there is an advantage to becoming a "social person": you can gather resources that are many times more than your own, and this ability is rolling and growing, becoming more and more powerful. But if you once go downhill, your credit will become worse and worse, until you can never turn over.