Credit Action stats out for Dec

purch

easy access to credit for business and individuals is vital, the point I was making is that sometimes it can be too easy

What seems to have gone wrong is recognising the difference between making credit available to the right risks, and just making credit available to everyone irrespective of risk

The availability of credit is a vital component of our economic system, but the control of risk is just as vital a component too.

setmefree2

Dithering_Dad wrote: »

Disagree with me? How very dare you?

Actually, we do agree. I also think that easy access to credit for business and individuals is vital, the point I was making is that sometimes it can be too easy, especially when used for non-essential items. If your vehicle dies and you use it for business or getting to work or other essential tasks, then clearly you can't do without until you can save up for a new one. However, if people just want to get a new car because 'her at number 27 has a brand new Yaris' then having to save up for it will probably make 'keeping up with the Jones' less vital, especially when you have to hand over £10k off your own hard earned and hard saved cash just on a silly whim.

I must admit that once I have money in my bank account eaning interest, I do think twice (even three or four times) before I go out and spend it - something that doesn't always happen when we use the 'Magic Money' of credit.

Then we do disagree, because I think if you want a car you should be able to get a car loan and buy one, no problem. Personally, I'd rather save up for one but each to their own....I suppose we nearly agree.

Wish those pesky money markets would get fixed quick.:D

setmefree2

purch wrote: »

What seems to have gone wrong is recognising the difference between making credit available to the right risks, and just making credit available to everyone irrespective of risk

The availability of credit is a vital component of our economic system, but the control of risk is just as vital a component too.

I think Chairman Bernanke and chums will be planning some big changes in the future.

WTF?_2

purch wrote: »

What seems to have gone wrong is recognising the difference between making credit available to the right risks, and just making credit available to everyone irrespective of risk

The availability of credit is a vital component of our economic system, but the control of risk is just as vital a component too.

Yes, if credit had been kept properly under control, most of this mess could have been avoided. Credit is a fantastic tool to enable you to be more productive in a shorter time period if you borrow to invest sensibly. It has been massively abused by people borrowing to mindlessly overspend and consume.

But now there's the problem that the very availability of credit has dried up because there's nothing there to back it up. New financial instruments promised massive amounts of 'money for nothing' but have ultimately proved to be a load of rubbish.

Credit is about pledging our own future productivity, which lets us gain immediate access to spend someone else's existing pool of savings from their past productivity.


If that existing pool of accrued savings doesn't exist or is rare, forget about getting credit.

If you aren't capable of being productive in the future (i.e. paying back the fruits of someone else's labours that you borrowed), forget about getting credit,


We've had an economy increasingly built on 'undeserved' credit. We either accept that credit isn't going to be as freely available in the future and/or we work damn hard at making ourselves productive so that we can gain be more credit worthy and build a pool to borrow from.

geoffky

I have never had a credit card in my life and do not have any debt..before i had some money i would just go without as i was brought up in a family that thinks that way.
debt is a life style as far as i am concerned as some people are happy with it and some like me fear it and its consequences if circumstances change..
It would be interesting to see people who are in debt and look at their family attitude to debt as i expect the figures to show that its a running theme.
I would also think that the middle class attitude to debt is more confident than the poor as the poor don't have assets to back them up in the event of default..I am talking about unsecured debt here by the way

setmefree2

!!!!!!? wrote: »

It has been massively abused by people borrowing to mindlessly overspend and consume.

I have no problem with people lending money to buy a car, furniture, carpets, holidays or whatever they want really. They borrow the money - they pay it back. Where's the problem in that? I have had loans in the past. I paid them off. I'm glad I borrowed the money. Sadly, my youth has gone, my children's childhood is nearly over - I'm glad someone gave me the money I needed, when I needed it.

None of the problems we have now were caused by people over extending themselves. They were caused by dodgy sub-prime loans in the US and a previously undetected (not a black swan) structural failure in the markets.

What exactly do you mean by mindless overspending and consumption? I don't know anyone like this? What's your problem with consumption anyway?

Dithering_Dad

setmefree2 wrote: »

What exactly do you mean by mindless overspending and consumption? I don't know anyone like this? What's your problem with consumption anyway?

It's a catchy soundbite, empty and meaningless, but catchy.

Cannon_Fodder

setmefree2 wrote: »

I have no problem with people lending money to buy a car, furniture, carpets, holidays or whatever they want really. They borrow the money - they pay it back. Where's the problem in that? I have had loans in the past. I paid them off. I'm glad I borrowed the money. Sadly, my youth has gone, my children's childhood is nearly over - I'm glad someone gave me the money I needed, when I needed it.

None of the problems we have now were caused by people over extending themselves. They were caused by dodgy sub-prime loans in the US and a previously undetected structural failure in the markets.

What exactly do you mean by mindless overspending and consumption? I don't know anyone like this? What's your problem with consumption anyway?

"None of the problems caused by people over-extending"...wrong...if there had been no demand for lending then the banks would not have had to be creative in finding new ways for the same finite amount of money to be circulated around more and more products/people/purposes.

Not absolving the banks of blame, as they didn't understand their own 'creative accountancy', and its a bit chicken and egg, which came first - 1 only slightly iffy product was noticed and well taken up by the public, so the banks decided something a bit riskier was profitable etc...but if there had been a shortage of loan demand, there would never be the need for new products/'instruments'.


"previously undetected structural failure" - agree. But that doesn't explain the cause of these loans. The 'raison d'etre', in the first place.

Sub-prime also exists in the UK. No sub-prime client was forced at gunpoint to sign on the dotted line. It required self-discipline. Which in many cases does not exist - across whole neighbourhoods.

"What's the problem with consumption?" - ermmm....the planet, like. I'm no tree hugger, but I can see the wasteful practices in the shelves of just about every shop.

Try watching Spendaholics - entire wardrobes of unused designer clothes, being sold off to repay debts - when not buying them in the first place would avoid the debt, save the raw materials, and avoid the child labour that is a direct result of the buying power of large western conglomerates upon the developing world.

"its wrong to stop the developing world from having what the developed world already has, so they need to earn a living wage"...

...this is almost exactly the same as the "second income in a household" argument.

After twenty years, when the developing world has developed a bit, fast foods joints on every corner, poundshop on the high street, the stress is killing them, cancers are prevalent, etc etc, will it be so great that we are so consumption driven...?

WTF?_2

setmefree2 wrote: »

I have no problem with people lending money to buy a car, furniture, carpets, holidays or whatever they want really. They borrow the money - they pay it back. Where's the problem in that? I have had loans in the past. I paid them off. I'm glad I borrowed the money. Sadly, my youth has gone, my children's childhood is nearly over - I'm glad someone gave me the money I needed, when I needed it.

That's great- so long as they actually can pay it back.

As far as I can see, an awful lot of people were borrowing to blindly consume and live a life beyond their means with no firm plan about how they were ever going to pay it off. They just kept taking on more and more debt any time they were faced with the issue of seriously repaying.

setmefree2 wrote: »

None of the problems we have now were caused by people over extending themselves. They were caused by dodgy sub-prime loans in the US and a previously undetected (not a black swan) structural failure in the markets.

I don't even know where to begin addressing that comment, you appear to have swallowed the Labour party spin hook, line and sinker.

You seem to think that the UK housing market and economy was ticking along nicely in a sustainable manner when suddenly this huge, unpredictable external event came along and upset the applecart.

In fact, our housing market and economy were built on copious amounts of cheap and easy credit being available. That cheap and easy credit in large part was being created by new financial instruments and built upon securitization of risky property loans in the US which were packaged as AAA grade securities and sold on generating enormous profits for all concerned. As the market grew, the property loans just got riskier and risker in an attempt to keep expanding the market.

Once the mortgage debt defaults started in the US, as was inevitable since the loans were just getting more and more risky, it was only a matter of time before the pack of cards came tumbling down. Take away that credit - the Credit Crunch - and the whole basis for our house price inflation and economic success story evaporated.

Much of the UKs 'prosperity' since the turn of the century has been predicated on the back of what was going on in the US. It simply wouldn't have been possible without it.

setmefree2 wrote:

What exactly do you mean by mindless overspending and consumption? I don't know anyone like this? What's your problem with consumption anyway?

Mindless consumption - 'shopping as a hobby', consumption as a lifestyle ; People taking on thousands of quid of debt to just buy more and more consumer goods or spend on luxuries. No real thought as to 'can I afford to repay' and hence ever increasing amounts of debt related problems.


You are honestly saying you can't see this going on all around you? That beggars belief, it really does. You actually really think that everything was sustainable if not for all that pesky credit crunch stuff which just happened arbitrarily and upset things?

I'm dumbfounded that somebody could really be in that much denial of the facts and unable to join the dots - especially as the dots have been joined goodness knows how many times for you by posters here.......

purch

mindless overspending and consumption

I don't know why you needed to bring my missus into the conversation !!!!