Posted by
James Burns on Tuesday, September 30, 2008 10:58:56 PM
As I dwell on the "financial crisis" that is being blasted all over the news. I wonder is there really a crisis?
Look I am forty years old. I remember when credit cards were luxuries.
Most people only had mortgages and car payment. Even car financing was
hard to get at that time. Credit was something you earned. Know a days
its thrown at you and as long as you don't screw up you can keep it.
Look you can walk in to a car dealership and walk out with a car, no
cash changes hand just sign here. Many people bought houses with no
money down just pay closing costs, strictly credit. If you go to
McDonalds you can finance a Big Mac if you use a credit card.
Now everything runs on credit. That is a problem. Because this means
everyone runs in debt. From your employer who pulls short term loans to
pay your paycheck to the person who buys your product. We really are in
a credit free for all, and have gotten so used to functioning with it,
we have forgotten how to function without it. I have a mortgage, a car
payment, both cars are used one payed for with cash, and a credit card
with less than a two hundred dollar balance. If I want a p.c or a 72"
LCD HDTV I need to pay cash for it, if I don't have the cash I don't
buy it. This free for all credit has fueled this "Keeping up with the
Jones" attitude to an all new high. I will admit I have had credit
cards multiple car payments etc. Got myself into trouble, got out of it
and believe me will never allow myself to get into the mess again.
Unfortunately not enough people have gone through that, but know are.
Because everything is financed not owned outright. The temptation is
just to great.
In my opinion, as economist say, markets go through corrections.
Readjusting to over valuing because of heavy investing. I think now
were in the same kind of correction. Just it is the credit market
realizing that it over extended credit ,playing the big paper shuffles
to fix the books, and not recouping the funds lent out. It is now
tightening the reigns because of all the over extension of credit and
everyone is screaming because people do not know how to function
without it. I think when its all over businesses and people will have
relearned how to function with what cash they have and a little credit
rather than all credit. Not saying it will be an easy lesson to learn,
but a much needed one.