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Thread: What will happen if people will stop to take money in debt?

  1. #1 What will happen if people will stop to take money in debt? 
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    One of the problems with private borrowing is the risk factor, after the banking crisis it seems the lenders have been ultra cautious with their approach to lending. What this has meant in practise is that many ordinary people and small businesses have found it extremely difficult to borrow money. Whilst governments may want us all to start borrowing money, so as we can start spending it and stimulating the economy, and as such are keeping interest rates low, it seems lenders are not to enthusiastic about the idea. This is because with lower interest rates loans carry the same levels of risk but with lower potential returned for the lenders, the lenders want people to borrow when the interest rates are high so they make more money.

    This is a problem for governments trying to create a demand for credit and at the same time trying to persuade the lenders to actually supply the credit. Eventually it will get worked out because lenders will have to start lending out money sooner or later to keep profits up, because no lending means no profits so this situation will only persist so long.
    One thing you can bet on though is that once lending starts to increase in any significant way then we will start to see a rise in interest rates.


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    The paradox of thrift is the textbook answer for what happens when everyone decides to stop using debt to maturity shift their comsumption - in short you have a depression.
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    As is often the case with technical subjects we are presented with an unfortunate choice: an explanation that is accurate but incomprehensible, or comprehensible but wrong.
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    Quote Originally Posted by Stanley514 View Post
    As it is well know in recent years US government and gov. of other developed countries are trying to
    stimulate people to take money in debt.For example they lowered interest rate almost to zero long ago.
    But according to some recent data most of western countries started to reduce their foreign borrowings
    and private debts and this is only gov. debts that continue to grow.What will happen if people will continue
    to reduce their private (including morgage) debts?
    The current western economic system is based on "debt", however, one really has to understand that "debt" in the US, as well as in a few other countries, does not quit mean what most think it does.

    Debt: 1. Something owed, such as money, goods, or services.

    The US, as well as a few other nations, will never owe anyone anything more than a few strips of plastic, a few pieces of paper and a little bit of ink no matter how much "debt" they appear to "owe". Many American people, as well as others in the west, benefit from this type of "debt" or trade/trade off as well, and as long as this trade/"debt" dynamic remains intact the US government and its people will continue to take on "debt".
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    That is going to be difficult for some people for supporting their financial stuff.In Finland every people dream to be a debt or luottotiedot free however unlike on some business some are really reducing their debt but in the other hand they can't do it for the reason that sometimes they need some money to support their business.By the way i am pretty impress about the answer on the first comment and i am agree with him.
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    Interest rates will climb and inflation will also rise due to so much money being created by the Fed at their printing plant.It is only a matter of when that will take place not if it will. That will drive the economy down, IMHO.
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    If i understand what I've read, most current US debt is being bought by the federal reserve bank(the fed). The fed, just prints money to buy the debt, which should be entering circulation and stimulating the economy. This doesn't seem to be happening as planned(if planned?).
    The associated fear is that all that extra money should be devalueing the us dollar, which also doesn't seem to be happening.
    Meanwhile, the stock market is running at or near all time highs.

    .................
    (I ain't completely confused, but I am working on it.)
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    Eventually the " kicking of the can down the road" will come to an end and when that day comes the economy will suffer greatly. Just because it isn't happening today doiesn't mean it can't happen tomorrow.
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    Quote Originally Posted by sculptor View Post
    If i understand what I've read, most current US debt is being bought by the federal reserve bank(the fed). The fed, just prints money to buy the debt, which should be entering circulation and stimulating the economy. This doesn't seem to be happening as planned(if planned?).
    The associated fear is that all that extra money should be devalueing the us dollar, which also doesn't seem to be happening.
    Meanwhile, the stock market is running at or near all time highs.

    .................
    (I ain't completely confused, but I am working on it.)
    At least the part we can see, I do think it is somewhat deeper than that.
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    Quote Originally Posted by cosmictraveler View Post
    Eventually the " kicking of the can down the road" will come to an end and when that day comes the economy will suffer greatly. Just because it isn't happening today doiesn't mean it can't happen tomorrow.
    The crisis now in progress is not just based on economics. There are too much social and political confusion based on greed and inequitable wealth distribution. There is as far as I know no culture that has lasted for ever; eventually we come to a point known as the rise and fall phenomenon where everything falls and new ones arises. There is no doubt that one of the greatest civilization the Egyptians we know of today did fall. Most western civilizations only last approximately 200 to 300 years.
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    WOW
    that's a bold statement
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    Quote Originally Posted by sculptor View Post
    WOW
    that's a bold statement
    Which one?
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    The one which used the bold font.
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    Which should not be taken to mean that I disagree with the thought.
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    Quote Originally Posted by sculptor View Post
    Which should not be taken to mean that I disagree with the thought.
    It all boils down to subjective observations.
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    And a reasonable study of history
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    Quote Originally Posted by Stanley514 View Post
    As it is well know in recent years US government and gov. of other developed countries are trying to
    stimulate people to take money in debt.For example they lowered interest rate almost to zero long ago.
    But according to some recent data most of western countries started to reduce their foreign borrowings
    and private debts and this is only gov. debts that continue to grow.What will happen if people will continue
    to reduce their private (including morgage) debts?
    Long term there's going to be a massive global collapse of debt and paper money. 2 to 3 billion people will starve to death. The rest will band into gangs fighting for whatever resources are left.

    Or, the Fed will print its way to eternal prosperity.

    Which is more likely?
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    Quote Originally Posted by someguy1 View Post
    Quote Originally Posted by Stanley514 View Post
    As it is well know in recent years US government and gov. of other developed countries are trying to
    stimulate people to take money in debt.For example they lowered interest rate almost to zero long ago.
    But according to some recent data most of western countries started to reduce their foreign borrowings
    and private debts and this is only gov. debts that continue to grow.What will happen if people will continue
    to reduce their private (including morgage) debts?
    Long term there's going to be a massive global collapse of debt and paper money. 2 to 3 billion people will starve to death. The rest will band into gangs fighting for whatever resources are left.

    Or, the Fed will print its way to eternal prosperity.

    Which is more likely?
    The question could be asked, is there really a crisis or is there a deliberate attempt to cause chaos. In the case it is deliberate; our problems are not entirely based on economics. Have you noticed all of a sudden the war options are not so prevalent on the menu? What is the reason for this?
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    If borrowing ceases, wealthy people will panic. Inflation eats into their savings day by day and investing their money to earn interest is the only way they can continue to live without working.

    The dream of being idle rich depends on being able to accumulate a large amount of money and then let your money work instead of you working. Maybe that will become a thing of the past.
    Some clocks are only right twice a day, but they are still right when they are right.
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    Quote Originally Posted by kojax View Post
    If borrowing ceases, wealthy people will panic. Inflation eats into their savings day by day and investing their money to earn interest is the only way they can continue to live without working.

    The dream of being idle rich depends on being able to accumulate a large amount of money and then let your money work instead of you working. Maybe that will become a thing of the past.
    I am sincerely hoping that we will reach a reasonable equitable solution on wealth distribution and the alleviation of poverty, which I think is the real evil.
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    Putting economics aside, from a strictly philosophical viewpoint, I think people will have greater joy and peace, living within their means, and trying to decrease new debt/working on getting rid of all debt. To be in debt, creates an enslavement attitude towards one's job, whether consciously realized or not. We need to stop comparing ourselves to others, and try to find happiness outside of purchasing 'things' to obtain that happiness. Just my view.
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    Quote Originally Posted by wegs View Post
    Putting economics aside, from a strictly philosophical viewpoint, I think people will have greater joy and peace, living within their means, and trying to decrease new debt/working on getting rid of all debt. To be in debt, creates an enslavement attitude towards one's job, whether consciously realized or not. We need to stop comparing ourselves to others, and try to find happiness outside of purchasing 'things' to obtain that happiness. Just my view.
    When you really check it out, life itself does not owe or borrow. When you go to pick a fruit from a tree, the tree does not tell you it owes you one because it is low on water. If you hurt yourself the pain is immediate it does not tell you it will come back tomorrow to start paining you. Lol.
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    Quote Originally Posted by Stargate View Post
    Quote Originally Posted by wegs View Post
    Putting economics aside, from a strictly philosophical viewpoint, I think people will have greater joy and peace, living within their means, and trying to decrease new debt/working on getting rid of all debt. To be in debt, creates an enslavement attitude towards one's job, whether consciously realized or not. We need to stop comparing ourselves to others, and try to find happiness outside of purchasing 'things' to obtain that happiness. Just my view.
    When you really check it out, life itself does not owe or borrow. When you go to pick a fruit from a tree, the tree does not tell you it owes you one because it is low on water. If you hurt yourself the pain is immediate it does not tell you it will come back tomorrow to start paining you. Lol.
    haha, true. I'm in agreement with you. I've been in debt, and debt-free, and while being debt-free means saying 'no' sometimes to certain purchases, the peace that money CANNOT BUY, is ...well, priceless.
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    Quote Originally Posted by wegs View Post
    Quote Originally Posted by Stargate View Post
    Quote Originally Posted by wegs View Post
    Putting economics aside, from a strictly philosophical viewpoint, I think people will have greater joy and peace, living within their means, and trying to decrease new debt/working on getting rid of all debt. To be in debt, creates an enslavement attitude towards one's job, whether consciously realized or not. We need to stop comparing ourselves to others, and try to find happiness outside of purchasing 'things' to obtain that happiness. Just my view.
    When you really check it out, life itself does not owe or borrow. When you go to pick a fruit from a tree, the tree does not tell you it owes you one because it is low on water. If you hurt yourself the pain is immediate it does not tell you it will come back tomorrow to start paining you. Lol.
    haha, true. I'm in agreement with you. I've been in debt, and debt-free, and while being debt-free means saying 'no' sometimes to certain purchases, the peace that money CANNOT BUY, is ...well, priceless.
    Wegs, trust me when I tell you, I sleep very good at nights knowing that I am free from owe and borrow. I learnt that from my mother who was always saying what you own is what you own. A lot of people get rich and have so much money that they do not want to spend any of it but keep it and get more. I am quite happy for the moment when I have food, it means a lot to my health.
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    The role wealthy people play as investors is figuring out who will and will not pay back a loan. That's a very important task, because for every business idea that will work, there are about 100 or so that won't work. We can't fund them all, and if we try then we'll be wasting so many resources there won't be any left for us to feed our children.

    So collectively, from a tribal perspective, the wealthy investors' job is to say "no" to the rest of us (unless we are right.) It's a hard job, and it's easy for those who have been told "no" to drum up 1000 reasons why they think they should have been told "yes".

    But now we face a strange problem, because lately people are becoming less and less interested in asking for permission from these investors. The market is so unpredictable that people don't want to owe money on a loan. It's a dangerous kind of overhead cost to a business, because you have to keep making your payments even if business is slow. It's getting more popular for businesses to focus on getting out of debt, rather than expanding their operation, when they make a good profit.

    The only thing that worries me here is that the government might keep trying to bail the rich people out. And the banks. With no legitimate place to lend their money, the banks/rich people are starting to put their money in dumber and dumber places, then begging the Federal government to fix it when they fail.
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    Quote Originally Posted by kojax View Post
    The role wealthy people play as investors is figuring out who will and will not pay back a loan. That's a very important task, because for every business idea that will work, there are about 100 or so that won't work. We can't fund them all, and if we try then we'll be wasting so many resources there won't be any left for us to feed our children.

    So collectively, from a tribal perspective, the wealthy investors' job is to say "no" to the rest of us (unless we are right.) It's a hard job, and it's easy for those who have been told "no" to drum up 1000 reasons why they think they should have been told "yes".

    But now we face a strange problem, because lately people are becoming less and less interested in asking for permission from these investors. The market is so unpredictable that people don't want to owe money on a loan. It's a dangerous kind of overhead cost to a business, because you have to keep making your payments even if business is slow. It's getting more popular for businesses to focus on getting out of debt, rather than expanding their operation, when they make a good profit.

    The only thing that worries me here is that the government might keep trying to bail the rich people out. And the banks. With no legitimate place to lend their money, the banks/rich people are starting to put their money in dumber and dumber places, then begging the Federal government to fix it when they fail.
    I don't think you need to worry about the lack of borrowing to much, this is most likely a short term phenomenon, as it will likely as not correct itself as the world economy starts to get back on track. What we also seen is a reluctance to lend for several years, so don't expect all of a sudden lenders will magically be able to suddenly be able to lend out all the money they want to. People have rightly become more cautious and this has led to more paying down of debt, but again this is only a tempory situation and a consequence of the global down turn.

    As we start to see an upturn in business investment for expansion, new products and taking on staff ect... we should also start to see less need for government support and incentives. Ideally most governments prefer to see the markets working effectively by themselves without government stimulus measures, so really in the long term we can pretty much expect this practice to start tailing off. Again it was pretty much the extent of financial problems that lead us to this situation, which is to say far from the ordinary and thus as things return to normal so once again are we more likely to see a the return of normal business practices.

    Just to go back to your original point though about "The role wealthy people play as investors is figuring out who will and will not pay back a loan. That's a very important task, because for every business idea that will work, there are about 100 or so that won't work. We can't fund them all, and if we try then we'll be wasting so many resources there won't be any left for us to feed our children." I think it needs to be said here that one of the real problems is that even sensible ideas that could or should work won't necessarily do so without the right people to make them work. It's very easy to come up with good ideas, but actually making them a successful reality is another thing altogether, this is why so many small businesses go to the wall.
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    Quote Originally Posted by Ascended View Post
    Quote Originally Posted by kojax View Post
    The role wealthy people play as investors is figuring out who will and will not pay back a loan. That's a very important task, because for every business idea that will work, there are about 100 or so that won't work. We can't fund them all, and if we try then we'll be wasting so many resources there won't be any left for us to feed our children.

    So collectively, from a tribal perspective, the wealthy investors' job is to say "no" to the rest of us (unless we are right.) It's a hard job, and it's easy for those who have been told "no" to drum up 1000 reasons why they think they should have been told "yes".

    But now we face a strange problem, because lately people are becoming less and less interested in asking for permission from these investors. The market is so unpredictable that people don't want to owe money on a loan. It's a dangerous kind of overhead cost to a business, because you have to keep making your payments even if business is slow. It's getting more popular for businesses to focus on getting out of debt, rather than expanding their operation, when they make a good profit.

    The only thing that worries me here is that the government might keep trying to bail the rich people out. And the banks. With no legitimate place to lend their money, the banks/rich people are starting to put their money in dumber and dumber places, then begging the Federal government to fix it when they fail.
    I don't think you need to worry about the lack of borrowing to much, this is most likely a short term phenomenon, as it will likely as not correct itself as the world economy starts to get back on track. What we also seen is a reluctance to lend for several years, so don't expect all of a sudden lenders will magically be able to suddenly be able to lend out all the money they want to. People have rightly become more cautious and this has led to more paying down of debt, but again this is only a tempory situation and a consequence of the global down turn.

    As we start to see an upturn in business investment for expansion, new products and taking on staff ect... we should also start to see less need for government support and incentives. Ideally most governments prefer to see the markets working effectively by themselves without government stimulus measures, so really in the long term we can pretty much expect this practice to start tailing off. Again it was pretty much the extent of financial problems that lead us to this situation, which is to say far from the ordinary and thus as things return to normal so once again are we more likely to see a the return of normal business practices.

    Just to go back to your original point though about "The role wealthy people play as investors is figuring out who will and will not pay back a loan. That's a very important task, because for every business idea that will work, there are about 100 or so that won't work. We can't fund them all, and if we try then we'll be wasting so many resources there won't be any left for us to feed our children." I think it needs to be said here that one of the real problems is that even sensible ideas that could or should work won't necessarily do so without the right people to make them work. It's very easy to come up with good ideas, but actually making them a successful reality is another thing altogether, this is why so many small businesses go to the wall.
    [QUOTE][I don't think you need to worry about the lack of borrowing to much, this is most likely a short term phenomenon, as it will likely as not correct itself as the world economy starts to get back on track./QUOTE]

    Ascended, I see no evidence that the economy will get back on tract unless there be some radical changes to wealth distribution. I cannot see the dollar basing itself on oil forever. I cannot see the banking system not needing bailouts in the future if things do not change. You have to take in consideration that things were going good until the developing nations began to demand. It has revealed the problems the world is now facing. If the majority of people continue to get poorer, and the rich continue to get richer, logic will take over.
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    Hi there Stargate, apologies for not responding sooner as wanted to check some facts first. To take your first point "I see no evidence that the economy will get back on tract unless there be some radical changes to wealth distribution." Well certainly things won't be exactly the same as before as the conditions have changed, no two sets of conditions are ever identical, however this being said there hasn't actually been any economic paradigm shift that could substantially or permanently effect the economic cycle. The nature of the global economic problems was somewhat exasperated and prolonged by some very poor lending practices, greed and general ignorance in what was occurring, this doesn't mean that people will not go back to doing business in a pre-crash way, rather that at least some more sense of caution and responsibility will be adopted, but again essentially with pretty much unaltered business models.

    Wealth "redistribution" has certainly taken place, but here I suspect not in the way you were referring to, with many countries cutting back on social spending, massive public sector job losses and wide spread pay freezes even pay cuts in many cases. Whilst share prices and investments have generally recovered, wages, when measured against inflation, have drastically fallen in real terms. What this all means is there has been a process of redistribution taking place with the disposable incomes falling for the bottom half of society, whilst those at the top have seen their incomes recover. Money has been diverted away from the poorest to prop up the incomes and investments of the wealthy.

    Rightly or wrongly this has been part of a process taking place of not only spending cuts but also of social engineering by politians to make their economies more competitive. When people have less money there is more pressure to find employment and businesses can reduce their overall labour costs making them more efficient and competitive, an important concern for many governments seeing rising commodity and energy prices.

    With regard to "I cannot see the dollar basing itself on oil forever." There was some suggestion, before the economic crisis, of oil being traded in other currencies such as the Euro. Whilst if this in the future does become a reality it might have a small effect on demand for the US dollar but realistically it seems unlikely that oil won't be traded in dollars at all, but perhaps more significantly is the size of the US economy and the sheer range of places globally willing to buy and accept the dollar as a reserve currency mean that any drop in demand from it's use as an oil exchange currency wouldn't be terminally detrimental.

    "I cannot see the banking system not needing bailouts in the future if things do not change. You have to take in consideration that things were going good until the developing nations began to demand." The way the current banking system works I would certainly have to support that assessment, though one would hope that at least some lessons in risk management will have now been learned. But I don't think you can really link it entirely to increased demand from developing nations. In terms of the global picture this demand now represents new markets to be exploited and opportunities for companies to make profit from servicing this new demand. So really this should result in more money, with the correct management, certainly not less.

    "It has revealed the problems the world is now facing. If the majority of people continue to get poorer, and the rich continue to get richer, logic will take over."
    The thing herethough is that whilst there are people in richer countries that are getting poorer there are many people in, what were poorer countries, now getting richer and wanting the higher living standards, this means more opportunities for richer countries to sell them the consumer products of the 1st world lifestyle.
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    Quote Originally Posted by sculptor View Post
    If i understand what I've read, most current US debt is being bought by the federal reserve bank(the fed). The fed, just prints money to buy the debt, which should be entering circulation and stimulating the economy. This doesn't seem to be happening as planned(if planned?).
    The associated fear is that all that extra money should be devalueing the us dollar, which also doesn't seem to be happening.
    Meanwhile, the stock market is running at or near all time highs.

    .................
    (I ain't completely confused, but I am working on it.)
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    The thing herethough is that whilst there are people in richer countries that are getting poorer there are many people in, what were poorer countries, now getting richer and wanting the higher living standards, this means more opportunities for richer countries to sell them the consumer products of the 1st world lifestyle.
    Yes, it is true that some countries are getting richer; only, the wealth on their part is not being equitable distributed either, and so the small majority at the top is still holding the bag. You see the problem is not only in the US, it's worldwide. If you notice most of the countries that trade in oil, shows the greatest disparity in wealth distribution. If you think Europe and the US is bad, Saudi Arabia is frightening.
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    Quote Originally Posted by Stargate View Post
    The thing herethough is that whilst there are people in richer countries that are getting poorer there are many people in, what were poorer countries, now getting richer and wanting the higher living standards, this means more opportunities for richer countries to sell them the consumer products of the 1st world lifestyle.
    Yes, it is true that some countries are getting richer; only, the wealth on their part is not being equitable distributed either, and so the small majority at the top is still holding the bag. You see the problem is not only in the US, it's worldwide. If you notice most of the countries that trade in oil, shows the greatest disparity in wealth distribution. If you think Europe and the US is bad, Saudi Arabia is frightening.

    I would agree with you here and traditionally countries have faced revolts and revolution where the level of disparity in society has gone to far.
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    From a simplified macroeconomic point of view, debt reduction also reduces the effective demand thus, produces unemployment, reduces incomes, etc.

    Some data may prove it:
    http://www.incrediblecharts.com/imag...ages/keen4.gif
    http://www.debtdeflation.com/blogs/w...outbreako1.png
    http://blogs.lse.ac.uk/politicsandpo...12/03/Fig4.png

    From a more critique approach I would say that private debt (enormous expansion of mortgage lending, including to the poorest working classes in US) is an integral phenomenon of financialisation process and the outcome was the 2007 crisis. Thus, if this phenomenon stops, then historically, we may have a new very interesting period for capitalism where financial expropriation won't exist.
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    Quote Originally Posted by Achilleas View Post
    From a more critique approach I would say that private debt (enormous expansion of mortgage lending, including to the poorest working classes in US) is an integral phenomenon of financialisation process and the outcome was the 2007 crisis. Thus, if this phenomenon stops, then historically, we may have a new very interesting period for capitalism where financial expropriation won't exist.
    It seems there are still some major questions to be answered as to just how much impact the financial crisis will actually have on lending practices over the long term, certainly it's not beyond comprehension to imagine that institutions will once again start mortgage lending to every man and his dog once the housing market picks up. Perhaps though there has to be some hope that common sense will be exercised by at least some lenders in carrying out due diligence in ensuring that their clients are actually capable of making their payments and not lending excessively to them in the first place e.g. 125% mortgages ect... Though just how many will indeed be kept honest in the face of profits and greed is a cause for concern. However unless lending ceases altogether can we really expect any extended period seeing no financial expropriation? Surely this seems unlikely unless everyone borrowing money suddenly becomes perfect debtors with no defaults.
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    Quote Originally Posted by Ascended View Post
    Quote Originally Posted by Achilleas View Post
    From a more critique approach I would say that private debt (enormous expansion of mortgage lending, including to the poorest working classes in US) is an integral phenomenon of financialisation process and the outcome was the 2007 crisis. Thus, if this phenomenon stops, then historically, we may have a new very interesting period for capitalism where financial expropriation won't exist.
    It seems there are still some major questions to be answered as to just how much impact the financial crisis will actually have on lending practices over the long term, certainly it's not beyond comprehension to imagine that institutions will once again start mortgage lending to every man and his dog once the housing market picks up. Perhaps though there has to be some hope that common sense will be exercised by at least some lenders in carrying out due diligence in ensuring that their clients are actually capable of making their payments and not lending excessively to them in the first place e.g. 125% mortgages ect... Though just how many will indeed be kept honest in the face of profits and greed is a cause for concern. However unless lending ceases altogether can we really expect any extended period seeing no financial expropriation? Surely this seems unlikely unless everyone borrowing money suddenly becomes perfect debtors with no defaults.
    To be honest with you, I do not think I can tell you what the answer is or will be. Borrowing money has to have some sort of limit based on not only the potential to pay back but on the real value. If the banks can led out money based on a unrealistic projection and not on substance or accountability, then I am clueless as to the outcome of lending and borrowing.
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    Quote Originally Posted by Stargate View Post
    Quote Originally Posted by wegs View Post
    Putting economics aside, from a strictly philosophical viewpoint, I think people will have greater joy and peace, living within their means, and trying to decrease new debt/working on getting rid of all debt. To be in debt, creates an enslavement attitude towards one's job, whether consciously realized or not. We need to stop comparing ourselves to others, and try to find happiness outside of purchasing 'things' to obtain that happiness. Just my view.
    When you really check it out, life itself does not owe or borrow. When you go to pick a fruit from a tree, the tree does not tell you it owes you one because it is low on water. If you hurt yourself the pain is immediate it does not tell you it will come back tomorrow to start paining you. Lol.
    It's true that the tree won't tell you that you owe it some water (I think that's what you were saying?).

    However, you do owe it water. The only difference is that it's not telling you so, because it doesn't have the power of speech. If you continually take from the tree and don't give back, then the tree will die. Then you'll have nowhere to get fruit from.



    Quote Originally Posted by Ascended View Post

    Wealth "redistribution" has certainly taken place, but here I suspect not in the way you were referring to, with many countries cutting back on social spending, massive public sector job losses and wide spread pay freezes even pay cuts in many cases. Whilst share prices and investments have generally recovered, wages, when measured against inflation, have drastically fallen in real terms. What this all means is there has been a process of redistribution taking place with the disposable incomes falling for the bottom half of society, whilst those at the top have seen their incomes recover. Money has been diverted away from the poorest to prop up the incomes and investments of the wealthy.

    Rightly or wrongly this has been part of a process taking place of not only spending cuts but also of social engineering by politians to make their economies more competitive. When people have less money there is more pressure to find employment and businesses can reduce their overall labour costs making them more efficient and competitive, an important concern for many governments seeing rising commodity and energy prices.
    The problem is they're competing for a reward, but eroding that reward.

    It's like many hunters, with better and better shotguns, all out trying to hunt a dwindling population of deer.

    If nobody has disposable income.... then what are we competing for? What's the prize for winning? Half a stick of chewing gum? A nickel?




    "It has revealed the problems the world is now facing. If the majority of people continue to get poorer, and the rich continue to get richer, logic will take over."
    The thing herethough is that whilst there are people in richer countries that are getting poorer there are many people in, what were poorer countries, now getting richer and wanting the higher living standards, this means more opportunities for richer countries to sell them the consumer products of the 1st world lifestyle.
    Yeah. I don't think it's happening in equal amounts here. Demand gained from poor workers in China isn't going to balance lost demand from privileged workers in the USA. It can't. One group had disposable income. The other group doesn't hardly.

    The rich in China will keep getting richer. Just like the rich in the USA are getting richer.

    The poor in China will get poorer as the Chines Yuan appreciates in value. They have to. Cutting their wages is the only way Chinese factories can continue to keep the prices on their exports low.


    Quote Originally Posted by Ascended View Post

    I don't think you need to worry about the lack of borrowing to much, this is most likely a short term phenomenon, as it will likely as not correct itself as the world economy starts to get back on track. What we also seen is a reluctance to lend for several years, so don't expect all of a sudden lenders will magically be able to suddenly be able to lend out all the money they want to. People have rightly become more cautious and this has led to more paying down of debt, but again this is only a tempory situation and a consequence of the global down turn.

    That may be true, unless the global downturn is not just because of chance.

    Without any impediment to trade, each region of the world becomes subject to the volatility of each other region. We don't just get the good. We get the bad too.

    World wide business risk has increased exponentially. You never know where the cheapest labor source will be tomorrow, or who's going to be able to pay more than you to get petrol. Nothing is stable, nor can it ever be stable, because with the whole world all gathered into one super-economy, there are simply too many dice in motion all the time.

    Without stability, you can't make educated guesses about where to invest your money. You can make uneducated guesses, but then you might as well just take your money to a casino.
    Some clocks are only right twice a day, but they are still right when they are right.
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    It's true that the tree won't tell you that you owe it some water (I think that's what you were saying?).

    However, you do owe it water. The only difference is that it's not telling you so, because it doesn't have the power of speech. If you continually take from the tree and don't give back, then the tree will die. Then you'll have nowhere to get fruit from.
    I think differently on this point. I listen to the trees and I listen to life, I pay attention to details and I hear and see when a tree needs water. If I do not give it water, when I approach it to reap the fruits it laughs at me and tells me I need to get myself together because I obviously cannot see that it cannot bear fruits if I do not give it water.

    The rich in China will keep getting richer. Just like the rich in the USA are getting richer.

    There is no problem with the rich getting richer, but the poor have to be able to pay the rich. You know there are certain points where logic should take command.




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    Quote Originally Posted by Stargate View Post
    It's true that the tree won't tell you that you owe it some water (I think that's what you were saying?).

    However, you do owe it water. The only difference is that it's not telling you so, because it doesn't have the power of speech. If you continually take from the tree and don't give back, then the tree will die. Then you'll have nowhere to get fruit from.
    I think differently on this point. I listen to the trees and I listen to life, I pay attention to details and I hear and see when a tree needs water. If I do not give it water, when I approach it to reap the fruits it laughs at me and tells me I need to get myself together because I obviously cannot see that it cannot bear fruits if I do not give it water.


    If so, then you understand this perhaps better than you think you do. Money lenders have to make their money back. If not all of it, then at least most of it. If a lender lends you a million dollars and then your business tanks and goes bankrupt, so they lose all of that million, then it will take them a long time to make another million dollars so they can lend again. (Kind of like a tree needing to regrow from a stump.)

    It's easy to think they're rich and they can afford it. That's kind of like thinking a very big tree won't need water, and only small trees need water. But that's obviously not true. Big trees need water too. If you deny them enough times they'll still die.

    The rich in China will keep getting richer. Just like the rich in the USA are getting richer.

    There is no problem with the rich getting richer, but the poor have to be able to pay the rich. You know there are certain points where logic should take command.


    Yeah. People have been falling for some foolish logic for a long time. For example : "trickle down economics".

    Money doesn't trickle down. It only trickles up. The reason most wealthy people are wealthy is precisely because they're good at holding onto their money. The reason most poor people are poor is because they're not very good at holding onto their money.

    It naturally follows that, if you put money in the hands of poor people, it will soon find its way into the hands of some rich people. And the transactions that happen along the way will generate economic activity.

    On the other hand, if you give the money directly to rich people, it will just sit there and stagnate. Rich people are smart and they'll pay as little as possible to get the most labor they can get. The trouble is that then the economy becomes a cost cutting economy, instead of a growing economy. It's a crocodile eating its own tail. Without a little bit of waste, there can be no innovation.
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    Money doesn't trickle down. It only trickles up.
    I like this because what trickles down is negligible.
    .

    [QUOTEThe reason most poor people are poor is because they're not very good at holding onto their money. ][/QUOTE]

    In the final analysis rich people have to hold on to the money in order to become rich, where poor people must spend theirs to become poor. I guess you have to look at definitions, when is rich, rich?




    It's easy to think they're rich and they can afford it. That's kind of like thinking a very big tree won't need water,

    I see your point; however, everything must be equitable distributed. As I said before I do not see anything wrong with being rich or poor, both have to have a bottom level of existence.
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