Comments on: My Main Issue with President Bush’s Financial Crisis Speech Last Night: Consumer Debt as Usual

By: miranda

miranda — Fri, 10 Oct 2008 12:40:51 +0000

Thanks, Peter. And for sharing a link to your own thoughts.

By: Peter

Peter — Fri, 10 Oct 2008 10:46:14 +0000

I love and agree with your points on americans and access to FURTHER loans… Thank you for a really good artichle!
Please can I ask you all to read another good artichle adressing similar things:

http://peekablog.net/2008/10/what-caused-the-financial-crisis/

By: Miranda

Miranda — Mon, 29 Sep 2008 10:38:03 +0000

You are right that consumer standards should remain tight, ToughMoneyLove. That is important. Everyone should be more cautious about consumer borrowing. And Francois, I agree that this is little more than a band-aid. It doesn’t address the fundamental problems with what our economy has become.

By: Francois Viljoen

Francois Viljoen — Mon, 29 Sep 2008 09:20:05 +0000

I agree Miranda.

This bailout is giving the “OK” stamp on more debt. It’s putting a plaster to hide a much bigger wound…

By: Mr. ToughMoneyLove

Mr. ToughMoneyLove — Mon, 29 Sep 2008 03:47:30 +0000

Right now consumer credit standards have tightened considerably which is a good thing. If as a result of government action this week those standards are relaxed again, we are likely to find ourselves back in this position before too long.

By: miranda

miranda — Mon, 29 Sep 2008 02:14:15 +0000

Thanks Pinyo and ToughMoneyLove for your thoughts. I think that consumer spending — and the continual encouragement the government gives to it — is a source of major problems.

Sean, thank you for your insights. You are right that credit is important, and that transactions are important. However, my main issue is this continued emphasis on increasing consumer spending funded by consumer debt.

I also think that the government could ease that particular credit situation by offering loans, similar to that offered to AIG. Although I am glad that the agreed-upon plan does require that the government receive equity in the companies bailed out. Hopefully as the stock market recovers the government will recover some of what is spent.

By: Mr. ToughMoneyLove

Mr. ToughMoneyLove — Mon, 29 Sep 2008 01:38:19 +0000

Miranda: I agree. The Fed, administration and Congress have based our fiscal and monetary policies on the “spenders” in our economy, not the “savers.” The spenders have no more money to spend and they are also out of credit. This causes concern and results in “rescue” packages to free up more credit. It won’t work in the long run. The economy needs to be “dialed back” to meet the needs of the savers and to rein in the spenders.

By: Sean

Sean — Sun, 28 Sep 2008 15:32:00 +0000

Hmm… I do not think it is so simple due to the dual nature of the credit markets. Yes, they contain debt instruments, but they also contain transaction instruments. Particularly in B2B. The SMEs I know who want to operate on a cash-like basis accept corporate credit cards. They do not require their customers to show up at their door with dollars or gold bullion. Pay by check? Forget about getting your mission-critical parts in time. Extend trade credit? Not to non-.govs during a financial meltdown. Anyway, I agree with your sentiment on the debt side. Just do not neglect the economic friction on the transaction side.

By: Pinyo

Pinyo — Sun, 28 Sep 2008 04:22:01 +0000

I agree. I think the market is working perfectly, and those who irresponsibly profited for the last few years should pay for their greed.

By: miranda

miranda — Fri, 26 Sep 2008 17:40:56 +0000

I agree completely. Endless consumption sustained by increasing debt is an unsustainable economic model. Because we will always need more. Plus, this sort of setup just leads to greater inflation on top of everything, since the “money supply” can be increased at any time simply by borrowing. Of course it’s all information and paper and not backed by anything…