[Epaphras]

What's so bad about not being able to get a car or business loan in a credit crunch? Heaven forbid we have to save up and buy things with cash, or saving extra during good months to make payroll in bad months.

Remember the old nursery tale about the ants and the grasshopper? The ants worked all summer storing up food for the winter, and the grasshopper just hanged out and made fun of the ants for working and thinking ahead. When winter came, the grasshopper went cold and hungry, while the ants were warm and full of food in their tunnels.

Don't believe the hype: you will still be able to buy a car. No one is going to reject cash. Car dealers can't finance 140% like they used to. They can't take your $2,000 trade-in and get you a $16,000 new car in a credit crunch. But they will take your $2,000 trade-in and $6,000 cash for a three year-old used car. In fact, you could get a really good deal because they are starving for cash.

So, the point of this thread is to discuss the real value of credit in this economy. Is a credit crunch really a bad thing?

[Jfool]

Credit was way too loose. The market needed a "correction". The laws need correcting too, so that credit is only given to those who truly qualify.

[Bryan]

Originally Posted by Jfool

Credit was way too loose. The market needed a "correction". The laws need correcting too, so that credit is only given to those who truly qualify.

but why should the government protect companies from their own stupidity? If a company wants to loan money to someone with high risk and charge a high rate, why shouldn't they be able to? And if they go out of business because they had a bad business model, so be it.

[Epaphras]

Originally Posted by Jfool

Credit was way too loose. The market needed a "correction". The laws need correcting too, so that credit is only given to those who truly qualify.

Unfortunately there is a huge "entitlement' mentality in our culture, fed by the advertising machine.

You need a new car, you deserve a bigger house, etc. This is the message we recieve from every media source.

Yes, it boils down to personal responsibility, but I agree the laws need to check against greedy, aggresive lenders that can smooth-talk naive people into loans and financing they really can't afford.

[Epaphras]

Originally Posted by Bryan

but why should the government protect companies from their own stupidity? If a company wants to loan money to someone with high risk and charge a high rate, why shouldn't they be able to? And if they go out of business because they had a bad business model, so be it.

Because it affects more than the lender and the lendee. An entire market economy driven by bad debt is what got us into this mess. It never would have happened if there were regulations in place that made it impossible for certain people to get the kinds of loans they did.

The answer is not a bailout of these companies that made stupid decisions, but tighter regulation so those stupid choices don't have a ripple-effect in the globalized economy like we're seeing now.

[Ridley's Own]

Originally Posted by Epaphras

What's so bad about not being able to get a car or business loan in a credit crunch? Heaven forbid we have to save up and buy things with cash, or saving extra during good months to make payroll in bad months.

Blame Mrs. Thatcher and Mr. Reagan. IT was their notion of a 'right to buy' that began all this. When the notion of private property becomes the end all and be all of all moral decision making, this is where we end up.

Originally Posted by Bryan

but why should the government protect companies from their own stupidity? If a company wants to loan money to someone with high risk and charge a high rate, why shouldn't they be able to? And if they go out of business because they had a bad business model, so be it.

PERCHANCE he for whom this bell tolls may be so ill, as that he knows not it tolls for him; and perchance I may think myself so much better than I am, as that they who are about me, and see my state, may have caused it to toll for me, and I know not that. The church is Catholic, universal, so are all her actions; all that she does belongs to all. When she baptizes a child, that action concerns me; for that child is thereby connected to that body which is my head too, and ingrafted into that body whereof I am a member. And when she buries a man, that action concerns me: all mankind is of one author, and is one volume; when one man dies, one chapter is not torn out of the book, but translated into a better language; and every chapter must be so translated; God employs several translators; some pieces are translated by age, some by sickness, some by war, some by justice; but God's hand is in every translation, and his hand shall bind up all our scattered leaves again for that library where every book shall lie open to one another. As therefore the bell that rings to a sermon calls not upon the preacher only, but upon the congregation to come, so this bell calls us all; but how much more me, who am brought so near the door by this sickness. There was a contention as far as a suit (in which both piety and dignity, religion and estimation, were mingled), which of the religious orders should ring to prayers first in the morning; and it was determined, that they should ring first that rose earliest. If we understand aright the dignity of this bell that tolls for our evening prayer, we would be glad to make it ours by rising early, in that application, that it might be ours as well as his, whose indeed it is. The bell doth toll for him that thinks it doth; and though it intermit again, yet from that minute that this occasion wrought upon him, he is united to God.

Who casts not up his eye to the sun when it rises? but who takes off his eye from a comet when that breaks out? Who bends not his ear to any bell which upon any occasion rings? but who can remove it from that bell which is passing a piece of himself out of this world? No man is an island, entire of itself; every man is a piece of the continent, a part of the main. If a clod be washed away by the sea, Europe is the less, as well as if a promontory were, as well as if a manor of thy friend's or of thine own were: any man's death diminishes me, because I am involved in mankind, and therefore never send to know for whom the bell tolls; it tolls for thee. Neither can we call this a begging of misery, or a borrowing of misery, as though we were not miserable enough of ourselves, but must fetch in more from the next house, in taking upon us the misery of our neighbours. Truly it were an excusable covetousness if we did, for affliction is a treasure, and scarce any man hath enough of it. No man hath affliction enough that is not matured and ripened by it, and made fit for God by that affliction. If a man carry treasure in bullion, or in a wedge of gold, and have none coined into current money, his treasure will not defray him as he travels. Tribulation is treasure in the nature of it, but it is not current money in the use of it, except we get nearer and nearer our home, heaven, by it. Another man may be sick too, and sick to death, and this affliction may lie in his bowels, as gold in a mine, and be of no use to him; but this bell, that tells me of his affliction, digs out and applies that gold to me: if by this consideration of another's danger I take mine own into contemplation, and so secure myself, by making my recourse to my God, who is our only security.

[Fandrew]

This is why high school economics is the most underrated subject taught in public schools.

[Ridley's Own]

Originally Posted by Neutered

This is why high school economics is the most underrated subject taught in public schools.

I'm not sure knowing high school economics would have fixed or prevented anything. What this is a result of is bad moral teaching and the replacement of morality with free-market economics. Knowing economics wasn't the problem. KNowing right from wrong is.

[Bryan]

Originally Posted by Epaphras

Because it affects more than the lender and the lendee. An entire market economy driven by bad debt is what got us into this mess. It never would have happened if there were regulations in place that made it impossible for certain people to get the kinds of loans they did.

no, what got us in this bad mess was the government encouraging the accumulation of bad debt. We are in the mess because FRE & FNM had rules changed so they could buy subprime loans so that poor people could get loans. The system was find working on its own. Government intervention caused this mess in the first place.

The answer is not a bailout of these companies that made stupid decisions, but tighter regulation so those stupid choices don't have a ripple-effect in the globalized economy like we're seeing now.

the answer is a market free of government influence to take risk. If FRE & FNM had never been expanded, we probably would not have been in this mess to begin with.

[Bryan]

Originally Posted by Ridley's Own

I'm not sure knowing high school economics would have fixed or prevented anything. What this is a result of is bad moral teaching and the replacement of morality with free-market economics. Knowing economics wasn't the problem. KNowing right from wrong is.

free-market economics has not replaced morality.

[bravesfan007]

Originally Posted by Epaphras

Unfortunately there is a huge "entitlement' mentality in our culture, fed by the advertising machine.

Agreed. What's the one thing that most people do as soon as they graduate college, sometimes even before they get a job? They get a new car. They believe they are entitled to it for working so hard over those years.

Originally Posted by Bryan

no, what got us in this bad mess was the government encouraging the accumulation of bad debt. We are in the mess because FRE & FNM had rules changed so they could buy subprime loans so that poor people could get loans.

Agreed. Although, I've said it for a long time. I'm not sure who to blame more the institutions for making the loans or the people signing them. Yes, they did pressure them into signing the loan and perhaps they did talk them into it, but that's the job of car salesman and real estate people. They are supposed to sale to people or else they have no income.

Hence why when asked who's fault it is I reply that it's both the governments and the taxpayers. The government did make it easier to afford homes through sub-prime loans and the taxpayers took them out knowing that at the slightest change in their monthly budget they would not be able to make the payment. By a slight change I mean illness or any small little thing that comes up. That's another reason why we have people who work 70+ hours a week and still can't get by.

[Ridley's Own]

Originally Posted by Bryan

free-market economics has not replaced morality.

I think that's a pretty empty assertion, actually. Take, for example, the decision to have sex before marriage. People, particularly teenagers, have been sold (literally, in some cases) an understanding of sex that is primarily pleasure-driven. Pornography, for example, though it doesn't have to be that extreme. How about selling thongs to pre-pubescent children? That kind of misuse of sex makes money, more so than seeing sex within a responsible, loving committed couples in a marriage. So people make a choice to have sex based on what they perceive is the benefits of sex, itself a product.

That's probably a bad example, so let me put it this way. I'd argue it's immoral to provide a loan to someone who will likely default, based on what they make and their credit history. It puts them at risk of homelessness, and it puts the lender (and everyone else depending on them) at risk. So why do it? Because it pays, that's why. We're not looking at decisions and going 'Is this a right thing to do in terms of morality,' but looking at it and going 'Ahh! More money!' Greed is good and all that.

Or how about this? What were mortgage lenders actually selling? Paper. THe big difficulty in all of this is that we're not actually functioning under Adam Smith capitalism because we're not actually making anything. We're trading things that 100 years ago were simply the means of exchange. Now the means are the ends in and of itself. Thats not capitalism that Adam Smith would recognize.

I think free-market capitalism is a fine thing, I just think when it becomes more than a system to work under, and a metanarrative all by its lonesome, we're in deep poo. Like $700 billion dollars deep.

[Bryan]

and the problem that you have here is that we got to the place we are in now because of a free-market, we did not.

[Chrysostom]

Originally Posted by Epaphras

You need a new car, you deserve a bigger house, etc. This is the message we recieve from every media source.

What's interesting is that if you're right that this is the crux of the issue then this is something that the government actually should have jurisdiction over by just about anybody's standards, because in advertising some incredibly false statements are made. That is something the government can regulate -- breach of contract.

But the government couldn't regulate it, because it is premised on a philosophical opposition between facts and values. "Facts" in advertising must be true, because "fact" and "reason" is the realm of public discourse. "Values" in advertising are unregulated, because "value" is private, not part of the public discourse that is the government's universe.

Regulate advertising and you kill all sorts of debt trouble. But regulate advertising and you kill the government.

[JerryLove]

Originally Posted by Ridley's Own

I think that's a pretty empty assertion, actually. Take, for example, the decision to have sex before marriage. People, particularly teenagers, have been sold (literally, in some cases) an understanding of sex that is primarily pleasure-driven. Pornography, for example, though it doesn't have to be that extreme. How about selling thongs to pre-pubescent children? That kind of misuse of sex makes money, more so than seeing sex within a responsible, loving committed couples in a marriage. So people make a choice to have sex based on what they perceive is the benefits of sex, itself a product.

What!

I'm used to you having well-considered posts, but are you seriously attempting to argue that teen and pre-marital sex is a new idea? Seriously? Pick your era!

We can look at teen pregnancy rates ofer the past 50 years or so if you like. I can certainly pull up data on sex between unmarried and generally teen-aged American soldiers and foreign nationals in WWII. I can certainly show it in the roaring 20s, or in the post-civil war era where people like "billy the kid" at 13 was spoken of like an adult. I can point out that Juielete was 12, and didn't get married until afterwards, or when the Catholic church declared 9 "a marriable age"... though I suppose that's pre-teen sex-within-marriage.

That's probably a bad example, so let me put it this way.

I make a perfectly good rant *then* read this part. Well, it's going up anyway!

I think free-market capitalism is a fine thing, I just think when it becomes more than a system to work under, and a metanarrative all by its lonesome, we're in deep poo. Like $700 billion dollars deep.

I think regulation is neccessairy.

OTOH, I think market manipulation does not work... and I think we've been more focused o nthe latter than the former.