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Credit . . . Catch 22

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posted on Oct, 16 2008 @ 07:58 AM
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I try to pride myself on being a relatively astute observer of things, and of moderate intelligence.

Having said that, the one thing I can't seem to wrap my head around is the perceived need to 'free up' credit markets as our road to economic salvation.

If living beyond our means is what got us into this mess . . . in both corporate and private circles . . . what will be accomplished by spending more of what we don't have to fix the problem created by spending more of what we never had in the first place.

It is akin to telling a lung cancer patient that they've contracted cancer from smoking but the only way for it to go away is to smoke more . . .

You eventually kill the patient with the prescription. Sure, the cancer's gone, but . . . .

It just seems that the fix is the problem that we're trying to fix.

Or am I missing something here.




posted on Oct, 16 2008 @ 08:09 AM
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i was under the impression that they were referring more to banks lending to other banks, etc

not so much from the consumer side of things

i may be mistaken



posted on Oct, 16 2008 @ 08:16 AM
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This is the way I see it . . .Banks lend to banks so banks can lend to corporations who can fund the manufacture of goods that we can buy on credit that we get from the banks who are making interest on difference between what they borrow from the banks and what they get on interest from the corporations who continually borrow as an advance on profits they make from selling us more stuff that we've bought on credit from the banks that continue to borrow from eachother to lend to corporations who can fund the manufacture of goods that we can buy on credit that we get from the banks who are making interest on difference between what they borrow from the banks and what they get on interest from the corporations who continually borrow as an advance on profits they make from selling us more stuff that we've bought on credit from the banks that continue to lend to . . . .



Thus the conundrum . . . we buy in advance of money we make to buy the stuff and pay the interest to fund the corporate and financial empires to continue to feed the wheel . . .

At what point do the wheels come off?



posted on Oct, 16 2008 @ 09:47 AM
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reply to post by GoalPoster
 


I think it is not necessarily a matter of using credit means one is living beyond their means.

For example, any time someone buys something online, using credit is the most efficient way to pay for it. That does not mean that the buyer is living beyond their means... it is quite possible they pay the entire credit card bill each month.

Another aspect I heard recently is the concept of letters of credit. I don't understand it in detail but I gather the basic approach is:

Somebody (manufacturer) makes something. Somebody (distributer) else wants to buy a million of them for retail sale.

The normal method is that the distributor's bank sends a letter of credit to the manufacturers bank that says the distr. is good for the money. So the mfgr sends the stuff, and then gets paid.

These letters of credit between banks is one of the things that is grinding to a halt.



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