Credit crisis headlines all over the world, yes some are so deep in debt they will not survive.
But the real crisis seems in getting credit, without it the world economy is stalling.
Always a balancing act borrowing, but our whole economy relies on us spending money we do not yet have.
If the world undertook to pay cash, only spend what you have, we would never come out of this crisis, thoughts?

Agree belly that credit creation happens as debt. Have read that the first flaw in the system is that money to cover the interest on this debt is not also created at the time and this gives us the boom/bust cycles.

Also read that dollars to pay the blow out in oil prices, (nearly $1billion last year for the US) left economies short of readies to repay loans

However you will I am sure forgive me for saying for some the laws a borrowing are not well known.
Credit is the oil our capitalist world runs on but over use of it, use without even being backed by assets has bought us to this crisis.
If we are to begin to get out and back on track this year it will be how we handle credit that rules our failure or success.

Belly,it is a matter of credit at what price? Study carefully the history of the US Federal Reserve.They are the devils in the current catastrophy.This is a private banking cartell that owns the US currency and charges the US people interest on their own productivity.

If you have the time ,this is a movie that is well worth watching. www.zeitgeistmovie.com While I'm very suspicious of their alternate solutions and philosophies,they do paint a picture of the Global Corporates that is very damning.

Only a fool Arjay would not agree America has played a bigger roll in this crisis.
It seems that country, the birth place of modern capitalism, let greed take a hand.
Credit its self is not evil, within the well known rules, one we live by here, it is the life blood of the economy, we can not prosper without it.
Borrowing must be based on the ability and intent to repay.
It surely must be backed by asserts worth the borrowed amount or more.

Credit is fine, but the interest can only be paid with growth in the
economy. We appear to at last be up against the loss of growth due
to the plateau in the production of energy .
At the moment we have a little freeboard but as soon as the economy
starts to recover we will be up against the limit to growth.
Without increased energy we cannot have increased growth.

Over the next year or two the game will have changed dramatically for
the financial world. With no growth, who will lend money ?

From what I have been reading lately it is believed that the economy
will start to pick up and oil prices will rise also as demand increases
until demand hits the production plateau at which time oil prices
will rise quickly. The high prices will cause another crash and the
cycle will repeat. It has been suggested that there will be 2 or 3
cycles like this before depletion is down too low to enable another
recovery cycle.

All this is of course is theory as we have never been here before and
it makes up some new rules for economists who believe in the magic pudding.

“If the world undertook to pay cash, only spend what you have, we would never come out of this crisis”

If the world undertook to pay cash only, you would send the national economies of the developed nations back more than 300 years.

How would anyone pay for their imports or be paid for their exports with no Letters of Credit?

The crisis would be lack of economies of scale, something akin to 100% tariff barriers because no one would trust someone beyond national boundaries to pay when due.

Like Bazz said “Credit is fine”.

It is an unemotional process, formed from trust or a basis of trade (usually organised through banks), when trust might be lacking.

In the sense that credit enables people to benefit from a wider choice of often cheaper or better quality goods, than those made locally and allows efficient manufacturers to expand their markets into populations they would not otherwise be able to service, without significant risk, the provision of credit is a value adding element to the process of “production” and is thus an equal contender for a share in the value of production,

Thus, countering the silliness of some (Marxist thinking) folk who foolishly pretend that “labour” is the only “productive” component in the supply side of a transaction.

The US Corporates for some time have been pushing for a North American Union that would see US,Canada and Mexico using one currency called the Amero.The US Dollar is on the brink of collapse.Aparently Ameros are being printed already.What the Corporates will do is get in early and buy Ameros before the collapse happens.Anyone who then has investments in US dollars after this realisation happens,will lose out big time since the US dollar will then be worthless.The US people themselves will be the greatest losers.The Chinese who hold $1.8 trillion US dollars as a trade surplus will also lose out.

Many Aussies still have super invested in US companies.They will lose out again.

This is the way in which the US corporates will escape bankruptcy and the Federal Reserve Cartell will extend their power base to both Canada and Mexico.If you don't believe me,google Bush,Obama,Amero.There is much video evidence on youtube.

I am glad you are connecting the dots on this subject, Arjay.

Well I tried, Col is concerned about reds under the bed Marxists? they could not fill a phone box if they held a conference.
Arjay is chasing a phantom that never existed.
The subject was credit, maybe it was meant to look at just how we would control credit after we recreate world financial markets this year.
We will do that wont we?
We must do that mustn't we?
500 billion dollars in one fraud?
Almost quarterly we see a multi billion dollar failure of a firm we thought of as invulnerable.
Up the thread some one, forgive me, said we must pay interest on loans from increases in income?
No not so if my income is 100 units and I borrow 100 I must, should insure I can repay my loan and interest from my current income, and live on the remainder.
Must go and see if any Marxists are under my veranda.

Col Rouge;
How do you find the money to pay interest if there is no growth ?
When you borrow money you expect to pay for the goods with past
profits plus the expanded business activity profits.
Take out the expansion and you only have the accumulated profits to
pay your costs and living.
Others have expressed this problem better than I can but
growth cannot go on forever with energy being limited.

Letters of credit are just a guaranteed promise to pay are they not,
and do not necessarily have an interest component.
The financial world will have to do a rethink on how business is
conducted when we have zero growth. I understand that it is like
swearing in church to state that growth will soon end.
It is almost like predicting the end of the world.
It will certainly be like the end of the finance world.

I am sure that they will adapt and invent new procedures.
The big worry is that their history of innovative procedures such as
Credit Default Swaps has not been good.

Anyway the energy will enforce change whether they like it or not.

Belly “Col is concerned about reds under the bed Marxists”

Not at all, I was merely identifying another one of the many socialist/communist/Marxist frauds, the common one, which fraudulently claims the only generator of wealth is ‘labour’.

But, in Belly's words, I am doing one thing, Arjay another, Belly seems to be demonstrating his capacity for the facile. Looking for whatever is under his veranda is likely to be a more productive pursuit than pondering what might be found between his ears.

However, “The subject was credit,“

Belly rightly reminds us all, the topic is “Credit”

And the relevance of my comment was “Letter of Credit”, although not commonly used as a personal facility, it has, nonetheless, as its name implies, something relevance to “Credit”.

Maybe Belly thinks different rules apply for commercial credit (the gross value of transactions which dwarfs personal credit) as do for personal credit.

Wrong. Same rules apply, essentially, advances made attracting costs for interest, services, insurance etc. identical principles, some slightly different but sharing a lot of common processes. For instance, I can get a credit card in my own name ior a credit card in one of my business names. The only material difference, any interest charges are directly identifiable for tax deductibility purposes on the ‘business’ credit card. I have several bank accounts, a private one and a couple of business ones. I have loans in my own name. If I so desired, I can get loans in my business name too, based on business financial history and good credit rating.

“Almost quarterly we see a multi billion dollar failure of a firm we thought of as invulnerable.”

No different to WorldCom(2001), Barings Bank (1995), Christopher Skase(1990), Cambridge Credit (1976) Charles Ponzi (1900ish - who has a fraud named after him).

You will find the history of commerce littered with fraudulent schemes all the way back to the South Sea Bubble and the Jewish concept “geneivat da'at”.

So don’t worry Belly, Chicken Little can rest safe, the sky is not really falling in.

Its dumb and dumber to allow the banks to get their hooks into you.
I havent had a credit card since 1981.
You can practice to live without credit.
It may not be a short road... but you can get there.

The worlds final economy, the Bible tells, us is a mark/microchip on the right hand or forehead (Revelation 13:16-18).
The Bible also tells us that we are not to take this mark/microchip because it aligns us with the satan puppet, the coming Antichrist (Revelation 14:9-11).

They have been quietly trial-running this 'buying and selling mark' for sometime and the system is just over the horizon.
Many christians are already preparing for a resistance.
We aint taking it no way, because The Lord says not too.

Bazz “Letters of credit are just a guaranteed promise to pay are they not,
and do not necessarily have an interest component.”

LoC are not provided by banks for “free”. LoC carry a commission charge, essentially a charge for
A providing the service and costs of administration
B costs for the advance of sufficient funds to cover the interest charges for the time needed to negotiate (facilitate) and execute the transaction.
A LoC may be for immediate settlement or with a term delay. On a term delay the recipient can cash the LoC immediately, for a commission (interest equivalent). One way or the other, interest will always be included.

“How do you find the money to pay interest if there is no growth ?”

The processes and systems of business are in a state of continual flux. Whilst some are declining, others are expanding.

Regardless of “growth” or” decline”, the banking system is “transaction” based, just the same as stock brokers. Share brokers charge commission on the trades, regardless of the realized value of the transaction, same too banks. In any dynamic market, the value of individual transactions are likely to increase or decrease as much as the number of transactions.

“The financial world will have to do a rethink on how business is
conducted when we have zero growth.”

Based on past performance, they would seem to be up to that challenge.

Normally I use debit cards. I have credit cards with very high limits as I'm building a house (owner builder) and need to make large purchases for materials while constructing. My card is paid in full each month. It's usually not possible to rent a car without a credit card. I consider credit cards to be essential but I know how to manage mine. When making purchases with credit card, remember, the bank is not giving you the money, you do have to pay it back.

When getting finance for buying a house or car or whatever else, carefully work out a budget. Most people borrow the maximum they can for a home and then realise that they can't afford it. My advise is when saving for a home, save the amount of the repayment (less any rent you are currently paying), plus an amount ot cover rates and insurance. If you can save this amount for 6 - 12 months then you will find that having a mortgage is not so great a burden. Also, buy a house within your means. Your first home may have to be a modest 2 or 3 bedroom fibro house in a not so popular suburb. You can always upgrade later.

Belly'"Arjay is chasing a phantom that never existed." It was a US think tank that came up with the idea of a North American Union and the Amero.Have you actually researched it Belly?There are many credible US commentators,one from CNN who have a lot of inside information,who are being vilified for speaking the truth.Bush was quizzed on it's existence and did not comfirm or deny plans for it's implementation.He just stated that there was a vast difference between reality and what people think might happen.Why this equivocation?Just confirm or deny the reality.Even Ron Paul a well respected US congress man knows of this proposal.

So don't espouse things about which you have no knowledge.Do some research first.Obama on the news tonight has declared that he must make a drastic decision soon.I think it will be about the Amero and the North American Union.He will turn out to be just a another toady boy for the US corporates.He will betray the US public just like George Bush.

I am rather chuffed, is it spelled that way? Col has let his dislike of me run riot here.
Thanks Col no offense taken.
See I measure my self by both my Friends and my not Friends.
The sky may not be falling, but you in giving history of dreadful frauds and failures underline my concerns, we must consider how we use credit.
Well aware of each of you stated failures and crimes , many more exist , I wonder why a bankrupt worker is treated more harshly than say John Howard's brother was.
No credit no economy, simple as that we produce every thing using credit.

Belly,
Credit is like a gun it is a tool it can be used to protect or it can be used to rob.
Credit per se is neither good nor bad the defining factor is how it’s used or abused.
In the computer game there was an old expression “to err is human but to really screw up you need a computer”. One could paraphrase in context to say “to steal is human but to steal in a big way you need a corporation.”

The problem isn’t with credit it is with the ethos of corporate thinking and the way it’s administered. By that I go beyond the thinking of Col and his let the market run unhindered mantra. Firstly because unfettered markets can’t exist.
The nearest to a free market we have gotten is that of derivatives…and that hasn’t ended well.

Capitalism has at its base one fatal flaw it assumes that people will act in both their interests and the interest of the whole via the silent hand. Unfortunately they don’t companies/individuals abuse their power and seek to distort the market place.
There are numerous examples of this predatory/perverting behaviour. Consider the US military industrial complex. There are those e.g. Halliburton who lie and cheat the taxpayer. There are those who make munitions for wars that don’t exist and consequently get the government to create ‘aid (sic) deals’ for unstable governments to gain horrific weapons rather than food/health technology.

Then there are those who aggressively push credit as a panacea for everything to the people who can’t afford it playing on their ignorance and inability.

In the final analysis I think that faceless companies/corporation and those who control them that are at fault simply because they can hide from their culpability.
Enron is a clear example here. Much to the disgust of Col and his ilk the truth is people can’t be trusted and therefore regulation IS required.

Belly “Col has let his dislike of me run riot here.”

Duhh?

Sorry to deflate your self-proclaimed notoriety but you do not feature so prominently in my posting thoughts for you to assume "significance".

“The sky may not be falling, but you in giving history of dreadful frauds and failures”

Those frauds and failures illustrate how the system manages to absorb such blows and still carry on.

That the ‘financial system’ can withstand such ‘shocks’ is not by accident but by design.

The “financial system”, through its inbuilt processes of accounting, audit and risk management, anticipates the consequences of a failure and provides for its eventuality, like an insurance policy covers a risk and determines a premium once the risk factors and probabilities have been quantified.

“I wonder why a bankrupt worker is treated more harshly than say John Howard's brother was.”

One could ask the same question of Goff Whitlam’s son and the shenanigans at NRMA.

Examinator “Capitalism has at its base one fatal flaw it assumes that people will act in both their interests and the interest of the whole via the silent hand.”

It would seem to me, the nature of paying taxes, from earnings, contradicts that criticism.

Socialism’s fatal flaw, it assumes that those elevated to exercise power in the name of the proletariat act in the interests of the proletariat.

Unfortunately the actions of Lenin, Stalin and every other ratback socialist politician, including Krudd and as exemplified by that malignant NSW couple, John Della Bosca and Belinda Neal, have proved that to be a complete falsehood.

The capitalist system sees the exercise of such power devolved across many, reducing any “absolute” effect.

The socialist model sees power centralized, ensuring that any error or impropriety has a more “absolute” effect and is harder to discover or rectify.

‘Absolutes’ are undesirable, when dealing with ‘power’, economic or political.

“the truth is people can’t be trusted”.


thats a Gross generality

Examinator must be articulating his own "trustworthiness".

I would sooner trust “people” than “government”

btw, that "silent hand" was louder, as things bumped into it, it being “invisible”.