I am in Australia where my personal world view sheets a lot of the blame for the current credit crisis to the decisions of Alan Greenspan and the very loose regulatory environment, allied with the willingness of banks to lend far more than people can afford in order to make huge profits for shareholders. The whole house of cards has come tumbling down. All I see is the wealthy via dubious investment vehicles removing money from the less well off and then governments being forced to bail out the mess. I have still not seen the wholesale return of bonuses and profits made by the financial sector in the last decade returned to truely pay the bill. Thes were false profits not associated with increased productivity. The futures market is exactly that - a device to create future debt tht is paid for by somebody else.
Like I said - right wing economics. If you stepped outside the USA you would find that many are interested in US domestic policy because of the impact it has on a global economy. At the moment the by world standards, well run relatively low exposure Australian banks are raising interest rates to cover their increased credit costs. These increased credit costs are directly related to the subprime debacle which is directly related to easy credit from the US central bank, poor regulation and policy driven by short term profit .
So - it feels to me as though I am paying for an American banker's Ferrari.
The mantra of right wing financial policy - I will say it again - privatise the profit and socialise the debt.
Kevin
Philosophically, you are probably right. But I think blaming [a lack of] regulation is the easy way out. Do we need some common sense rules to prevent people from owning a house they can't afford. Yes - absolutely. Why not just have an established debt/income ratio and be done with it. If you want to buy a $500,000 house, you better be making 250k/year (or whatever) to afford the payments.
Having said that, the REAL problem is the "buy it now, worry about paying for it later" mentality that plagues most Americans. It's a total lack of understanding of basic personal finance, banking, and budgeting that is the real issue here. We finance everything - our homes, cars, college education, boats, trips, etc. No wonder the American consumers have a 2.5 trillion dollar debt. Most Americans spend the majority of their lives paying debts.
Maybe if they showed people what the TRUE cost of a college education is, people will think twice about going to a super expensive private school vs a community college for 2 years and then transfering to the nearby state school at a fraction of the price. Maybe if the consumer saw how much the new car's value drops the second you drive it off the lot, will they realize, then, that the 2004 Accord is a better buy than the brand new $35,000 SUV.
No one wants to work for anything any longer it seems. It's all linked to short term profit, or short term 'happiness.' Everyone wants instant gratification - at work, at home, you name it. It amazes me that young people, just out of school, think they can buy this big house, fill it up with stuff, buy a new car all when they are 22 or 23 years old. Nevermind that their parents probably had to work for 15 or 20 years before they had the nice house, with the nice kitchen utensils, big deck, huge grill, and so on.
Live within your means - it's that simple.
Erik
