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So Bush has bailed out the banks, which is akin to granting amnesty to Bin Ladin – too bad it won’t work – it will simply prolong the inevitable and provide an opportunity for the speculators to make more money. It won’t work because the banks won’t pass on the same ‘Forgiveness Strategy’ to their customers – the ones they’ve been robbing for as long as they’ve been in existence. I have been saying for years that the way to deal with the global financial problems is a universal forgiveness of debt – it started some years ago when the Big 7 began waiving debt owed by third world countries. It was done with the knowledge that leaving the debt in place would be counter productive to those countries ever having a chance of restoring pride in their existence and any chance of financial stability. When faced with hopelessness countries and their people tend to begin killing each other.
Now the powers that be have realized that the banking system have become architects of their own demise. Banking has become an immoral industry churning out fictitious wealth by preying on the ignorance of the masses. They have forced credit on the consumers by offering fictitious rates on mortgages, blindly allowed people access to loans and credit card debt knowing full well that it was way beyond their means. The governments are just as guilty as the banks as they have turned a blind eye to this viral lending which has created a massive pool of toxic debt. Preferring instead to say and do nothing while basking in the glow of a so called vibrant economy fueled by false wealth. But what amuses me is that the real financial crunch seems to have been forgotten. It will be experienced by the millions of consumers hanging on for dear life with mountains of secondary debt – who is going to forgive their debt – the banks – give me a break.
Money makes the world go round and the world revolves around money – but if the consumer is handcuffed with unaffordable mortgages, auto loans, lease payments and mountains of credit card debt whose going to spend the money? Adult life begins as an initiation into debt. The unspoken message of the Blair boom years was always spend spend, spend. Why deny yourself that Easy Jet mini-break or must have handbag? Whack it on the plastic and pay whenever. Even gambling was rebranded from a vice to harmless fun – talk about the decay of morals. A credit boom fuelled the economy and a government, fearful of recession, was never going to advise its card juggling citizenry: ‘For your futures sake stop bloody spending money you don’t have’.
And now the financially illiterate are at the heart of the current crisis in the sub-prime fiasco. The poor and ill educated, desperate to own their own homes, never fully comprehending – or, more likely, not being told by commission motivated lenders and realtors – that interest rates could rise and that their homes will be lost. In Britain the only thing preventing families throwing up their arms and despair and declaring bankruptcy has been the pride in owning their own home. Now that millions will end up in foreclosure their pride will be shattered and their willingness to rob Peter to pay Paul will diminish resulting in millions of personal bankruptcies. Under current credit criteria once a bankrupt you are a financial leper – never to be trusted again with virtually no access to credit for the foreseeable future.
In this scenario there will be less and less money to make the world go round – the economies will stagnate, mass unemployment will begin to compound the problem. Crime will increase as good people become desperate to provide for their families, in effect we will experience serious social unrest. How can this be prevented? The only way to maintain the consumer’s ability to buy is for the financial industry as a whole be made to write off a substantial portion of individual consumer debt. This was granted immorally in the first place using unscrupulous credit granting in an insatiable desire to drive up share prices and ultimately director’s bonuses and dividends.
This could be done by applying fair and reasonable financial affordability ratios taking into account family income relative to the debt they can reasonably afford. Apply the same principals as are utilized by consumer affairs when one is faced with an Orderly Payment of Debts order. The adjudicator takes the net income, deducts housing costs, food, transportation and clothing and whatever is left is what is left for the creditors to be distributed on a pro-rate basis. In this scenario the creditors have no choice but to accept this revised offer of payment but at least they get something. The consumer is allowed to retain their home and afford the basics in life and most importantly their personal pride. To do nothing and allow the banks to bring in their collectors en masse would result in far more expensive consequences for the country, not only financially but socially. To bail out the banks and not the consumer is akin to giving the bartender the breathalyzer.
Again, you have hit the nail on the head.
This is a serious evaluation of rapidly expanding world problem, brutally frank I might add, but for good reason.
Better than your evaluation, you have a reasonable solution. I wonder who out there is listening?
DaveO - 25 09 08 - 16:56
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