Financial Meltdown (The World)

Kooky · Post by **Kooky** » 19th Dec, '08, 12:20

I'm blaming nobody for nuffink, baloo - just wondered if the retailers covered their arses or were at risk.

I would never take out one of those deals as I'm never sure what's happening next week, never mind next year. What if I couldn't pay? I'd be mortified.

edit: I do believe there are people who take out these things with no intention of ever paying. In the UK it was always sofa retailers that pushed them, and I wondered WTF they'd do with a worn-out sofa instead of their dosh.

azzam · Post by **azzam** » 19th Dec, '08, 12:25

Kooky wrote:I'm blaming nobody for nuffink, baloo - just wondered if the retailers covered their arses or were at risk.

Watch my video! Watch my video!

baloo · Post by **baloo** » 19th Dec, '08, 12:33

I would imagine the store credit is not offered by the store itself but a finance company behind the scenes with the store getting a commision for sale. No harm to the store.

J85 might be able to confirm or deny that.

azzam · Post by **azzam** » 19th Dec, '08, 12:34

You're not watching my video are you.

baloo · Post by **baloo** » 19th Dec, '08, 12:40

azzam wrote:You're not watching my video are you.

Sorry azz, you were so anti-Financial meltdown talk early on in this thread that I've just ignored all your posts thinking they were just more snide remarks or attempts to get people to drop the subject.

Have you genuinely taken an interest now ?

Kooky · Post by **Kooky** » 19th Dec, '08, 12:44

Well if you'd told me he talked in terms of champagne I would have watched immediately!

Thanks baloo - I guess I was getting at, somebody somewhere down the line must take the risk.

I go blank (yeah, more so than usual) when it comes to economics; I've never passed an economics exam in my life. I don't care that much for money really; I would be happy if we all just had enough to eat and to do whatever we wanted to do.

(can't find a Hippy smiley)

(I don't think I should go back into accountancy, do you?

)

Burbage · Post by **Burbage** » 19th Dec, '08, 13:06

No one is blaming the shops Baloo. But the problem with their strategy is that they're essentially getting peoplr to spend the money they will earn in the next four or five years in one year, which essentially means that in a couple of years times all the money available for years 1-10 has been spent in years 1-2 and nobody has any money or available credit for years 3-10. Which is fine for the owners of the shops, since they clean up in years 1 and 2 and their staff all get fired in year 3. And then everyone is broke for 8 years.

Recession.

And it seems to me that this is happening in Australia. When the credit card limits are reached and the houses are all remortgaged and you can't sell a second hand boat for any more than 30% of the purchase price, you mght want to wonder why you should have taken the credit in the first place. The people who didn't take the credit and saved their money are laughing all the way to the second hand, but virtually brand new, 60% discount powerboat emporium.

Joseph27 · Post by **Joseph27** » 19th Dec, '08, 13:31

What about the family whose fridge or washing machine just broke and they need a new one but don't have the money? I am happy to provide finance and in really - 3rd party companies take the risk and ultimately the reward. Default rates can be high sometimes but take this example - customer buys a $2000 computer on 15 months interest free deferred. It cost them $84.25 in account keeping fees - at the end of that finance period they have to either settle it or pay back the loan at 29.9% interest. If they manage their money properly they can have what they need today however if they screw it up - then they pay more.

There is very little risk - so if 10% default - the 90% that pay makes the business viable and every percentage up from around 92% is icing on the very profitable cake. There is a lot to be said for paying cash - but if you are starting up a small business - you want to hold onto your cash as much as possible.

azzam · Post by **azzam** » 19th Dec, '08, 14:38

baloo wrote:
azzam wrote:You're not watching my video are you.
Sorry azz, you were so anti-Financial meltdown talk early on in this thread that I've just ignored all your posts thinking they were just more snide remarks or attempts to get people to drop the subject.

Have you genuinely taken an interest now ?

What are you on about Baloo? My second comment was to say that I was worried about my investments. I did say I was tired of reading about the panic - but that referred to the world in general, not the board, and was mostly about my feeling scared by it all. If you take that as me being snide, then I apologise

It's not like I've been able to comment from a position of any real understanding or knowledge, but have been following the thread and am now able to share some stuff that has been sent to me by someone who is trying to help me understand it all.

So bite yer bum.

Morrolan · Post by **Morrolan** » 19th Dec, '08, 14:40

A'less: baloo is essentially right: if China can change their export based economy into an inward looking economy, amongst others by continuing to improve their infrastructure and manufacturing products for the internal market, then they, India and for instance Brazil will avoid going into recession. I think you'll find China is no longer buying a lot of T-Bills, that ended a while ago when the US economy started to look weaker and weaker and they then moved to other currencies to invest their surplus in.

Burbage · Post by **Burbage** » 19th Dec, '08, 14:51

There's no risk to the business at all. Ten years worth of custom for one year's worth of costs. Bingo.

The problem is when their fridge breaks down and they've maxed out all their lines of credit. They still can't buy the fridge plus they're paying all that interest. In effect they're far worse off than those who struggled through a couple of months without a fridge in order to buy one with money rather than credit.

Essentially the system is good for businesses and bad for consumers. I don't think there is anything wrong with it, but I think that the way credit is sold needs to be far more honest.

I had a flyer through the mail a few days ago from my bank trying to flog me a credit card. On the front it had "2.4%" in about a size 60 font. It turned out that this 2.4% was for any balance transferred from another card for one year and would be payed off after all other debts incurred on the card were serviced. I have an IQ in the 140s and a PhD and still took me quite a while to find, hidden in the small print, the actual interest rate on the card that would come into effect in a year on the transferred debt. 28%

I think this is dishonest. I'm not interested in a credit card, but it seems to me that such advertising should display the standard rate of interest in the same size font as the "special offer" rate.

Obviously enough people are taken in by this kind of marketing to make it worth the while of the bank. But I do wonder what I could legally get away with on unsuspecting idiots before it would be called fraud, or obtaining money by deception.

slinky · Post by **slinky** » 19th Dec, '08, 15:22

Wot Burb just said above, essentially.

They've got these 'rent-to-own' places all over the US and low income people buy stuff like huge screen TVs for some fairly small amount per week for x number of months ---- but the interest rate

They usually end up paying nearly double the price by the time they're done & while that's probably somewhere in the fine print, you really can't help but think they are taking advantage of people who really don't have the money to be taken advantage of. It's the underhandedness and dishonesty of it that I find appalling. I don't know what the solution is though, because those same places do sell refrigerators, stoves, washing machines & other necessary home appliances. (well, 'washing machines' being necessary in your home is debatable, I know in my younger, single days I spent a good two years going to the laundrymat to do my laundry as I didn't have enough money to buy a washer & dryer....)

When Mr. S & I bought our first house more than 10 years ago, I involuntarily laughed out loud when the mortgage broker told us how much we 'qualified' for in a loan. Then I told him 'we have to eat you know' -- at which point he noted that he wasn't actually suggesting we borrow that much, he was just showing us what we could have. I have no doubt he would have given us a loan that large if we'd wanted it & that's the scary part.

Dinosaur · Post by **Dinosaur** » 19th Dec, '08, 15:36

slinky wrote:
When Mr. S & I bought our first house more than 10 years ago, I involuntarily laughed out loud when the mortgage broker told us how much we 'qualified' for in a loan. Then I told him 'we have to eat you know' -- at which point he noted that he wasn't actually suggesting we borrow that much, he was just showing us what we could have. I have no doubt he would have given us a loan that large if we'd wanted it & that's the scary part.

I think banks really suck and always have done. When we started up our business and went to the bank to open business bank accounts, the smug git manager leaned back in his chair with cheesy grin and said "And how much would you like to borrow?". "Nothing" we said. You shoulda seen his face

Joseph27 · Post by **Joseph27** » 19th Dec, '08, 15:50

The notion of China investing part of its surplus on building up the country is extremely positive - especially if they start to become focused on renewable energy. A China engaged in constructure sustainable development would be a big positive for the globe - alas I am probably just dreaming...

As for store finance - I use it happily - I decorated my house with items bought on it - I paid it back and used it again. My money is elsewhere. Now what happens to personal responsibility - if you want a product and don't have the money - why is it a bad thing to borrow the money to get it? Instead of going to the laundry and paying $20 a week - why not take finance and get the $1000 washer today - you use the $20 a week to pay it off and at the end of the year you have your washing machine. The $1000 can be used for a holiday or towards a house - or just blow it on alcohol and strippers.... Now my IQ may only be in the low 140's and I am only just beginning the research for my PhD but that does make sense...

Fat Bob · Post by **Fat Bob** » 19th Dec, '08, 16:09

Hmmmm....see both sides of the arguement. Yes, it should be clearer what the relevant rates are, and one rate shouldn't be in such large sized font that others are not found easily. And perhaps tighter controls should be installed to stop people overloading on debt.

But also people should have a level of personal resposibility. borrowing to buy a washing machine or a fridge freezer or a TV or a DVD player or any other gadget is not wrong in my book. borrowing to buy a washing machine AND a fridge freezer AND a TV AND a DVD player AND every other gadget at the same time is bad. If you bugger up your finances because of it's really your own fault. Just because there's a fire in the fireplace, doesn't mean you have to stick your hand in it!

slinky · Post by **slinky** » 19th Dec, '08, 17:39

Fat Bob wrote:But also people should have a level of personal resposibility. borrowing to buy a washing machine or a fridge freezer or a TV or a DVD player or any other gadget is not wrong in my book. borrowing to buy a washing machine AND a fridge freezer AND a TV AND a DVD player AND every other gadget at the same time is bad. If you bugger up your finances because of it's really your own fault. Just because there's a fire in the fireplace, doesn't mean you have to stick your hand in it!

That's definitely a fair point too, FB. I wonder how much of the general population have so little understanding of basic finance & economics that they should have to take a course or something before they are allowed to borrow tons of money...

Joseph27 · Post by **Joseph27** » 20th Dec, '08, 09:13

http://www.cfr.org/publication.html?id=18007

Put it on in the back ground - an insightful article into the role of China post market crash

Fat Bob · Post by **Fat Bob** » 20th Dec, '08, 11:28

slinky wrote: That's definitely a fair point too, FB. I wonder how much of the general population have so little understanding of basic finance & economics that they should have to take a course or something before they are allowed to borrow tons of money...

Maybe that's where the banks and/or industry regulators must come in with much better standards. But hey, it doesn't take Burb's 140 IQ and PhD to understand that if you borrow money, you have to pay it back. And if you borrow tons of it, you have to pay tons of it back!

slinky · Post by **slinky** » 21st Dec, '08, 17:44

Fat Bob wrote:
slinky wrote: That's definitely a fair point too, FB. I wonder how much of the general population have so little understanding of basic finance & economics that they should have to take a course or something before they are allowed to borrow tons of money...
Maybe that's where the banks and/or industry regulators must come in with much better standards. But hey, it doesn't take Burb's 140 IQ and PhD to understand that if you borrow money, you have to pay it back. And if you borrow tons of it, you have to pay tons of it back!

with interest!

Spike · Post by **Spike** » 21st Dec, '08, 20:12

slinky wrote:
Fat Bob wrote: Maybe that's where the banks and/or industry regulators must come in with much better standards. But hey, it doesn't take Burb's 140 IQ and PhD to understand that if you borrow money, you have to pay it back. And if you borrow tons of it, you have to pay tons of it back!
with interest!

Retailers' credit schemes have horrendous interest rates, as already pointed out in this thread. I was talking to a used car salesman the other day (well someone has to) and he talked about the Singaporean mentality of, "Never mind the cost, how much is the monthly payment?" Some even fall for the, "Take the loan and add $2,000 to it and it'll only cost an extra $20 per month to walk away with $2,000 in your hand, plus a brand new car." Now those car buyers find that when they want to sell their motor, not only has it's valued dropped dramatically because COE's on new cars are cheaper but they have a huge debt to repay, well above the value of the car. They don't even think to do the maths that any primary school child could do when they take out the loan. The dealer however is laughing because not only has he got the money for the car from the loan company he's got extra commission for selling the customer the $2,000 cash back.

Sadly this is the consumer mentality that has got so many people into such a kerfuffle. Apologies if I've repeated what's already been said but I cound't be arsed to read back through 15 pages of the thread

avatarless · Post by **avatarless** » 22nd Dec, '08, 02:42

Morrolan wrote:A'less: baloo is essentially right: if China can change their export based economy into an inward looking economy, amongst others by continuing to improve their infrastructure and manufacturing products for the internal market, then they, India and for instance Brazil will avoid going into recession. I think you'll find China is no longer buying a lot of T-Bills, that ended a while ago when the US economy started to look weaker and weaker and they then moved to other currencies to invest their surplus in.

Well, it looks like china added 65 billion in treasures during october. don't know yet about november. i'm guessing the purpose is to strengthen the dollar to support exports. seems pretty desperate, but what are they suppposed to do with all those dollars they already have? you can't really sell them in this environment without killing your exports..

http://www.cnbc.com/id/28237813/site/14081545/for/cnbc/

avatarless · Post by **avatarless** » 22nd Dec, '08, 03:40

regarding consumer credit, the fed now is trying to bail out the consumer by buying cars and televisions:

http://www.ft.com/cms/s/0/989db158-ce30 ... 07658.html

Morrolan · Post by **Morrolan** » 22nd Dec, '08, 09:23

avatarless wrote:
Morrolan wrote:A'less: baloo is essentially right: if China can change their export based economy into an inward looking economy, amongst others by continuing to improve their infrastructure and manufacturing products for the internal market, then they, India and for instance Brazil will avoid going into recession. I think you'll find China is no longer buying a lot of T-Bills, that ended a while ago when the US economy started to look weaker and weaker and they then moved to other currencies to invest their surplus in.

Well, it looks like china added 65 billion in treasures during october. don't know yet about november. i'm guessing the purpose is to strengthen the dollar to support exports. seems pretty desperate, but what are they suppposed to do with all those dollars they already have? you can't really sell them in this environment without killing your exports..

http://www.cnbc.com/id/28237813/site/14081545/for/cnbc/

why would you term this as desperation? just business as usual as far as i'm concerned.

China has a monthly trade surplus in (amongst others and mainly) USD, which is invested in various currencies partially in order to maintain the Yuan exchange rate. their USD investments are done in US government paper; T-Bills, bonds etc., as they represent the lowest risk USD investment available. this demand helps keep US interest rates low, by the way, so China and Japan have been propping up the US economy for the past half decade. China abandoned the peg of the Yuan against the USD in 2005 and manages their exchange rate on a more balanced basis against a basket of currencies. their current holding of USD paper at around USD 650 billion (your quote) is less than in 2005 when they held more than USD 700 billion (article).

Dinosaur · Post by **Dinosaur** » 22nd Dec, '08, 10:47

I dunno, the Chinese are not daft, are they. Seems to me, and I have minimal knowledge of these things, they are still calling the shots aren't they?

cromasaig · Post by **cromasaig** » 22nd Dec, '08, 10:55

China has a huge surplus, but I also think that the might of the Chinese economy is perpetuated by smoke and mirrors (rather like the banking system, hurrah!). I don't believe that China yet has the level of infrastructure, education, experience and culture it needs to make it a stable growing economy in the long term. But it also doesn't have a free media, so we don't know exactly where all the skeletons are.

Remind you of anywhere?

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