The Credit Crunch is a Media Scare-Mongering Myth

[aranarose]

Banks are still granting credit. New credit even. And not just to those with perfect credit scores.

People are still buying houses. Not as many as before, but they are still buying them.

People have started to panic because of the media, not because of reality.

Just sayin'...

[GEBS]

I'm afraid I have to agree on some level. I know there are some problems but the media coverage scares people into reacting.

[aranarose]

I just recently got approved for two new credit cards. It was an experiment to see if this whole "OMGz there's no more credit!" thing was as bad as everyone seems to think. And I have shitty credit. So if I can get approved, then it really isn't nearly as bad as some people seem to think.

[Stormbeard]

Tell that to the people who lost a lot of money with the collapse of Lehman Brothers...

[aranarose]

I'm not saying there isn't a problem. I'm saying that it's not nearly as bad as the media has made it out to be.

[GEBS]

Of course there are people that are having problems. I think the point is that it probably wouldn't be quite as bad if everyone didn't panic based on the media.

[BlackLili]

/shrugs

I didn't have any money to begin with. So things haven't changed much for me.

A coworker of mine just bought a house yesterday. He got it at auction, it needs a bit of work; some paint and a refinished basement, but its structurally sound and huge. He got it for less than $60k and in 2005, it sold for $187k.

Point is, life is still going on. The sky isn't falling, it's just raining a bit.

[aranarose]

/shrugs

I didn't have any money to begin with. So things haven't changed much for me.

A coworker of mine just bought a house yesterday. He got it at auction, it needs a bit of work; some paint and a refinished basement, but its structurally sound and huge. He got it for less than $60k and in 2005, it sold for $187k.

Point is, life is still going on. The sky isn't falling, it's just raining a bit.

See!

[Philosophia]

The media is just that...the media. They will do and say anything if it gets the ratings up.

The credit crunch exists but unfortunately it's a term now used as a catch all for most economic worries. If we get to what a credit crunch actually means, than people may see that not everybody will suffer from it evenly.

This is a good article that goes into it better than I could:

http://www.time.com/time/business/article/0,8599,1845818,00.html?xid=rss-business

[GEBS]

So things haven't changed much for me.


We are safe so far but mol works for CitiBank so I do get worried. I'm not letting it stop my life though. There will always be ways to earn money if you are determined enough.

[Stormbeard]

And there you have the way that the media works. They spin EVERYTHING. A few people get the flu and suddenly "INFLUENZA EPIDEMIC ON HORIZON"

Scared and confused people make good customers. It's the basis of that kind of capitalism.

[Autumn]

The credit crunch/freeze is with the banking loans from one bank to another on the short term lending market...and with the loans big companies use to buy product, in other words it's hard for Ford to get a loan to buy sheet metal.

Yes there are issues with consumer credit, some people are having their credit limits lowered and cards canceled all together. There is consumer credit flowing but it flows slowly.

I recommend folks listen to NPR, they explain regularly who's impacted and how, in clear terms and I have learned a LOT about what's been going on by listing to programs like Marketplace and Marketplace Money...

[Terra Mater]

If people would learn to live within their means instead of living off their credit, then lowered limits wouldn't be a problem.

I don't have a single credit card nor am I interested in ever having one. Credit cards are a trap.

[aranarose]

If people would learn to live within their means instead of living off their credit, then lowered limits wouldn't be a problem.

I don't have a single credit card nor am I interested in ever having one. Credit cards are a trap.

I currently have two. With a $250 limit on each. And they are for emergencies only. Because there are times when I need cash sooner than I'm getting paid to do something important. Like fix the pipes.

Personally, I think the only thing you should buy on credit is a house, and that's because that's an investment.

Maybe, and this is a big maybe, buy a car on credit, but then again, I'd rather buy a used car, and save up to pay cash for a newer one.

Really, the only thing that you can buy on credit that will increase in value is a house. Everything else will depreciate over time. The car, the electronics, all of it. Which means not only are you paying more, with interest, than it was originally worth, you'll never truly get that value back.

[Lyrien]

Alright, as someone that is massively affected by this 'credit crunch' I feel I must respond.




Banks are still granting credit. New credit even. And not just to those with perfect credit scores.

People are still buying houses. Not as many as before, but they are still buying them.

People have started to panic because of the media, not because of reality.

Just sayin'...

Some banks are still granting credit. There are many that have pulled back and some that have stopped lending altogether.

My husband is a finance manager at a car dealership and has done this type of work for the past 15 years. Over the past year we have watched his commission based income drop by 14k per month. He has watched several banks stop issuing auto loans. He has seen it become more difficult for borrowers to obtain loans for cars. It is happening whether you want to believe it or not.

The media has definitely had an impact on the population, but they are not completely to blame. The main effect that I see is that they are scaring people into not spending their money. This in turn causes lowered revenue for business causing employee layoffs.


The credit crunch/freeze is with the banking loans from one bank to another on the short term lending market...and with the loans big companies use to buy product, in other words it's hard for Ford to get a loan to buy sheet metal.

Yes there are issues with consumer credit, some people are having their credit limits lowered and cards canceled all together. There is consumer credit flowing but it flows slowly.

I recommend folks listen to NPR, they explain regularly who's impacted and how, in clear terms and I have learned a LOT about what's been going on by listing to programs like Marketplace and Marketplace Money...

This is exactly what is happening and I too recommend NPR. How this will affect you is that these companies that can not get loans to do business will eventually close causing employees to lose jobs. Those employees now have no money to spend which will decrease income at other places of business causing more job losses. On and on it goes.


If people would learn to live within their means instead of living off their credit, then lowered limits wouldn't be a problem.

I don't have a single credit card nor am I interested in ever having one. Credit cards are a trap.

This is terribly offensive to me. I was never living irresponsibly, we were not living beyond our means. For years we had on average 5-10 thousand dollars per month left over after our bills were paid. Now that we've burned through savings and are having a difficult time paying a mortgage that was WELL within our means, in no way makes us irresponsible. It makes us screwed because of the type of work DH does.

[Nicholas]

The fear mongering has reached Canada. The phrases "Economic Crisis" and "We're heading into the great depression!" are being thrown around carelessly. Oh! this one is my favorite, it was recently on the local radio, "The island is in a downward spiral of economic despair!". That statement coming from someone who does not live on the island, if they did they would know that this island has been in economic despair for the last 50 years.

[Avanti]

Alright, as someone that is massively affected by this 'credit crunch' I feel I must respond.





Some banks are still granting credit. There are many that have pulled back and some that have stopped lending altogether.

My husband is a finance manager at a car dealership and has done this type of work for the past 15 years. Over the past year we have watched his commission based income drop by 14k per month. He has watched several banks stop issuing auto loans. He has seen it become more difficult for borrowers to obtain loans for cars. It is happening whether you want to believe it or not.

The media has definitely had an impact on the population, but they are not completely to blame. The main effect that I see is that they are scaring people into not spending their money. This in turn causes lowered revenue for business causing employee layoffs.



This is exactly what is happening and I too recommend NPR. How this will affect you is that these companies that can not get loans to do business will eventually close causing employees to lose jobs. Those employees now have no money to spend which will decrease income at other places of business causing more job losses. On and on it goes.



This is terribly offensive to me. I was never living irresponsibly, we were not living beyond our means. For years we had on average 5-10 thousand dollars per month left over after our bills were paid. Now that we've burned through savings and are having a difficult time paying a mortgage that was WELL within our means, in no way makes us irresponsible. It makes us screwed because of the type of work DH does.

Yea, I heard that they've cut car loans to up to 60% even? But, I don't remember where I heard that from... Hope things improve for your family!

I seriously don't understand why banks are still issuing credit cards to those with already appalling credit records (not referring to anyone, but in general I mean)while at the same time they are restricting loans to businesses. I guess the loans would be much larger, and if they deem an industry like the car industry to suffer, then they will be more hesitant to lend.

Anyway I have no idea what the true extent of the damage is going to be. I agree we should realistically look at our OWN situations and not panic as a whole.

[aranarose]

Alright, as someone that is massively affected by this 'credit crunch' I feel I must respond.





Some banks are still granting credit. There are many that have pulled back and some that have stopped lending altogether.

My husband is a finance manager at a car dealership and has done this type of work for the past 15 years. Over the past year we have watched his commission based income drop by 14k per month. He has watched several banks stop issuing auto loans. He has seen it become more difficult for borrowers to obtain loans for cars. It is happening whether you want to believe it or not.

The media has definitely had an impact on the population, but they are not completely to blame. The main effect that I see is that they are scaring people into not spending their money. This in turn causes lowered revenue for business causing employee layoffs.



This is exactly what is happening and I too recommend NPR. How this will affect you is that these companies that can not get loans to do business will eventually close causing employees to lose jobs. Those employees now have no money to spend which will decrease income at other places of business causing more job losses. On and on it goes.



This is terribly offensive to me. I was never living irresponsibly, we were not living beyond our means. For years we had on average 5-10 thousand dollars per month left over after our bills were paid. Now that we've burned through savings and are having a difficult time paying a mortgage that was WELL within our means, in no way makes us irresponsible. It makes us screwed because of the type of work DH does.

Considering I live on less than 10k a YEAR, that does seem like an unnecessarily extravagant lifestyle to me.

I'm not saying that the problems aren't real. But the media's attitude of "OMGz it's the end of the world! The economy is going to implode!" is NOT helping at all.

If you were living within your means, and weren't living off of credit, more power to you. But there are people that live well beyond their means, living off of credit. There were thousands and thousands of people who bought houses they knew they could never honestly afford because the banks were letting them.

Then when the bubble burst, the media went nuts, causing people to panic and pull money from banks and stop spending, which only makes things even worse.

Worse still, the panic has caused some people to give up entirely. People who could have cut back a bit and still made their mortgage payments just stopped with the attitude, "Well, we're gonna lose our house anyway..."

[Shanti]

My son works at a large chain department store and 10 people were approved in one day for new store credit cards.

I still see a lot of advertising for no money down home mortgage loans...um those 80/20 no money down loans are one of the types that supposedly are causing the mess, but yet they still are offering them?

[aranarose]

My son works at a large chain department store and 10 people were approved in one day for new store credit cards.

I still see a lot of advertising for no money down home mortgage loans...um those 80/20 no money down loans are one of the types that supposedly are causing the mess, but yet they still are offering them?

See, this is exactly what I don't understand. If it's as bad as the media says it is, how are people still buying ANYTHING?

[Shanti]

But!!
On the other hand my mate has a friend at work. He tried to get his house refinanced to just get a lower interest rate. He has a normal loan and not late or having probs.
He has a 730 credit rating, perfect history and cant get a new loan!
Go figure.
If you have good credit and no reason to be denied, your turned away.
Want to buy a house that you wont be able to afford because you cant even save for a down payment, and done deal!

Sometimes I swear they want the economy to crash or appear to do so.

And why the bail out considering the banks are doing nothing to help themselves?

[Philosophia]

I posted this article earlier which goes into this with some detail:


While Congress bickers over how to fix the financial meltdown, there's a decent chance you haven't even felt it. Why, you may be asking yourself, does everyone think there's such a big a problem when you're still being offered credit cards in the mail and 0% financing at the car dealership? Maybe you used to bank with Washington Mutual or Wachovia and overnight you've become a Chase or Wells Fargo customer, but if your money's still there, why does the rest matter?

http://www.time.com/time/business/article/0,8599,1845818,00.html?xid=rss-business

[GEBS]

Alright, as someone that is massively affected by this 'credit crunch' I feel I must respond.


:hugz: I fear being in your position. I hope you guys find a way to make it through.




Considering I live on less than 10k a YEAR, that does seem like an unnecessarily extravagant lifestyle to me.

I'm sure you know a lot depends on the area you live in. When you calculate the loss of income she mentioned and factor in a guess at what may be left of her husband's income it seems like a normal income for a professional in my area. I know that we may be higher than the norm but the point is that what may be average for Lyrien could be completely different than your average. That doesn't necessarily mean that she's living extravagantly.

[Xander67]

Of course there are people that are having problems. I think the point is that it probably wouldn't be quite as bad if everyone didn't panic based on the media.

Seems like the ones hurting the most are the rich. Gas is now $2.92 a gallon and the price of land is low. Heck, you can buy 100 acres out in oregon for $50 thousand dollars.

Home prices are great for first time buyers, (but I wouldnt buy unless I had the money to buy it outright)

THe market is below 9,000, and we are seeing an ominous repeat of 1929. Granted, if we do not get above 10,000 soon then there will really be problems.

The media loves to sensationalize things.
we will just have to wait and see what happens.

[Xander67]

The fear mongering has reached Canada. The phrases "Economic Crisis" and "We're heading into the great depression!" are being thrown around carelessly. Oh! this one is my favorite, it was recently on the local radio, "The island is in a downward spiral of economic despair!". That statement coming from someone who does not live on the island, if they did they would know that this island has been in economic despair for the last 50 years.

I really feel bad for the people of Iceland, they have (had) one of the best per capita incomes in the world and now they are on the verge of bankruptcy. Their entire economy is based on credit.

[Xander67]

It is people like this who start the people to panic. They WANT the Economy to fail...

WASHINGTON (Reuters) - The IMF warned on Saturday the world's financial system was near meltdown and France promised that a meeting of European leaders in Paris will detail measures to keep a market panic from triggering the most severe global downturn in decades
Thank you for nothing Mr Rothschild! :mad:

http://biz.yahoo.com/rb/081011/business_us_financial3.html?.v=8&.pf=banking-budgeting

Panic? yes, thanks to the folks at cnn, fox, and a few others, we are seeing a panic.

now we have "Market Psychology Experts" adding more fuel to the panic fires..
got this from Buisnessweek.

Searching for a way to describe the current stock market meltdown? Call it the "Panic of 2008."

In the past century, the world has seen countless financial crises, economic downturns, and market crashes. But the last major event to be called a 'panic' was the Panic of 1907.
If ever it were appropriate to revive the term "panic," this is the time. The day-after-day declines in the stock market are unprecedented

http://finance.yahoo.com/banking-budgeting/article/105936/Stock-Market-Crash:-Understanding-the-Panic

This is a somewhat encourageing article about what the banks of the world are doing to quell the panic, the video is interesting too
http://www.businessweek.com/magazine/content/08_42/b4104028030821.htm?campaign_id=investing_related?campaign_id=yahoo

But the good news is... its bad news for Big oil, experts are saying that the era of sky high prices and record oil profits could be over .. for now:thumbsup:
http://www.businessweek.com/bwdaily/dnflash/content/oct2008/db20081010_772519.htm?chan=rss_topStories_ssi_5

[Lyrien]

:hugz: I fear being in your position. I hope you guys find a way to make it through.





I'm sure you know a lot depends on the area you live in. When you calculate the loss of income she mentioned and factor in a guess at what may be left of her husband's income it seems like a normal income for a professional in my area. I know that we may be higher than the norm but the point is that what may be average for Lyrien could be completely different than your average. That doesn't necessarily mean that she's living extravagantly.


We do live in a very high cost of living area. For example, we moved here from Missouri and DH's income there was roughly 75k per year. For us to live comparably here, he had to make close to 200k. We have a nice, but very normal 3 bedroom house on no land and our payment is 2300 per month. 1800 of that is the actual payment, the rest is tax and insurance. So Anarose, I'm glad you can live on 10k per year; but we are 5 people and it costs just under that per year for food alone. For perspective, take that 10k per year and your current living expenses and reduce your income to 2k per year by no fault of your own. How well would you survive? This is the exact ratio we are working with here.





THe market is below 9,000, and we are seeing an ominous repeat of 1929. Granted, if we do not get above 10,000 soon then there will really be problems.



Honestly, I'd view the unemployment percentages as a better indicator than the stock market. There has been so much emphasis on the market and I really feel that the emphasis is misdirected for the average person. For the long haul view of what our economy will be doing in the next couple of years, those unemployment numbers will predict much.

[WitchJezebel]

If people would learn to live within their means instead of living off their credit, then lowered limits wouldn't be a problem.

I don't have a single credit card nor am I interested in ever having one. Credit cards are a trap.


Considering I live on less than 10k a YEAR, that does seem like an unnecessarily extravagant lifestyle to me.


So that automatically means that those of us with a credit card(s) and higher salaries are extravagant and wasteful? I see this kind of stuff posted alot here and frankly, it's rude. Why is it that those of us who make higher salaries are automatically considered as living extravagantly or beyond our means? Why is it wrong to make a decent salary and live comfortably? Not everyone lives off their credit cards, not everyone has fallen into the credit card trap. Many of us know how to have and use credit cards responsibly. For what it's worth, all of us are feeling the crunch, many of us have had to tighten our budgets - the fact that I make a decent salary makes little difference when I pay the same price for food and gas as anyone else.

[Vampiel]

This is terribly offensive to me. I was never living irresponsibly, we were not living beyond our means. For years we had on average 5-10 thousand dollars per month left over after our bills were paid. Now that we've burned through savings and are having a difficult time paying a mortgage that was WELL within our means, in no way makes us irresponsible. It makes us screwed because of the type of work DH does.

Wait.... you had 5-10 grand a month extra for years and your house isn't paid off by now? That's about 180,000 dollars, how much do you owe on your house?

Well I would have dumped that 180k into my mortgage but that's just me. (dont take this the wrong way im just curious)

[Lyrien]

Ya, lol...I ask myself that every day. We purchased the house for 200 with 20k down and now owe 255. Our initial purchase was less than DH yearly salary, most peoples home purchase is double (or more) their yearly income. We now have a HELOC that we took out to finish some of the renovations. All told we probably have about 275-280 into the house. Not all of the HELOC was spent on renovations, keep in mind that we've been living at this income deficit for over a year now. Going backwards every month even with massively changing our lifestyle.

That income amount is an average as DH has a commission based pay. So some months he would make 20+k and some he'd make 9. Keep in mind this is before taxes, health, dental, and 401k and that this stopped a year ago.

We spent some of that money massively renovating a house that is now worth much less than what we've put into it, and I made 1k payments to cars/credit cards for most months. Cars that we've since sold to pull out the equity. We also ate out a lot and other things that waste money that we no longer do. We also spent about 3 years paying DH's disabled and widowed mother's mortgage. But when you have that kind of money and make those kinds of payments, our expenditures weren't out of line.

We had debt beyond our comfort level because of the renovation and we knew it, but because we did the whole house at the same time, we couldn't just stop in the middle of it. We weren't tight on bills, just uncomfortable with the debt load. Our plan was to take all of '08 to pay this off, unfortunately DH lost his job last year just before the projected pay off start date. This was a SHOCK as he was ranked in the top 3 in the nation for what he does just weeks prior. We weren't maxxed out by any means, but now we are from utilizing this credit for the past year just to stay afloat. It was a risky plan, but one that would have worked had we not encountered this economy situation. We knew the housing market would correct itself so we made every effort not to acquire debt beyond a 20% equity. Keep in mind that we owed approx. 225 on a house that appraised at 330 just a year and a half ago. The house is now worth 230ish.


Far more information than you asked for, but here it is. Our major screw up that, yes, could have been avoided, but there was no forseeable reason to do so. We were not out of conrol or irresponsible with our plans, we just have no control over the economy.



I just wanted to add to the convo earlier. I spoke with the general mgr where DH currently is working. He's spoken with many people within the local market and there are dealerships here that as of yesterday have only one car out. This means they have only sold one car for the entire month of October so far. On average a normal sized dealership sells between 80-120 cars per month. DH's dealerhip has 14 out. This is our economy, people.

[Terra Mater]

This is terribly offensive to me. I was never living irresponsibly, we were not living beyond our means. For years we had on average 5-10 thousand dollars per month left over after our bills were paid. Now that we've burned through savings and are having a difficult time paying a mortgage that was WELL within our means, in no way makes us irresponsible. It makes us screwed because of the type of work DH does.

Why is it offensive to you? I was talking about people who live irresponsibly and live off their credit rather than living within their means, you claim you weren't, so it doesn't apply to you.

If you mean you find people who live off their credit and live beyond their means offensive, then I agree. However, since such people are now dealing with the consequences of those actions, I don't really care all that much.

I have to ask, do you think that they should keep giving loans to people who already have bad credit and cannot afford another loan just so your husband can rake in the commissions again? If so, I find that really offensive.

[Lyrien]

If people would learn to live within their means instead of living off their credit, then lowered limits wouldn't be a problem...

I was talking about people who live irresponsibly and live off their credit rather than living within their means...

If you mean you find people who live off their credit and live beyond their means offensive, then I agree. However, since such people are now dealing with the consequences of those actions, I don't really care all that much.




What I find offensive is that you've lumped a large number of people with varied situations into a very narrow mindset. Your posts display inexperience, you claim it to be irresponsible to live off of credit; yet there are very few people in this country who pay cash for a home. In your view, that is irresponsible because the consumer utilized credit to purchase a house and therefore are living beyond their means.

Did you purchase your home with cash?


If this is not what you intended and were referring solely to credit cards, then it still reeks of inexperience since you didn't even consider the other areas of credit.



We do agree that it is irresponsible when someone utilized their available credit for things such as starbucks or unnecessary clothing that they just HAD to have. It is also irresponsible when someone purchases a home that is more than 50% of their income. These people are getting hurt and wouldn't be if they had been more responsible with their money. However, I can not ignore that many of these people did not get there on their own. There was a lot of illegal predatory lending going on for the past few years, I have some very responsible friends that fell victim to this because they were LIED to. Your assumption that the only people being hurt are these terribly irresponsible people, or basically anyone who uses credit for any reason is irresponsible...is dead wrong.



I have to ask, do you think that they should keep giving loans to people who already have bad credit and cannot afford another loan just so your husband can rake in the commissions again? If so, I find that really offensive.

What I think they should do is keep giving loans to those with good credit who can afford another loan. What you are missing is that the banks have stopped/slowed/made it real damn hard lending to these people. Since my husband never dealt with secondary lending, that would be those people with the crappy credit, then your incredibly rude statement does not apply.

[watersprite]

Well, I do not have a single credit card besides my credit/debit card that gets taken out immediately from my account. So I just put it in my checkbook as a check. Until I finally pay off my car and have NO debt, I think I like it better this way.

[Terra Mater]

What I find offensive is that you've lumped a large number of people with varied situations into a very narrow mindset. Your posts display inexperience, you claim it to be irresponsible to live off of credit; yet there are very few people in this country who pay cash for a home. In your view, that is irresponsible because the consumer utilized credit to purchase a house and therefore are living beyond their means. Did you purchase your home with cash?
Nope, I rent and plan to keep on renting for many years. I take the money I save on home repairs, property taxes, and all the other ownership headaches and buy land with it. I buy an acre here and an acre there when I have enough to pay cash for an acre. I buy land in undeveloped areas and over the years have sold half that land when people move in and start developing the areas.

I still rudely and impertinently state that the whole thing sounds like a New Age Chicken Little running around screeching "The banks are failing, the credit is drying up." Pardon me for still rudely not caring.:rollingla

Enough already. I am outta this topic. Cya!:ballonsmi

[Happydeadkitty]

This is all pretty funny to me. I've always been broke, so when things like this happen it doesn't affect me much. No credit cards...none of that junk.

"Like Pa always says...cash on the barrel!" Laura Ingalls

The only debt I have is my house, which is a very tiny house, with a very small mortgage, that I can pay easily...even if I lost my job, I could easily find a job to at least cover my mortgage.

IMO way too many people live beyond their means.

HDK

[Glowingsun]

I don't really pay much attention to this so-called crisis. Prices are rising and dropping regardless due to oil fluctuations. I'm living the same which is paycheck to paycheck. We are renting to own a house through my mom and her boyfriend and I haven't heard any plans on them raising our rent/mortgage. But I guess it helps that we don't have a credit cards throught the banks and we don;t place investments into bonds and stocks.

Perhaps if the governements dropped their petty war they could save a few billion dollars. In fact, that war is what got everyone into that scare.

[Infinite Grey]

Ummm the true affects of the credit crunch won't be felt for about 18 months to 3 years from now... so of cause nothing much has changed for most people yet. :goodgrief

A part of me hopes my bank will go belly up and take my credit card debt with it... buuuut that's the mean Iggy.

[banondraig]

Banks are still granting credit. New credit even. And not just to those with perfect credit scores.

People are still buying houses. Not as many as before, but they are still buying them.

People have started to panic because of the media, not because of reality.

Just sayin'...

That's what I said!

I couldn't give you karma for this, unfortunately.

Do you know what the old-fashioned term for a depression was?






A panic!

[Renny]

The media is exaggerating it, just like they do with everything else