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The Credit Cruncher was conceived to help you to keep up to date with credit crunch and recession developments, it provides some helpful credit crunch advice and it addresses personal debt. The Credit Cruncher also seeks to explain how the credit crunch started and shed some light on the worldwide recession. Recently, we have begun to look at how BREXIT will affect the UK economy. Please feel free to leave comments where relevant.

4 Aug 2008

Economy fuelled by debt

I’m not one to subscribe to the conspiracy theories concerning why debt is so prevalent, but the widespread acceptance of debt as a way of life is certainly a contributory factor to the credit crunch. Why else would the sub-prime market borrowers have been happy with the deals they were offered unless they were comfortable with the concept of debt.
In generations gone by when debt was the domain of the upper classes, the working man would have shied away from debt like a disease. ‘Modern’ man (in the Western world) now embraces debt like an old friend who will see him through hard times.
In fact debt is neither a disease nor a friend, but something to be used appropriately and with caution, like a medicine that could be fatal in the wrong dose. The truth is that our economy is fuelled by debt, and when this is in proportion, it can help to keep the economy afloat. However, when foolhardy lending tips the balance from healthy to unhealthy – that’s where our friend the credit crunch rears it’s ugly head.
I have heard it rumoured it certain quarters that the credit crunch doesn’t actually exist, but it is a kind of conspiracy theory to keep the proletariat in their place ie. to justify static wages and rising prices, and to a degree there is some truth in saying the credit crunch does not exist. This is because as a single identifiable entity – it does NOT exist in that it cannot be quantified. Bad debts can be quantified as can negative equity, the price of fuel and interest rates – but the credit crunch cannot as it means different things to different people.

Popular Questions:
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Rachel said...

An interesting point of view. I guess the credit crunch is now a term used by the media to describe an economic situation where so many people are in debt that it is effecting the state of the countries economy.

jay said...

I think that that is indeed the underlying problem, but it took the sub-prime mortgage fiasco to highlight it.. that's got me thinking again....