Credit rationing threatens the economy

The deterioration of bank balance sheets weighs on the sources of financing for growth

Should we fear for the financing of the economy? The question begins to shake the business community, worried both by the decline in the stock market and the deterioration of the financial situation of banks. How, they wonder, will we finance economic development, if the money dries up on the stock market and if the banks, for their part, for lack of capital, close the credit tap?

In the United States, 130 billion dollars (82 billion euros) have already been swallowed up by the banking system, in the form of new capital, without the health of US banks improving, quite the contrary. The situation of European banks is hardly better, as the second wave of the subprime crisis (risky mortgages) is formed with the bankruptcy of so-called “monoline insurers”. Even banks that have not taken direct risks on the subprime market will be affected and will suffer losses.

Now in line with the idea that the worst of the financial crisis from the subprime probably has not passed, economists expect difficult months. “We do not know when or how intense it will be, but there will be a” credit crunch. ” Households and businesses will suffer, especially the most fragile, SMEs,” warns Olivier Pastré, professor of economics at the University of Paris-VIII and co-author of the true novel of the financial crisis (Ed. Perrin, 2008, 275 pages, 19 euros).

This credit crisis would already be felt at the micro-economic level, according to the accounts of businesses and households. These contrast sharply with central bank lending statistics – notably with the growth rate of lending to businesses and households in the euro area of April, by + 10.6% – still very largely positive, but behind the reality. “The statistics take into account the year-on-year growth, and they can also be multi-year lines of credit, granted to companies when things are going well,” says a relative of banking supervisory authorities.

On the contrary, economists seem, on the other hand, to be divided on the consequences of such a credit crisis, and especially on how to continue financing growth. For some, it will change the model, out of an economy of over-indebtedness, funded in recent years by exaggerated “leverage” to a capital-financed economy.

This change of model should then favor the rise in the economy of investors in the long term, investors with deep pockets escaping the constraint of immediate profitability, such as, for example, sovereign wealth funds, pension funds or public financial institutions.

In times of turbulence in the markets, these investors – which all Western countries are now trying to attract – would ensure long-term financing of large companies listed on the stock market, while stabilizing their capital. The economic crisis of 1929 resulted in the return of capital financing.


Other economists, more nuanced, believe that the current crisis will lead to a rebalancing between market financing and bank loans.

This is the case of Nicolas Véron, a researcher at the Bruegel center. Convinced that “the difficulties of the banks, in tension on their own funds, will be transmitted to the economy”, Mr. Véron expects a braking brought to the dynamism of small and medium enterprises, the most job creators. France, where large local banks such as Crédit Agricole have suffered from the crisis of subprimes, should be concerned by this slowdown.

But Mr. V.éron does not believe in a revision of the model of financing of the economy, estimating that “one will not be able to replace the debt by capital”. Explaining that despite appearances, “the stock market (with the exception of banking stocks) collapses less than credit,” the economist advocates a system “more open to market financing”, as is the case overseas. This, he believes, would “limit the vulnerability of the economy to a banking shock”.

Finally, Judge Christian de Boissieu, “the current pessimism is perhaps excessive”. While emphasizing the seriousness of a crisis which, for the first time, sees three major shocks: oil, food and finance, the economist believes that the liquidity, which is very abundant in the world, will end up supporting the rebound in markets and the economy. “The money which is nowhere must be somewhere (the money that is nowhere must be somewhere),” he concludes, citing economist Sir Dennis H. Robertson, who was the opponent of Keynes.

Title Financial Loans – Risking Your Vehicle

Debt in series could be paid off

Many enthusiasts will accept a percentage of the preliminary balance. You must keep in mind that paying down the debt will not erase the issue entirely. New creditors can appreciate the fact that you completed title loans your debt, but it will nevertheless create an adverse effect on your own score until it drops off seven years through the initial default. Before you create payments, consider pros and cons, especially if you cannot afford to pay your debt in full.

Additionally, the amount of the mortgage is really a small fraction of the worth of the car. Overall, title loans are useful techniques for getting fast cash. These loans have offered them the opportunity create the necessary funds to fulfill their requirements and handle their current fiscal negatives. You need some resources, and also you aren’t sure it is not impossible to acquire it.

Precisely what would bank perform? If your credit allows you to obtain a title loans loan from a financial institution, it will still be used because of collateral; the interest rate for the short-term loan will still be more than standard loans. If your arrears on your loan, your car can be the property of the bank. The actual banks target the vehicle? Loan companies target the revenue gathered from the interest on the mortgage. Higher risks always are more expensive.

Cash Advance Services

Cash advance services are a fast way to get fast secured personal loans. You will need to fill out an application and compose a check for the cost of the particular loan along with the service costs. Once you have done this, you will end up given either cash or perhaps a check that you can take to your financial institution. Cash advance services typically provide you with two weeks to pay back the particular loan. While some companies will help you to make payments, others will never. If you fail to make the obligations at the end of the two weeks, the money advance company will try to cash the check a person wrote them. If it bounces, both institutions will charge a person.

It’s scary to consider that title lenders like this exist, but you have to know exactly what you’re getting into, and that this is actually the nature of the market as well as the economy we live in. Provided that there are people in debt plus they are desperate for money, there will be an industry for car title loans, also called “pink slip loans” in individual states.

Precisely why bad credit happens is the fact that most people borrow more money compared to they can actually afford in order to borrow. When this happens, payments are usually missed. When payments are usually missed, credit ratings drop significantly.

Learn to cut back, conserve for large purchases plus build a savings account in order to avoid auto title loans, payday loans and credit cards for not extreme emergencies. No one can assure that there will not be any economic emergencies, one can only attempt to soften the blow. Not what you want to do is put your self back into financial stress right after working so hard to get from it.

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