[SpiderMonkey]

If there is a credit crunch going on, why am I being bombarded with an unusually high number of offers for loans and credit cards?

I thought the market was supposed to correct for these things?

[SaulOhio]

Because the market is not being allowed to correct it. We still have the Federal Reserve keeping interest rates down. We still have government bailouts saving companies that make bad loans. Credit card companies still feel safe to lend money like water, because if you default on your credit cards, the government will repay what you owe.

Its like the old analogy I think I have posted here before. If you have a rich uncle who owns a casino, and offers to repay you any money you lose, how much are you going to gamble? Even if you lose everything you have, you will not learn your lesson, because your uncle just pays back what you lost, and you can bet again.

A marker correction would involve Fanny Mae and Freddie Mac either going out of business, or correcting their bad lending policies. Since the first isn't going to happen because the government will always bail them out, they have no reason to do the second.

And remember, those two lending institutions were founded during the Great Depression as part of FDR's New Deal, in order to provide loans to poor people who the other banks considered bad risks. And what are they being criticized for now? Lending money to people who are bad risks.

[SpiderMonkey]

Do you read new scientist? There was an article recently in there about how recent events have shown the idea of economic equilibrium to be inherently flawed. The idea that the market will always correct itself as it should seems more like faith than science.

[hannu]

If there is a credit crunch going on, why am I being bombarded with an unusually high number of offers for loans and credit cards?

The tide is out & they've noticed that unlike some, you're wearing swimwear.

[RonPaulalways]

In case you haven't noticed, the market is not in control, the central bank is:

[SaulOhio]

The idea is that a FREE market will correct itself. What examples do they use to prove that wrong? Five will get you a thousand that if you look more closely at the examples they use, you can trace the instability directly back to government regulation.

Do they use the example of electric utility "deregulation" in California? That would be a big laugh.

Or do they use our hyper-regulated banking system as an example? Another big laugh.

[SpiderMonkey]

Thats the idea, but it is wrong. The latest computer modelling shows that instabilities arise even in completely unregulated markets.

[Dave]

Computer modeling has also shown that through the use of portfolio insurance and derivatives individual investors can always realize gains. To date this has produced two stock market crashes. One of the biggest problems with orthodox economics is its reliance on modeling, which only functions with the assumptions that the economy is in equilibrium, that individual agents act rationally to maximize utility, and that value is marginal. The first two are false and the third is not always true.

While it's accurate that at any instantaneous moment the economy tends to equilibrium, economic systems are by nature dynamic and attempting to understand them as equilibria can only produce a farrago of errors.

SaulOhio and RonPaulalways have correctly pointed out that our current financial system is operated by central banks, and therefore understanding it in the context of capitalistic theory is not helpful. That said, eliminating central banks would lead to even MORE volatility, since there would be no authority to rescue troubled banks or to restrict credit expansion during booms (although free banking would end long term price inflation for good. If you wanted to do that, you'd have to outlaw fractional reserve banking (a proposal many libertarians take seriously). With a 100% reserve system you would, of course, still have moderate asset booms and busts which can be explained by auto-correlation, but nothing as dramatic as we're used to. I personally think fractional reserve banking is worth it, since it allows future savings to be loaned out now, but it needs to be strictly regulated to ensure that reserves don't drop to dangerously low levels and bank runs don't happen.

[Todd D.]

The shorter answer is that if you check those things, they really aren't "pre-approved" at the rates they advertise.

Really, it's just that unsolicited spam mail hasn't gone down, the lines of credit being approved have. The two aren't really that related.

[SpiderMonkey]

This wasn't junkmail. A person phoned from BT, of all people, asking for my partner. When I said she wasn't in they tried to get me to accept a card. They were obviously trying to get whoever answered the phone to have a card.

We think it might be because we pay all our bills by direct debit, and the creditors are desperately hunting for reliable payers.

[hannu]

The tide is out & they've noticed that unlike some, you're wearing swimwear.

We think it might be because we pay all our bills by direct debit, and the creditors are desperately hunting for reliable payers.

Sorry, didn't realise you don't understand Kiam speak.

That's what I meant.

[SaulOhio]

SaulOhio and RonPaulalways have correctly pointed out that our current financial system is operated by central banks, and therefore understanding it in the context of capitalistic theory is not helpful.

That isn't exactly true. Economic theory says a lot about what actually happens when government interferes in different ways. It explains why we get shortages when governemnt imposes price cielings. It explains why printing more and more money causes inflation. And it explains why banks feel free to make bad loans when the government promises to make good their losses (bailouts and FDIC insurance).

[RonPaulalways]

Edit* good point.

[tornadouk]

Economic conditions are constantly changing. How can anyone look at the price of a good and be sure that the price is due to "speculation". "My mathematical model says that the price should be X, but the price is Y. There is some inherent flaw in the free market. A lot of the time people act irrationally and the price is driven in the wrong direction. Luckily I always act rationaly, I am absolved from error, and I have transfered this perfection into my model."

[Todd D.]

This wasn't junkmail. A person phoned from BT, of all people, asking for my partner. When I said she wasn't in they tried to get me to accept a card. They were obviously trying to get whoever answered the phone to have a card.

We think it might be because we pay all our bills by direct debit, and the creditors are desperately hunting for reliable payers.

That very well could be it, which would make sense. In a "credit crunch" they are more actively seeking folks with good credit to offset those defaulting. Seems logical.

[Zerogouki]

Credit is chewy, not crunchy.

Fools.

[SeriousCat]

Credit is chewy, not crunchy.

Fools.

I noticed the stream of spam you posted when I logged in and saw half the page having "Last Post: Zerogouki"