View Full Version : Economies based on credit a bad idea?

2008-Oct-02, 12:07 PM
I don't know anything about economics, but doesn't it seem like a bad idea to base an economy on credit or easy credit? Shouldn't nations/people have to live within their means? Here in Canada you can pretty much walk into a supermarket and get a credit card (plus a complimentary bag of cookies) just by proving you have a job....voila $5000.00 of instant credit.....I'm sure they check credit records as well....but it is way too easy. Maybe this is what keeps economies going/propped-up.... and this is the fundimental problem (at least to me) as well. What would our standard of living be like without the big lines of credit?

2008-Oct-02, 12:14 PM
Credit is fine.

Too much is not.

Like most things...sigh.

Larry Jacks
2008-Oct-02, 12:48 PM
Let's see, if there were no credit, then the only way an average person could ever own an expensive item like a house or car would be to save up for it. That would take many years. Since so few people would be able to afford paying cash for a house or car, demand would be low. That would tend to lower prices, but at the same time there wouldn't be very many of them built in any year. That means a lot of people who build expensive stuff wouldn't have a job.

A no credit society would be one extreme. It seems we've been living at the other extreme for some time now. Consumer spending accounts for about 2/3rds of the US economy. Take away all credit and the economy would collapse. On the other hand, so insane with credit as we've done recently and you build a house of cards that can also collapse.

Perhaps we need to nudge things back toward the center. Make credit available but keep it sane, such as loaning money to people who can reasonably be expected to pay it back on time. Teach kids about money (getting and keeping a job, managing your earnings, savings and investment, etc.) so maybe they won't make so many bad decisions like taking out credit cards when they have no job.