Monday, November 10, 2008

Credit Crunch

Credit companies are tightening up everywhere. Even companies that don't have a lot of delinquent accounts are lowering credit limits. For example, Canadian Tire says that it doesn't want its credit cards to be used as last resorts by people who've maxed-out their other sources of credit.

Two things:

1. Rising consumer debt has been caused, to a great degree, by the need to maintain consumption levels in the face of stagnant or shrinking wages and decreased job security. While some Canadians have been frivolous, it seems the vast majority of us are just making the mortgage, buying the groceries, maintaining the car and the work wardrobe and etc. Whatever one thinks of Canadians' spending habits, bear in mind that without this "living beyond our means" the economy would have probably been in a recession long ago.

2. Canada's financial sector isn't in as catastrophic shape as the U.S.A.'s financial system, and this seems to be due to greater regulation here.

1. is worse than 2. and that appears to be the area where "free market capitalism" has had greater sway, subjecting workers' incomes to the "market" where power and politics have as much to do with the capitalists' victory as anything else. Where things aren't as bad appears to be where rational regulation has been used. Go figure.

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