Guiding consumers since 2009

Global and local

By Staff Writer
Compare banks and save with Justmoney

Global and local

The financial crisis is a doozie, a whopper, the big kahuna of all financial crises.

Ever since the speculative Tulip Mania bubble of 1637, to the Great Depression, to now with the global Financial Crisis, the markets have been fuelled by greed filled speculation that inflates prices way above their value.

When this bubble is burst it is often preceded by a Minsky moment.

A Minsky moment is when the market collapses, often rather sharply, after 'a long period of prosperity and increasing values of investments, which has encouraged increasing amounts of speculation using borrowed money'.

This is the basis of the sub prime meltdown.

Too much greed, too much reliance on markets continuing to rise, too little attention to history.

Speculative bubbles crash when they over extend themselves.

The National Credit Act of 2007 in South Africa was a major factor in helping to cool down our credit market, and at just the right time.

The Act prevents lenders from lending 'recklessly', this means that they can't just lend to you with out doing their due diligence and being reasonably sure that you can pay back any credit that you are extended.

It means that we never got the problems caused by 'liar loans' as they have in the States. A liar loan is a document whereby some one applying for credit was able to effectively make up their financial situation, because there were no checks carried out on it.

The NCA prohibition on reckless lending, means that if they don't do a proper check on you, then they extend you credit, and they should not have, because you could not reasonably be expected to repay it, then that becomes the lenders problem.

The fact that lenders may now be held accountable for their actions, has lead them to calm down and not just chuck credit at anyone and everyone.

This is a major reason why the financial crisis, though it is here, is not as bad as in many other parts of the world.

There have been some seriously expensive responses to the financial crisis by the major economies.

Business Report looked at who is behind the meltdown. The article is in depth and looks at the various reasons that have created the crash, including more behind the scenes type analysis particularly pointing to the problem of global imbalances and the knock on effects that these cause.

The response has often been to chuck money at it, effectively printing your way out of the problem. The thing is that increasing your money supply has all sorts of effects, like hyperinflation, just ask Gideon Gono.

Yesterday, as reported in The Times Obama, signed the stimulus package, now we wait and see if it has the desired effect or it just causes further problems down the line.

 

Recent Articles

Featured What happens to your finances when the interest rate drops?

An interest rate cut simply means that the cost of borrowing is lower, and therefore cheaper. This is sometimes a tool used to encourage economic growth. But what does such a cut mean for your finances?

Raise a deposit for your house in 5 steps

If you’re a first-time home buyer, you could be lucky enough to be  approved for a 100% bond, but if you aren’t, a 10% deposit might be required. This  could be a daunting prospect.  However, a few financial tweaks to your lifestyle and spending habits could get you a foot in the property door and, once you’ve purchased a property, significantly reduce your long-term bond repayments.

Get personal with your finances – and tie the knot

As time passes, your financial products may not live up to your needs. Therefore, it’s important to take stock of what you’re paying for and adjust where necessary. We got in touch with financial advisers to find out how you can get your finances in order, and what you should do to ensure you’re financially stable.

Personal loan or business loan? The best way to finance your business

When starting your own business, you may have to rely on external funding. Perhaps you qualify for a personal loan, but would it be better to take out a business loan instead? We got in touch with a specialist to find out whether it’s best to take out a business loan or a personal loan to assist you with your ongoing business or start-up.

Deals

Cash Rewards up to 20% when you swipe your Absa Card at Spar

Price: Available on request
When: Daily
Where: Nationwide

The Royal Elephant Hotel Valentine's Day Special

Price: Available on request
When: 14 February 2020
Where: Centurion

Premier Hotels Vegan Dinner Special

Price: R225 per person
When: Monthly
Where: Nationwide