Quote:
Originally Posted by Claeren
Both?
I think a lot of the people you think have a lot of money are actually maxed out on credit and are just covering their servicing costs - though they would never admit it publically, while a lot of those you think are poor are actually just the savers.... ??
Same with companies. A lot of the companies with conservative values were largely punished for being such these last 5 years or so while those who embraced the high-flying zero-consequences lifestyle of easy credit and big leverage all looked good but are actually pretty hollow when poo hits the fan.
(I think one could make a case that the 'credit crunch' is really just a momentus and chaotic shift of power/money from the 'spenders' to the 'savers' so it is no surprise that many of the elites from the passing era will be under pressure in the new era while many of the thrifty outsiders of the past era will now have an opportunity to be elite if they capitalize on their savings to exploit deficits among the spenders.)
Claeren.
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I think that the credit crunch is much more than this. There are hundreds of profitable businesses with excellent balance sheets being denied credit right now. Further, when they are offered credit by the lenders there are strings attached that make these loans either impossible, or incredibly unattractive.
Whether people realise it or not, businesses borrow money to operate. Even very profitable businesses need to be able to finance things in order to operate and when this lending stops entirely (as it basically has), the business stops along with it.
That being said, we've seen this before. Governments acted quickly to stimulate the economy and while this money is not always spent wisely, it will help alleviate some of the stress. We've also seen that raising capital in the markets is not impossible. In other words...this to shall pass!