In Nigeria, we buy and sell almost practically everything with cash. This has made people to sometimes cut their coat according to their cloth for the most part, and left no loophole to be exploited. On the flip side, some say, it limits economic growth because of lack of credit flow. If our leaders had managed our money well by putting in place the necessary infrastructure , I think our system would be one of the best in the world.

Contrastingly, in the west and some other so called developed economies. The system is mostly credit based. Almost every tangible goods are bought and sold with credit. They spend more than they can afford and excess consumerism is encouraged. Credit cards are issued and mortgages taken with increasingly interest rates. This is one of the major factors that triggered the financial crisis and shook the global financial system which is still felt today. America - epitome of capitalism- owes about 15 trillion dollars in debt. Other European countries are struggling with their debt crises as well.

From your observation, which is more efficient and sustainable?

Abeg, we don't need a system based on credit. That system destroys lives. Everyone should cut their coat according to their sizes.

Cash based environment because it prevents you from becoming a slave to your salary

Personally, I'll say a mixture of both, however, on a scale of 75/25%

75% cash based and 25% credit based (short term) because that way people have options for short term credit facility based on their cash levels.

@OP going by your logic, we won't have banks in business; banks will no longer give credit. Mortgages cannot be financed (like it's being done in Nigeria), investments cannot be financed, most capital projects will not take place, I mean how do you survive without credit supporting facility? I think credit should come with applying wisdom, principles and education. As for the mortgage crisis that triggered particularly in the west, please, there were a lot of complicated issues (chain reaction) that caused the downfall. Please, it wasn't a basic credit scheme that collapsed the western economy. Please do your research correctly.

credit turns ppl to slave in western world,cos you must pay it by working hard or by  sentence to jail lol.

Cash system all the way. Let's learn from America's mistakes.

.NET

cash and credit at 50 50
People should have options after all both systems are good and bad at d same time.

Cash just make things slow! I hate it!

babaowo:

credit turns ppl to slave in western world,cos you must pay it by working hard or by  sentence to jail lol.

Perhaps it has turned you into one, else how does credit turn you into slave?

.NET:

Cash system all the way. Let's learn from America's mistakes.

.NET

Great! If you're going to learn, learn the correct factual mistakes NOT the self-identified (I think and I know) mistakes. That really helps along the way. at least we can start by telling all our states that have borrowed from the capital markets to STOP and refund all capital, TAX all state individuals @ 1000% to raise revenue so states can begin to implement infrastructural projects.

Credit is better. Grow the economy by making funds available to businesses and Govt. But it should be heavily regulated because it can grow into a monster.

Olodostein:

In Nigeria, we buy and sell almost practically everything with cash. This has made people to sometimes cut their coat according to their cloth for the most part, and left no loophole to be exploited. On the flip side, some say, it limits economic growth because of lack of credit flow. If our leaders had managed our money well by putting in place the necessary infrastructure , I think our system would be one of the best in the world.

Contrastingly, in the west and some other so called developed economies. The system is mostly credit based. Almost every tangible goods are bought and sold with credit. They spend more than they can afford and excess consumerism is encouraged. Credit cards are issued and mortgages taken with increasingly interest rates. This is one of the major factors that triggered the financial crisis and shook the global financial system which is still felt today.  America - epitome of capitalism- owes about 15 trillion dollars in debt.  Other European countries are struggling with their debt crises as well.

From your observation, which is more efficient and sustainable?

You are wrong on your assumptions on many fronts. The housing crisis in the US started because of greedy bankers lending money to those that cannot afford it. The money/notes were then mixed with other good notes making identification of the bad notes nearly impossible. This is whole credit default swap debacle.

America owes over 15 trillion in debt but how does the figure compare to America's GDP? Or is America currently struggling to pay her debt? If America and the Europeans are so much burdened by their debts, is Nigeria doing any better even after the so-called broke countries forgave Nigeria's debt?

Whose money do you think constitute the majority of the world banking bodies that bail Africa out?

Debt is only a bad thing when it is too much. Why use your own money to buy something if you can get a loan cheaper than using your own money? Here's an example, if you want to buy a $100k car and the bank is offering you a loan at 2%, would you take it assuming that you can invest the $100k in your account at a rate of 5%? If you take the loan, you'll end up with a profit of 3%.

Also, what happens if you spend your own $100K but now need additional $5k for service? Isn't it better to borrow part of the money at a reasonable rate and save your money for emergencies?

Both has its advantages and disadvantages

afam4eva:

Abeg, we don't need a system based on credit. That system destroys lives. Everyone should cut their coat according to their sizes.

^^^^^^^^^^^^^^^^^^^

AFAM4EVA has spoken and this is this is the plain truth, so end of discussion, people should stop
dreaming of wanting Nigeria to be like so "specific" western countries,

I'd go with cash, paying interest is slavery.
yankee article but the information can be used almost anywhere,



[b]7 Ways to Defeat The Banks: Stop Participating in the System!


Brandon Smith

Alt-Market

In Franz Kafka’s most popular work “The Trial”, his characters relate a short parable which has fascinated and confused curious readers for generations. That parable is entitled “Before The Law”, and its message has been interpreted, reinterpreted, and agonized over by the labyrinthine contrariness of academia, producing numerous conflicting views:
Existentialists, of course, automatically jump to the conclusion that “Before The Law” is a message of the absurd nature of man’s search for reason and structure in a universe of random coincidence. That “the law”, as it were, is a superficial concept that humanity uses to make life more bearable. That we seek to create artificial social constructs in order to keep ourselves afloat in a sea of chaos. This is partly true. The law is, indeed, an abstraction conjured by men. However, the source of the most fundamental laws, being inherent conscience, is far from abstract. In fact, it is one of the few aspects of our existence that is undeniably tangible and universal. It is proof that all is NOT random, and that there is a meaning and a purpose to what we do here and now.



I see “The Trial” and “Before The Law” not as treatise on the futility of man’s search for justice, but as a warning on the foolishness of man’s dependency on systems not rooted in conscience. That is to say, we have a tendency to linger about idly while others make our decisions for us. We expect the system we live in to provide answers, to provide nurturance, to provide fairness, and to provide change where necessary. This expectation is a dangerous one.
Most social and political systems today are designed around collectivist methodologies. Their primary tool is centralization of power, and the removal of choice from the public consciousness. We are made to believe that the establishment is necessary for our survival, and that to abandon it would mean certain destruction. We are taught that the individual is subservient and inconsequential in the face of the state. This is simply not so. Like the traveler in “Before The Law”, we have been defeated by our own expectations of how the law (or justice) works. We sit and wait for permission, when we should be charging through the gates and taking what is rightfully ours.
Even amidst recent and increasingly prevalent protest actions on the part of Occupy Wall Street groups, there are still some within these movements who believe the answer to fighting back against the corruption of banking cartels and puppet politicians is to hand even MORE power over to the state, and to collectivize our culture still further. The ignorance of this mentality is no less than astonishing.
The only practical strategy for combating the tyranny of centralized systems has been and always will be decentralization. Individuals must stop relying on the rules of a rigged game to see them through to the truth. This means that while mass protests are certainly a powerful tactic for voicing concerns on an international stage, they accomplish little to nothing in the way of meaningful change in the long run unless they are backed by individual actions to break away from dependency upon a poisoned political and economic framework.
The common assumption amongst Americans is that nothing can be done without mass action resulting in “compromise” from leadership. That the healing of our cultural dynamic is a “top down” process. That one person alone has little at his disposal for bettering the world. In fact, it is always self aware and self sustaining individuals who build better societies, not angry mobs without understanding or direction. Individuals blaze the path that the rest of the world eventually follows, and they do this through one very simple and effective act; walking away.
By walking away from the corrupt system, and building our own, we make the establishment obsolete. This philosophy could be summed up as follows:
Provide for yourself and others those necessities which the corrupt system cannot or will not, and the masses (even if they are unaware) will naturally gravitate towards this new and better way. Offer freedom where there was once restriction, and you put the controlling establishment on guard. Eventually, they will either have to conform to you, attack you, or fade away completely. In each case, you win. Even in the event of attack, the system is forced to expose its tyranny and its true colors openly, making your cause stronger.
The obvious question now is; how can each one of us use this strategy in our daily lives? Here are just a few easy applications:
1) Focus On The Federal Reserve
If you as an activist or the movement you support are not fully aware of the private Federal Reserve Bank and its primary role in the destruction of our economy, our currency, and our political dynamic, then your protests are a waste of time, and your movement will end in failure. Uneducated mass actions are easily manipulated, and can even end up serving the purposes of those oligarchs they seek to dethrone. G. Edward Griffin’s full analysis on the history of the Federal Reserve “The Creature From Jekyll Island” and similar materials should be handed to every OWS protester before it is too late.
2) Take Back Your Savings
Do you have a bank account with one of the so called “too big to fails”? Is the culmination of your savings currently in the hands of financial monstrosities like Bank of America, JP Morgan Chase, Citigroup, etc? Well, take your money back! This has been done by a few protestors and the response from banks has been outlandishly oppressive, including new guidelines attempting to obstruct customer access to savings, and even calling the police! This tells me that they are afraid. Afraid of Americans catching wind of the idea that the money they place in the accounts of bad banks is still theirs to do with as they will. If you don’t like how these institutions operate, don’t let them have your money. It’s as simple as that. Not only is this an act of defiance that truly hurts the banking system, it also protects your hard earned wealth (at least initially) from the inevitable collapse of these fiscally insolvent blood leaching leviathans (watch Bank of America closely, folks!).
3) Use Alternative Currencies
After you take your savings away from the banks, you still aren’t quite free of their influence. You are now holding fiat dollars, which the Federal Reserve, the foundation of all banking fraud, is currently devaluing. The idea of walking away from the dollar sounds ridiculous or even frightening to those trapped in the centralization mindset, but it is a highly effective method for combating the system itself. The dollar is a sham, and has been since its future was handed over to the Fed in 1913.
Alternatives exist, and they must be utilized. Communities across the country use various scripts as a means to diminish reliance on the dollar, but ultimately, the best currencies are those that cannot be created out of thin air unhindered. This means gold and silver.
Central banking proponents have been railing against even the concept of a return to gold and silver currencies for years, and the Department Of Justice has labeled the use of such alternatives in place of dollars as a form of “domestic terrorism”. This should tell you, quite clearly, that they are deathly afraid of activists organizing to drop the dollar to pursue metals. If the system is willing to use the law as a weapon to keep us from having sound money, then we should be rubbing their nose in it daily by trading without dollars. They should be forced to react, and in the process, forced to expose their true intentions for our economic futures.
4) Build Barter Networks
If a bunch of people can band together to huddle in parks with signs for weeks in cities across the nation, then they can band together to trade goods and services outside the establishment system as well. Barter networks grow spontaneously out of economic collapse regardless of what any group decides to do, but generally, they appear AFTER the worst has happened. Wouldn’t it be wiser to organize such markets now, before a full collapse takes place? By preempting disaster with a backup or failsafe free market barter economy in each town and city, we insulate ourselves from the effects of the crisis, and, we cut loose from our dependency on the controlled mainstream economy. Localized trade makes it possible to walk away from corporate chains and maintain the circulation of wealth within a community, while countering the increasingly higher taxes caused by austerity and inflation that we are likely to see in this country very soon. It really is a no-brainer.
5) Grow A Garden
I don’t know how to say this nicely; don’t be a jackass, learn to grow your own food. Don’t expect that our economy will continue to sustain you. Actually, you should have every expectation that it won’t! If every Wall Street or Fed protester had their own garden patch and some stored goods, we would all be much safer. Food dependence is the worst kind. It has been used by governments and despots for centuries to cull the masses and dissuade dissent.
Sharecropping should be common in every community. Neighborhood gardens should be standard. Every household should have a year’s worth of food. Period.
Imagine that you lose your job and every cent you have tomorrow. Imagine that mom and dad are broke and have no money to lend you. Imagine that food stamps are a thing of the past because the national debt has become so exponential that entitlement programs have been erased. Now, how do you live from day to day? Where do you get the nutrition required for you to continue holding up that sign or shouting that slogan? Think about it…
6) Start A Micro-Industry
If the U.S. economy is ever going to get on its feet again, it will be because average Americans bring it back through local industry. This means ending our community addictions to corporately produced goods and returning to specialized trade skills. It means coalitions of local farmers, craftsmen, and micro-industries providing goods and services with a city or county based market focus. Large manufacturers and business chains relying on the model of globalization will have absolutely no ability to rebuild mainstreet commerce, even if they wanted to, because their methods depend upon constant outsourcing and downsizing for survival. Private tradesmen will be the only people capable of filling the dark void these corporations leave behind.
7) Start An Activist Group
The establishment HATES when you do this. The spontaneous organizing of groups outside government or corporate purview has generated notoriously absurd responses from authorities, including accusations of “extremism”, infiltration, and wrongful arrest. If this sounds frightening, then I suggest you get over it quickly, because this is going to be the norm for many years to come. The evils of the world are not undone by apathetic naysayers anymore than they are undone by mindless mobs. Without the coordinated actions of aware individuals with a common focus, nothing is going to change.
This group could be something a simple as a local barter network or a political discussion forum, or, a complex national organization geared towards tangible political action. It doesn’t matter as long as it’s based on the promotion of Constitutional freedoms, and its leadership is decentralized. Just make it happen…
At bottom, if we want to fight back against a system we cannot take back through traditional means, then we must learn to walk away. If the system feeds us, clothes us, and shelters us at will, then ordinary protest is pointless. Our tender parts are in a rusty vice on the autocratic workbench and until we pull them out, no amount of screaming and pounding will improve our situation. Independence is won through the constant striving for self responsibility. Freedom is won through a position of personal strength, not weakness and self-enslavement.
Numbers alone do not make a movement, and the elites we currently work to supplant are not going to flinch at a few random protests. In all likelihood they will welcome these actions as a useful distraction. Tyrants don’t fear the torches and pitchforks anymore. What they do fear is balanced insight, self reliance, and exceptional force of will. A handful of men with these attributes are far more dangerous to a corrupt system than thousands of citizens driven only by insatiable anger. To overcome oppression, we must first overcome ourselves. The ability to step outside the paradigm, the ability to act without permission, and charge the gates without apprehension, is the key to toppling totalitarian systems and exposing the great lie of our age; that we cannot exist without the cage we were born into.
__________________[/b]

@ OP, Anyone with LEGITMATE JOB,will get involve with CREDIT, both in  Nigeria & abroad. Do you think it is that easy? There is so much ILLEGAL wealth in circulation in Nigeria & it has DEBASED alot of people thinking that CREDIT is bad. Alot of working class Nigerians live on CREDIT,but you fail to see it as credit. What do you call it,when people collect loan from CO-OPERATIVE UNIONS & SALARY ADVANCE from their offices?? I mean go to Nigerian BANKS,OIL COMPANIES & offices, then you will see how so many working class people are struggling to execute projects like buliding a house or buying a new car.
However, CASH BASED economy promotes BRIBERY and CORRUPTION, and some of these BRIBES people CASH based economy ( NIGERIA) receives helps them to buy things cash,not that they can AFFORD it. Nigeria is the HQ of credit, if you see any RECHARGE CARD seller near a bank or office environs, ask him or her to show you the list of people OWING her CREDIT" and have not paid back as promised. MILLIONS OF NIGERIANS DO NOT HAVE THE CASH & NO CREDIT FACILTIES, is it fair enough?

However, do not use the GREED that triggered the financial crisis as a yardstick to criticize the CREDIT BASED ECONOMY of the WEST. I perosnally think that the CREDIT SYSTEM contributed to the GREATNESS of their society. What do you think of a society that can give you access to HIGHER EDUCATION without cash? It gives you HOPE. It goes a long way to prove that POVERTY should not be an OBSTACLE  when you have the brain. Do you know how many SMART people that end up on the streets in Nigeria because they can't afford a CASH BASED EDUCATION?

CREDIT makes people to LIVE above their MEANS & it does not mean that CREDIT is bad. Nigerians are guilty of living above their means too. What do you call someone that does not have a job using BLACKBERRY?or someone owing his LANDLORD,but choose to do OWAMBE?

It is also important to inform you that Nigeria have been destroyed. If people were TAXED properly and all the social amenities were provided and people pay for them,there will not be much CASH left for people to waste and NIGERIA's ECONOMY WOULD HAVE BEEN CREDIT BASED TOO.

CASH & CREDIT is relative,but if it is based on Nigeria's cash society, there is nothing to ADMIRE IN NIGERIA as it is presently CONSTITUTED.

Interesting topic.

The benefits of credit, if properly managed, could be amazing.

Firstly, we must admit that Nigeria is afflicted with the vicious circle of poverty.
Low income -- low savings -- low investments -- low income,

While we might argue that Nigeria is a cash economy, we are gradually evolving. Its interesting to note that most employees
with blue-chip employers take consumer loans from the banks.

But its harder to grant loans to individuals in the informal sector - simply because you can't track term.

I can't imagine how the average graduate who has an average job would ever own a house in Nigeria is we don't address the mortgage issue.
A credit system is founded on savings- longterm savings. Hopefully, our burgeoning pension system would address this.

We can argue that credit has almost crashed the global economy. No - it was greed. The credit system worked well for decades and greed has caused the problems we see.

I stand to be corrected - We simply can't have a middle class, and in effect grow our economy, without credit.

Also, the global economy cannot work without the credit system.

How do you think banks transact with each other? When you deposit a GTB check into a First bank account, do you think money is immediately transferred? Written checks are nothing but promissory notes to pay the bearer. Ask people importing goods and they will tell you about Letter of Credit requested by the seller.

Among other things, the credit system was devised as a way of allowing people deemed creditworthy to transact commerce away from home without having to carry the required money on them. In the olden days before IOUs, pirates simply waited for commerce ships and robbed the business people of all their money. Kinda similar to the thieves that wait along the route to the East to rob luxurious buses during Xmas.

The bottom line is, too much of anything is bad!

manny4life:

Personally, I'll say a mixture of both, however, on a scale of 75/25%

75% cash based and 25% credit based (short term) because that way people have options for short term credit facility based on their cash levels.

@OP going by your logic, we won't have banks in business; banks will no longer give credit. Mortgages cannot be financed (like it's being done in Nigeria), investments cannot be financed, most capital projects will not take place, I mean how do you survive without credit supporting facility? I think credit should come with applying wisdom, principles and education. As for the mortgage crisis that triggered particularly in the west, please, there were a lot of complicated issues (chain reaction) that caused the downfall. Please, it wasn't a basic credit scheme that collapsed the western economy. Please do your research correctly.

Your 75/25 % scale sounds like a realistic idea in this system of economy. In that connection, short term credit facility would assist major players in the economy like banks to carry on with business of giving credit to significant investments and projects. However, it should be limited to that. If you read my initial post correctly, I used the word "loophole". It is believed that it was taken advantage of by those at the helm of affairs, and that eventually led to the crash.

If there wasn't a flaw in the basic credit scheme that shook western economies, why was there a freeze in credit flow? Why did the US gov had to print/borrow and pump money for banks to confidently start lending again?

I agree with you about applying wisdom, principles and education. Despite that, a lot of educated people were still screwed. Even many economists couldn't predict it. I think and many in the US still believe that there was a massive fraud that took place. Which is one of the reasons the issue of regulation took center stage afterward.

I am not an expert. In essence, it would be better to continue to do things our own way and not to wholly emulate or incorporate the credit system of the west. As afam4eva and others stated "Everyone should cut their coat according to their sizes" - especially the common man.

Mr--Why:

Your 75/25 % scale sounds like a realistic idea in this system of economy. In that connection, short term credit facility would assist major players in the economy like banks to carry on with business of giving credit to significant investments and projects. However, it should be limited to that. If you read my initial post correctly, I used the word "loophole". It is believed that it was taken advantage of by those at the helm of affairs, and that eventually led to the crash.

[i]If there wasn't a flaw in the basic credit scheme that shook western economies, why was there a freeze in credit flow? [/i]Why did the US gov had to print/borrow and pump money for banks to confidently start lending again? 

I agree with you about applying wisdom, principles and education. Despite that, a lot of educated people were still screwed. Even many economists couldn't predict it. I think and many in the US still believe that there was a massive fraud that took place. Which is one of the reasons the issue of regulation took center stage afterward. 

I am not an expert. In essence, it would be better to continue to do things our own way and not to wholly emulate or incorporate the credit system of the west.  As afam4eva and others stated "Everyone should cut their coat according to their sizes" - especially the common man.

Because no one could tell which banks were over-exposed to the toxic assets and by how much. Credit takes discipline and you're right by saying everyone should live within/below their means.

@Wallie

You are wrong on your assumptions on many fronts. The housing crisis in the US started because of greedy bankers lending money to those that cannot afford it. The money/notes were then mixed with other good notes making identification of the bad notes nearly impossible. This is whole credit default swap debacle.

America owes over 15 trillion in debt but how does the figure compare to America's GDP? Or is America currently struggling to pay her debt? If America and the Europeans are so much burdened by their debts, is Nigeria doing any better even after the so-called broke countries forgave Nigeria's debt?

Whose money do you think constitute the majority of the world banking bodies that bail Africa out?

Debt is only a bad thing when it is too much. Why use your own money to buy something if you can get a loan cheaper than using your own money? Here's an example, if you want to buy a $100k car and the bank is offering you a loan at 2%, would you take it assuming that you can invest the $100k in your account at a rate of 5%? If you take the loan, you'll end up with a profit of 3%.

Also, what happens if you spend your own $100K but now need additional $5k for service? Isn't it better to borrow part of the money at a reasonable rate and save your money for emergencies?

We are still saying the same thing. The credit system as it is gave the greedy bankers avenues to operate in that manner. Even credit rating agencies knowingly rated these bad products as worthy.

Well, America's debt is roughly 100% of its GDP and still growing. America is not struggling to pay her debt as of yet because she hasn't been fully called to order. Maybe it is just a matter of time. When that time comes, there will be a lot of cutting and raising taxes which will ultimately affect a lot of people. If those ruling Nigeria had used our money properly, we won't be running to these countries for loan. In fact, these international institutions initiate policies to lure us into taking loans, thereby yielding huge interest for them.

World banking bodies do not bail out Africa for free. In fact, they are detrimental to the progress of Africa and end up weakening African economies. It has been confirmed by many economists.

The credit system does have its advantages. But if used wrongly can have a very devastating effects unlike a cash based system. With that said, I think the American economy is a giant ponzi scheme waiting to burst. And with the Trans-national capitalists outsourcing jobs for cheap labor, things will only get worse.

Mr--Why:

Your 75/25 % scale sounds like a realistic idea in this system of economy. In that connection, short term credit facility would assist major players in the economy like banks to carry on with business of giving credit to significant investments and projects. However, it should be limited to that. If you read my initial post correctly, I used the word "loophole". It is believed that it was taken advantage of by those at the helm of affairs, and that eventually led to the crash.

If there wasn't a flaw in the basic credit scheme that shook western economies, why was there a freeze in credit flow? Why did the US gov had to print/borrow and pump money for banks to confidently start lending again? 

I agree with you about applying wisdom, principles and education. Despite that, a lot of educated people were still screwed. Even many economists couldn't predict it. I think and many in the US still believe that there was a massive fraud that took place. Which is one of the reasons the issue of regulation took center stage afterward. 

I am not an expert. In essence, it would be better to continue to do things our own way and not to wholly emulate or incorporate the credit system of the west.  As afam4eva and others stated "Everyone should cut their coat according to their sizes" - especially the common man.

Sorry dude, could not reply, just got home from work.

There wasn't any flaw in the basic credit scheme; the problem I see is application of credit (how, where, when and what). Credit on it's face is nothing but can I borrow or can u lend me till a later date when I can pay back and with interest rate, I mean that's it. However, when people involve credit along with other or more products, then you have a problem. I wouldn't say there was a freeze, more like there was a slow pace on credit flow and this is not because of one problem; but several. Some banks "did not" have any liquid cash to lend out; it was tied up in toxic non-performing assets. Some banks were just too reluctant to loan credit because the economy was in recession. Some banks needed the govt to set aside "reserve funds" to back up loans, and the list goes on. Please, also keep in mind there are tons of macroeconomic factors that directly and indirectly affect lending.

The economy was in recession ----> high rate of unemployment===> individual spending is on the low===>merchants/manufacturers have ripple effect which in turn affect their business, if care not taken, few headed for bankruptcy. Now, when the fed reserve saw what was going on, they used several mechanisms to stabilize the financial markets and largely the economy, and when that wasn't really working, they moved further to start printing money to go into circulation.

If you observed, the fed (treasury) in two years, gave numerous refunds on taxes to spur spending, the gave huge amount of credit to those who bought newer cars (American obviously) to spur spending because U.S. govt bailed out the Detroit three. They went as further to give up to $8,500 to first time home buyers to spur spending, banks were underwriting different financial programs to spur spending, higher tax credit to employers who hired more people, I mean a whole lot was going on just to increase spending and remove fears that the economy was stable.

When banks realized that the reserve bank was confident, lending resumed at a minimal pace, but as soon as spending increased and there was slight decline in unemployment, lending gradually started growing. In other words, it wasn't because of a flaw in credit scheme that banks did not lend, it was majorly about the recession that brought in high rates of unemployment etc. Therefor to answer your question, Why did the US gov had to print/borrow and pump money for banks to confidently start lending again? They had to print money in order to MAJORLY stabilize the economy and not really the credit market like many thought. So that enough bills was in circulation so people can spend MORE, MORE and MORE.


I have to disagree with you on this "Despite that, a lot of educated people were still screwed. Even many economists couldn't predict it." To be honest, economist are experts in their field of macroeconomics but financial engineers, analyst are experts in their field of money and finance. Quite a good number of analyst blew the whistle and warned the SEC how wall street traded securities, they were just too overblown or too busy to listen or investigate. They knew the mortgage outburst was coming, yet all on deaf years. It was more of "we are to big to be affected" and all it took was for high unemployment, people couldn't pay mortgages and since these mortgages were a backed security, all it took was for default, and there you have the chaos. The downfall wasn't the act, but the massive volume of the MBS and DEFAULT.

Personally, I doubt any fraud, however, I will acknowledge that few wanted to make quick buck to were to lazy to identify huge risk. Although the FBI white collar crime division are investigating the issue, let's hope and see what results they have for us. As for the regulation, trust me SEC woke up after that. I think it need tougher regulation as well; perhaps that will keep investors safe from harsh risk posed by security dealers. As for your last paragraph, I do agree that everyone should cut their coat according to their size--- very important.

@kachemnau a very nice exposition I hope it was your summary because of was quite detailed the only thing I couldn't decipher was the direct relationship between cash and credit
Well the credit would have been a good policy but we are not ripe for it if its done so many people wouldn't have assess to so many basic necessities it goes beyond buying items which is what they see it goes to availing credit lines to individuals I I beg to say only those working in government establishments multinational organisation may benefit and subsequently shutting out the majority target "people" that are supposed to benefit how would a person say a fulani buzu in the wilderness assess credit when he does have a steady well now address what of the way we average nigerias move change houses and locations how would that be managed what is the required infrastructure needed for this it may sound as simple as a P.O.S but it more complicated, you require a good network for internet services a very good fire wall to prevent you from hackers and viruses etc then comes the issue of what you would be buying with the credit cards the level of illiteracy etc then we would be confronted by the problem America is facing indebtedness to the tune of $3.5trillion dollars as a result of this same credit issue stealing of credit cards etc the country is already in trouble and I expect more proactive solutions like making credit available to SME closing the borders to importation of all items, encouraging transfer of technology and making nigerians work instead of waiting for govt handouts and sharing formular

Further more we restricted this discussion to aqdvanced societies that have well laid out structures we are talking about a develpoing economy here were largely 75% are illiterates or semi illiterates unemployment is high and security is low CORRUPTION is high do you know why its hard to track corrupt officials in Nigeria because everybody from the lowerest ranking officer that is directly or indirectly involved with a function requiring payment co-naive together to steal from the system I mean everyone from the accountants,auditors stores procurement officers Directors to the political appointees and only the greedy ones that eat alone get exposed, now imagine that system and imagine a credit system with these same set of men at the helm of affairs I bet you our case of recession would be worst then the american system now I think most of our policies makers are out of tune with the basics of what is happening on the streets most of these credit policies and the reasons given can only be appreciated in the long term what they would and how they would on a long term bases whereas we need immediate short term solutions that would metamorphous into these long term solutions, why start a credit system just to allow banks keep peoples money to also do cash transactions, where are the jobs and security of theses Jobs why can't Nigeria have an industrial revolution and infrastructural revolution first like china and stop trying to live the average social structure which is killing western countries why can't our Professor come out with research finds which are applicable and not waiting for handouts from the govt the reasons why we are not ripe as an country to start the credit system except it limited to certain areas I could go on but I think I would have to stop.

manny4life:

Sorry dude, could not reply, just got home from work.

There wasn't any flaw in the basic credit scheme; the problem I see is application of credit (how, where, when and what). Credit on it's face is nothing but can I borrow or can u lend me till a later date when I can pay back and with interest rate, I mean that's it. However, when people involve credit along with other or more products, then you have a problem. I wouldn't say there was a freeze, more like there was a slow pace on credit flow and this is not because of one problem; but several. Some banks "did not" have any liquid cash to lend out; it was tied up in toxic non-performing assets. Some banks were just too reluctant to loan credit because the economy was in recession. Some banks needed the govt to set aside "reserve funds" to back up loans, and the list goes on. Please, also keep in mind there are tons of macroeconomic factors that directly and indirectly affect lending.

The economy was in recession ----> high rate of unemployment===> individual spending is on the low===>merchants/manufacturers have ripple effect which in turn affect their business, if care not taken, few headed for bankruptcy. Now, when the fed reserve saw what was going on, they used several mechanisms to stabilize the financial markets and largely the economy, and when that wasn't really working, they moved further to start printing money to go into circulation.

If you observed, the fed (treasury) in two years, gave numerous refunds on taxes to spur spending, the gave huge amount of credit to those who bought newer cars (American obviously) to spur spending because U.S. govt bailed out the Detroit three. They went as further to give up to $8,500 to first time home buyers to spur spending, banks were underwriting different financial programs to spur spending, higher tax credit to employers who hired more people, I mean a whole lot was going on just to increase spending and remove fears that the economy was stable.

When banks realized that the reserve bank was confident, lending resumed at a minimal pace, but as soon as spending increased and there was slight decline in unemployment, lending gradually started growing. In other words, it wasn't because of a flaw in credit scheme that banks did not lend, it was majorly about the recession that brought in high rates of unemployment etc. Therefor to answer your question, Why did the US gov had to print/borrow and pump money for banks to confidently start lending again? They had to print money in order to MAJORLY stabilize the economy and not really the credit market like many thought. So that enough bills was in circulation so people can spend MORE, MORE and MORE.


I have to disagree with you on this "Despite that, a lot of educated people were still screwed. Even many economists couldn't predict it." To be honest, economist are experts in their field of macroeconomics but financial engineers, analyst are experts in their field of money and finance. Quite a good number of analyst blew the whistle and warned the SEC how wall street traded securities, they were just too overblown or too busy to listen or investigate. They knew the mortgage outburst was coming, yet all on deaf years. It was more of "we are to big to be affected" and all it took was for high unemployment, people couldn't pay mortgages and since these mortgages were a backed security, all it took was for default, and there you have the chaos. The downfall wasn't the act, but the massive volume of the MBS and DEFAULT.

Personally, I doubt any fraud, however, I will acknowledge that few wanted to make quick buck to were to lazy to identify huge risk. Although the FBI white collar crime division are investigating the issue, let's hope and see what results they have for us. As for the regulation, trust me SEC woke up after that. I think it need tougher regulation as well; perhaps that will keep investors safe from harsh risk posed by security dealers. As for your last paragraph, I do agree that everyone should cut their coat according to their size--- very important.

You make a good case and outlined it quite well. Meanwhile, we will keep watching as things unfolds.

Among the 185 million card-holding U.S. consumers, the average person carries three bank-issued credit cards, four retail credit cards and one debit card. Over the past few years, credit card issuers have improved rewards and cashback cards.