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> This is because almost everyone is thinking about and taking into account only the demand side – most people would love to borrow at low interest rates, ...lo
by Supermancho 5y ago
> This is because almost everyone is thinking about and taking into account only the demand side – most people would love to borrow at low interest rates, ...low interest rates must mean that credit is both cheap and plentiful. However, not thinking about and taking into account the supply side of the picture
I'm not sure this is any kind of explanation to the contrary. Credit issuance means someone took advantage of credit offered, not a total of the available credit (offered).
I got a home mortgage 2.75%@30yrFxd with 7%! down for hundreds of thousands of dollars this year. I have a friend who has almost 100k in debt, which she cannot service, and a credit score of just over 640 (by gaming the score during the pandemic from 500s) and has credit cards with 10k limits coming in the mail.
Credit IS cheap and plentiful and the same mistakes of 2007 have been amplified by the banking system (Fed + too big to fail cronies).
- WillPostForFood 5y agoCredit IS cheap and plentiful That's the fallacy, right? One would think it is plentiful given the low rates, you have an anecdote that it is, but look at the data. Lending is fraction of what it was in 2007. https://cdn.substack.com/image/fetch/f_auto,q_auto:good,fl_progressive:steep/https%3A%2F%2Fbucketeer-e05bbc84-baa3-437e-9518-adb32be77984.s3.amazonaws.com%2Fpublic%2Fimages%2F1d4895dc-9903-4a63-b0d2-f16a5b2d1e20_1833x1101.png https://cdn.substack.com/image/fetch/f_auto,q_auto:good,fl_p...
- Supermancho 5y agoAgain, that's because people aren't taking out copious credit, not that they aren't being offered. There's no data on what's offered, only what's contracted.
- SilasX 5y agoYep, and all throughout the 2008 crisis, I never stopped receiving credit card offers.
- Supermancho 5y agoOfc if you have decent credit you will get offers even in economic crashes which isnt relevant. That's part of the debt economy. There's no accurate aggregate measure of lines offered (only those issued), which is the subtle problem with the (most) analysis about credit gluts vs interest rates.
- SilasX 5y agoIt also means you have to be careful about tabulating "yes I can get credit fine, I just don't want it (at that price)". Edit: And also, at the time, even people with bad credit were still getting those offers. And my credit history was really short at the time.
- carlivar 5y agoIn 2006 your friend would be able to purchase 5 houses on top of existing debt. Is that possible now? So which year has looser credit?
- Supermancho 5y agoCompared to 2009, credit is loose and readily available. The phrase indicates a level of lending optimsm or negligence, depending on the specifics (person terms bank timeperiod).