4 ms·

What a crisis this is; I'm usually on the right of debates here and I have to disagree. It is definitely the consumers fault, but the banks should know better.

What a crisis this is; I'm usually on the right of debates here and I have to disagree. It is definitely the consumers fault, but the banks should know better. They have a responsibility beyond themselves, the entire economy relies on the money flows that they control. If every bank acts a bit irresponsibly just to make a few people rich now, they've screwed over a vast number of people outside of the bank. The cost to the bankers for acting irresponsibly is less than the cost to society. Therefore, I feel they should be regulated (within reason, of course).

netcan 18y ago
I don't disagree with you. Defaults on an individual level are consumers' fault. Magnifying that to the point where the worldwide economy is at risk is banks' fault. They leveraged to a point where everything breaks down at a point that isn't totally unlikely. I can understand that in light of that, seeing banks hound people to take credit makes people understandably cranky. I think the fact that it's consumers' fault is the interesting point here. This article implies that on average consumers cannot be trusted to loan what they can afford and/or pick the correct credit card. Not because they are being tricked or because information is unavailable or any other market imperfection. Because the average decision making is bad. What does that do to economic models?
- jmtulloss 18y ago
  The idea that all actors in an economic system are rational isn't a good one. A good example: the current stock market. Those people are really good at finances, they have an idea of what's a good stock and what's a bad stock. Emotions are playing a big part right now though, which causes the market to fluctuate in what I would call and irrational way.
  - netcan 18y ago
    The assumption is crucial though. Anyway it's made in aggregate & in a theoretical perfect market where everyone knows everything. The thing is with this market that it's damn near perfect. It's a big enough decision to make sure consumers research it, work it out on a piece of paper, hire consultants to help with the decision. There's plenty of legislation ensuring information availability & simplicity. Still the actors are not on average rational.

netcan 18y ago

I don't disagree with you. Defaults on an individual level are consumers' fault. Magnifying that to the point where the worldwide economy is at risk is banks' fault. They leveraged to a point where everything breaks down at a point that isn't totally unlikely. I can understand that in light of that, seeing banks hound people to take credit makes people understandably cranky. I think the fact that it's consumers' fault is the interesting point here. This article implies that on average consumers cannot be trusted to loan what they can afford and/or pick the correct credit card. Not because they are being tricked or because information is unavailable or any other market imperfection. Because the average decision making is bad. What does that do to economic models?

jmtulloss 18y ago
The idea that all actors in an economic system are rational isn't a good one. A good example: the current stock market. Those people are really good at finances, they have an idea of what's a good stock and what's a bad stock. Emotions are playing a big part right now though, which causes the market to fluctuate in what I would call and irrational way.
- netcan 18y ago
  The assumption is crucial though. Anyway it's made in aggregate & in a theoretical perfect market where everyone knows everything. The thing is with this market that it's damn near perfect. It's a big enough decision to make sure consumers research it, work it out on a piece of paper, hire consultants to help with the decision. There's plenty of legislation ensuring information availability & simplicity. Still the actors are not on average rational.