See, I still don't get where credit has gone -- credit is created by leveraging assets. You deposit money with a bank; people can then borrow against that money at some rate. (The bank is only required to keep some small percentage.) They then re-deposit the money at the bank, which means the bank can re-lend it.
There's some lag time while this happens, of course, but money can still be made, and anyone who's a low risk should still be able to get capital. (Assuming there isn't a bank panic -- mass psychology is a big player in all this.)
Though, if our two statements are both correct, this means that the economy runs on too-easy capital, meaning that we're screwed even with the bail-out.
(Also, I'm not sure that the car example is a good one -- car companies own their own lending companies -- but I do grok what you're saying.)
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Date: 2008-09-26 01:53 am (UTC)There's some lag time while this happens, of course, but money can still be made, and anyone who's a low risk should still be able to get capital. (Assuming there isn't a bank panic -- mass psychology is a big player in all this.)
Though, if our two statements are both correct, this means that the economy runs on too-easy capital, meaning that we're screwed even with the bail-out.
(Also, I'm not sure that the car example is a good one -- car companies own their own lending companies -- but I do grok what you're saying.)