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Banks and Credit

This article from February 1975, is well worth a study and is still pertinent to the circumstances leading up to the crisis of recent years. Although some of the references are dated they have been retained for historical purposes.


Economics:

THE USE-VALUE of loan capital, which is made available through the banking system, consists of producing profit, and this type of profit is described as interest. The rate of interest is arrived at by competition between lenders and borrowers, or by supply and demand; the lender of loan capital striving to obtain the highest rate of interest for the use of his capital, and the borrower seeking the lowest rate. There is no "natural" rate of interest, nor is there any limit to the rate that can be charged.

 In the German Weimar Republic during the period of great inflation after World War 1, the rate of interest was raised weekly in some cases to 200%. The "natural" rate theory has its basis in the repetitive form of dealings bet…

Its always the poor who pay

The poorest people in Scotland are being penalised by unfair overdraft charges, according to a report by Citizens Advice Scotland.

It said the banks' poorest customers were subsidising the richest by paying a higher part of their income in fees. Despite talk about being more responsible, banks were still imposing heavy charges on vulnerable people.

Citizens Advice Scotland chief executive Susan McPhee said "...the people who are worst hit by these charges are those who can least afford to pay them.Indeed these charges mean that the poor are actually subsidising the rich, like a reverse Robin Hood effect."

One pensioner was charged £66 for going overdrawn by 60p.

credit crunch bites

The number of Scots declared bankrupt is rising at record levels, figures have revealed.
Finance experts PKF said in the third quarter of 2008, 5,998 people had been made bankrupt or entered a voluntary repayment agreement with creditors.
The firm said this was an increase of 26.7% on the previous quarter and a 70% rise on the same quarter of 2007.
A total of 14,008 Scots have been made bankrupt so far this year, while the total figure for 2007 was 13,814.
PKF said around 20,000 Scots could be declared bankrupt by the end of 2008.

Debt Fears

One in five Scots home owners struggle to meet their mortgage payments, a survey suggests.

Almost one million people find it difficult to cover their monthly repayments and other debts .

Researchers also found 18% reported having to rely on credit cards or loans to pay for daily essentials like food.

Head of personal insolvency for the accountancy firm KPMG in Scotland, Andrew Kennedy, said: "Those people who have been robbing Peter to pay Paul, transferring balances from card to card, remortgaging and taking equity out of their property to pay off spiralling debt are fast running out of options."

KPMG said the global credit crunch meant payment troubles could worsen over the coming months ,people who previously had access to competitive mortgage deals, despite being late with a couple of payments, are going to find it very difficult to find a deal , and that the credit crunch is already seeing credit card companies reducing credit limits and increasing their rejection rates for…

A Very Merry Christmas ?

Debt advisers are set to take a record number of calls as consumers are left to deal with a Christmas on credit. Leading debt charities said today that the credit crunch combined with five interest rate rises had made the problem this year even more serious. It was reported today that an estimated £34 billion has already been spent on credit cards this month – a £3 billion increase on last year.
A Consumer Credit Counselling Service spokesman said the organisation expected even more calls this year from people concerned they have over stretched financially this Christmas.He said: "We expect just under 34,000 calls to our helpline in January 2008, five per cent higher than in 2007."
And Credit Action spokesman Christ Tapp echoed the claims, saying the hangover debt from the festive reason reached way beyond the first few days of the New Year, and that homeowners may be particularly concerned. He said: "It could certainly be our busiest January and February ever. People ar…

The Credit Crunch

Further to the previous post this news item perhaps explains the reason why many workers find it necessary to work long hours .

Around one in three mortgage customers face higher repayment rates and difficulty in borrowing more on their homes in the light of the recent credit crunch.Lenders have become increasingly cautious following the problems in the credit markets, and as a result many home- owners will be offered less favourable terms if they want to remortgage their homes. More people than ever are set to fall into the sub-prime category as a result of missed debt repayments, meaning that borrowing will now be put out of reach for many.
Mintel market analysts , estimates that around 9% of the UK's 16.5 million mortgage holders will now be considered sub-prime by lenders. It also forecasts that a further 24% could also be considered a high risk because of their personal circumstances, such as being self-employed or not having a regular income, or because they had moved freque…