Sunday, July 15, 2007

In Debt we TRUST!

"Stay away from credit cards and invest in yourself and Remember: ... Money doesn't create man; it is the man who created money." - Warren Buffett

Some unscrupulous person sold my telephone to a bunch of telemarketers; I now get 3-5 calls a day from credit card companies, banks and sometimes finance companies based in Philipines who promise to double my money in 3 months if I just wire a few thousand to them. Of course, I won't fall for the filipino finance company ploy but the ones from the banks are quite seductive - low interest of 3.5% for 6 months, interest free loan for 6 months just pay 2.5% ....."Sir, you have $8K available from credit card why don't you transfer it at an attractive promotional interest of 14.5%"....I had to explain to the telemarketer that 14.5% is NOT an attractive interest rate but he told me that other customers are happily paying 24% on rollover debts which amounts to billions in Singapore....

Research shows that US banks make the biggest profits from rollover debts with high probability of default. The high risk loans with high incidence of default and bankruptciies are also the most profitable for banks. There is no incentive for banks to alleviate the situation.



Throughout history money lenders have to be contained by govt regulation...you cannot count on the self-control of ordinary citizens. Credit card debt is addictive like drugs and we don't rely on individual responsibility when it comes to drugs .....why then do we allow them to destroy themselves with debt? The consumer debt situation in USA, UK and S. Korea tell us we should not standby as debt devour our society. Counting on the banks to be ethical is like asking a tiger to be a vegetarian......if you don't watch them closely, they will 'eat' you....be it structured deposits, issuance of credit card debts, banks don't give us a reason to believe they can self-regulate.

It used to be that one bank is allowed to make unsecured loans of 3 months of a persons salary(6 months ..credit card + credit line)...now with so many banks allowed to operate here this limit is not useful. A person who overspends and addicted to debt simply goes to several banks to get more money. Banks love customers who can't pay up because they keep rolling over their debts and paying hefty interest.

An extraordinary govt should be able to safeguard the interests of its citizens over the interest of banks. Banks can be force to screen their customers more if the maximum interest is capped to say 15% and the maximum loan that a bank can extend lowered.

6 comments:

Capt_Canuck said...

but, arent banks just money making possibilities, or a way for the gov't to gain money to reinvest in the country to which it is? wouldnt that be gov't influence and meddling in a private economy? gov'ts dont meddle in that sort of thing...do they?

LuckySingaporean said...

capt_canuck,

Govts don't control this sort of thing...but they are suppose to regulate it.

Either our extraordinary govt do it early, or they will end up doing it LATE..when the mess appears.

Why do N. Americans spend so much? ...They seem to buy up everything the Chinese can make.

Capt_Canuck said...

I believe N. Americans spend so much because of two things.

1) the credit card companys hand out credit cards like they are candy to anyone. You dont even need a lot of money in the bank, just apply and you can get one. As a student I had 5 cards to play with. A friend of mine has declared bankruptcy twice and he keeps applying and getting credit cards and maxes them out regularly. So, easy credit is one part.

2) Humans apparent insatiable need for 'gotta have'. I know it exists over in Singapore, but I keep screwing up the name for it "miaksu"? Kiasu? I don't think it is a case of N.A. buying up everything the chinese can make, more than N.A. buying up everything new and funky that hits the market in way of techno-gadgets. Just so happens that the chinese make more of that stuff for incredibly less (thanks to no minimum wage in their countries).

so you want the PAP to regulate Sinagporean spending or how the banks are available with money lending? interesting. When it comes to newspapers and freedom of speaking out and all, people jump forward and demand that happens claiming that people can control their tongues if given freedom of speech; but you want the gov't to have stricter controls over banks being able to lend money saying that Singaporeans cant control their spending? Interesting..or am I missing the point, like I usually do. I, personally, blame too much MTV.

Anonymous said...

the battering of the property market by the media, whilst understandable considering social and economic interests, is making the rich even richer, and leaving their poorer cousins homeowners, especially homes in suburban areas, not as rich if not at all. take for instance those who reaped from enbloc sales. they sold their properties at a high and now, with all these measures depressing the market, they get to buy another property(or several properties) on the CHEAP(relatively speaking). that's also true for non enbloc owners who own homes in centrally located areas.

so again, the rich gets richer and the poor, suppressed. but at the end of the day, the real suckers are the rich foreign investors? LOL.

but i welcome all these screwing measures! LOL.

Anonymous said...

The world is now flushed with money the pundits are saying. So the banks are trying to lend easy money.

More than that PAP has become a American stooge. Everything America does, Singapore just follows - in this case the culture of a debt-ridden society.

What does it matter that Singaporeans sold on credit cards and easy credit will eventually be drowned in debt.

If you just follow like sheep and take everything that the garmen says or allows, then you will be like sheep led to the slaughter.

Simple as that.

financial solutions said...

"Stay away from credit cards"

Just a thought, but coming from a man who could wipe out third world debt using the money in his jeans pocket...