What’s the credit crunch all about?
Turn on your TV. Open a newspaper. There’s been only one story over the last months. Something called a credit crunch is coming. This is bad. Nobody should panic but the economy is in trouble. You’re short of money, thinking about a payday loan online. Then come all the headlines. Wall Street high fliers suddenly bailed out, taken over or dropping into bankruptcy. The Fed is running around trying to look as if it’s in charge. Even the President comes on TV to push a plan to save everyone. Then the debate starts. Is this just to rescue the executives on Wall Street, or will it do something for everyone else on Main Street? Well, let’s get one thing clear. You’re not reading this because you’re a Wall Street banker. You’re one of the millions of guys who work steady and pull more than $1,000 per month. You’ve got a checking account but not a great credit record, and all you want is a few dollars as a cash advance payday loan. So what’s the credit crunch all about? Think about everyday produce you buy in the market and the more expensive organic foods. Everyone needs food to live but you don’t die if you never eat an organic bean. It’s the same with finance. Everyone needs money in a banking system, but if you never see a collateralized debt swap or a securitized derivative, you don’t die. All these clever bankers who work in these fancy skyscrapers have been playing with stuff that no one but them understands. Except it turns out they didn’t understand it either and they’ve all lost a small fortune. Does that mean banks have got no money to lend? No! Does that mean you can’t get an instant payday loan from a finance company? No! All the millions of guys like you have your weekly or monthly pay coming into your accounts. That banking operation has always been profitable. It’s still profitable. Ordinary Main Street banks are not going out of business. Even if they get into trouble, your money is guaranteed by the government so there’s no need to worry. More to the point, Main Street has got money to lend. You may not realize it but people like you help banks and finance companies to make a good profit. So don’t panic. If you run short between one payday and the next, there is money waiting for you to borrow.