Blog 14

2008-November-24

Credit Crunch, What Credit Crunch?

A personal view from Turkey by a Brit who lives there.

It makes me so angry when I see countless financial pundits on television warning the US public that unless they agree with the Seven Hundred Thousand Million dollar bailout of the financial system there will be mass unemployment, and companies stifled by lack of credit.

Have these pundits completely forgotten where all the money lent as credit comes from in the first place? Alternatively, are they so embroiled in the system that feeds them so diligently they’ve never really thought about it?

If all the people the pundits were talking to stopped building, growing and making things there would eventually be no money in the system. If the financial institutions of the world want to maintain their lifestyles, they have to look after the people who create all the real wealth very well indeed. The financial institutions, by allowing a situation to develop whereby the wealth creators became aware that they are at their mercy was definitely not a good move.

I can’t believe how so many people, wealth producers as well as wealth manipulators, are duped into believing that modern society cannot function without credit.

Credit is an invention of the banks; the money they lend created out of nothing by siphoning off the real wealth from those who create it. No mystery here, all the things we judge our wealth by, buildings, cars, the very clothes we wear, in fact everything made by man, was made by a relatively small number of people, supported only by designers, distributors and retailers, not by financial institutions.

In fact, there should be little if no requirement in a just society for any credit at all.

Whoa!, don’t all shout at once, did I hear someone shout ‘naïve’, ‘the world economy would collapse without credit, people would starve, companies would not be able to operate’, blah, blah, blah.

However, as long as there is a vast army of people in the financial industry supported by so few, I agree a credit society is necessary. (I use the word ‘industry’ here with tongue placed firmly in cheek)

Yes, of course, the world economy would collapse, the incumbent credit system took the banks hundreds of years to install, it would take many years of reform for it to be reorganized into the socially benevolent financial system it should be.

For the past 15 years, I have lived in Turkey. When I came here mortgages and credit cards were virtually non-existent, and surprise-surprise almost everyone lives very well in their own, paid for homes.

It’s with a sad heart that I have observed during the last few years the creeping cancer of bank driven credit spread its tentative tendrils into the Turkish economy. Homegrown banks are learning the fundamentals of ‘stealthy wealth extraction’ from their foreign cousins as well as an influx of foreign banks that see Turkey as a piece of prime meat, ripe for infection.

Of course, creating a credit reliant society is not something that can be done overnight, first the banks have to issue credit cards indiscriminately, offer larger and larger loans over ever extending periods of time and initiate systems that inject money into the financial system not backed by real wealth.

Gradually, in time, the intrinsic cost of everything will rise. Credit driven inflation (not to be confused with the day-to-day inflation percentage bandied about by governments), is the ‘built in’ inflation that is part of the cost of everything, this only evolves after many years of careful nurturing by the banks. Once installed it becomes almost impossible for most people to buy anything without resorting to credit.

Fortunately, Turkey is still in its infancy when it comes to being a credit driven society, though it’s obvious from observation today that the foundation stone for a future Turkish credit society has been laid, its eventual arrival is inevitable.

In the meantime, despite financial turmoil in many other countries, Turkey is still able to say, what credit crunch?

UPDATE: 2008-December-02

As with the fallout from the Chernobyl disaster that drifted eastward, the fallout cloud from the 2008 world banking disaster has finally reached Turkey. The fallout cloud is somewhat diluted for the reasons stated above, but perhaps in panic most of the Turkish banks have curtailed their lending only to low risk companies, and even then it's an 'arm up the back'negotiation. The Turkish government is offering interest free credit to manufacturing industry, which does make a modicum of sense.

UPDATE: 2009-April-08

The fallout from the world banking heist continues to settle here in Turkey. Of course with so much publicity in the world at the moment given over to the financial crisis it is understandable that the Turkish banks would take full advantage of the situation even though their balance sheets look reasonably robust, to hike charges in line with the rest of the world, though not really necessary. But then, that's what banks are all about, isn't it?

See also: Who creates the ‘real wealth’ in the world? and The stealing bankstards

 

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