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Strategies & Market Trends : 2026 TeoTwawKi ... 2032 Darkest Interregnum
GLD 379.87+0.4%Nov 11 4:00 PM EST
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To: TobagoJack who wrote (31900)3/30/2008 5:27:34 AM
From: elmatador  Read Replies (1) of 217701
 
Collateral is required to assure the lender that there is something he can go after in case the guy doesn't pay.

I never owed money since 1974 (barred a flat I bought 1979 get debt to be eaten by the inflation I saw coming and indeed came. I put 50% upfront.) I don't want lender to co-own what I purchase. Thus I always deferred my consumption to the time I had the cash.

If you buy a house, the lender owns the house until you finish paying it and can call it yours. That because the banks still have the rights to have it as the guarantee for the money you still owe them.

The banks do not let you borrow money that makes an instalment go above 30% of the family's income that is going to be signing as borrowers. That's how banks do in Brazil where capital is scarce.

If capital is a plenty banks and banks started doling out money left and right, without asking for collateral, nor guarantees and allowed people to have multiple mortgages, it is not a problem of the consumer, it is a problem of the economy as a whole.

Distortions are bad. Very bad. Too much money in Switzerland makes very easy for people to own their homes because lots of people park money there. Countries that are good parking lots for money can have it nicely. Therefore countries love capital hogging!!!

Now with the sucking sound of money going south we can provide some nice parking ground for the money and do nicely for a three decades as demographic window sends the SCALE to in imaginable levels.

But the culture of asking for guarantees is there. And if things get out of control government steps in and quiet it down.
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