Foreign Perspectives

The current economic difficulties are pretty unusual in their severity and therefore what “we” should do is not necessarily the same as what we’d ordinarily do by ourselves.

Typically, it’s prudent to build up some reserves in the bank to tide oneself over the hard times. However, if we all do that in the moment then chances are that the downturn will go on for a great deal longer than it needs to. What’s needed is for each of us to act as though the downturn didn’t exist as much as possible.

So, for instance, the banks have basically been told to return to normal lending practices “or else”. In fact, they need to do that for their own sake as tightening up on the lending criteria as many had been doing was simply acting to stagnate the economy which is good for nobody, including the banks.

From the rest of us what’s required is that we don’t simply bank any savings that we’re making but rather that we spend them and thereby do our bit to restart the economy.

Whilst your instinct might be to increase the size of any savings reserve as much as you are able, it’s the worst thing that we could do collectively.

That’s basically what governments around the world are doing right now when they’re supporting the banking system.

For normal people, borrowing even more to get yourself out of a hole can only be a short term solution and even then it only works if you have something else up your sleeve. Bridging loans are typically successful in this area because you’ve a house for sale on the market and will repay the loan when it’s sold.

It’s also only a short term solution for governments too, albeit the term over which they can get away with it is somewhat longer: typically several years or perhaps a decade. That “something up the sleeve” is mainly tax rises to pay interest on the loans that they’re getting and to start repaying them as well so we can all look forward to significant rises in taxes in the next term of our governments (perhaps even in the current Obama term as he won at a very unfortunate time). Other possibilities are asset sales of course so we can look forward to privatisations on a grand scale in a few years time although the unwinding of the various nationalisations of various banks will also need thought.

The other downer for governments is that borrowing more basically means printing more money which in turn reduces the value of that money which is why exchange rates are all over the place at the moment.

Of course, all this work is dependent on the banks returning to normal loan criteria and everyone spending money to get the economies going again…. not an easy thing to do when things look this bleak.

Not so long ago I was joking that either Citibank or HSBC going bankrupt would be a really spectacular event as both are based in one country yet have the bulk of their interests overseas, so who would support them?

Well, it’s happened to Citibank now and it turns out that the American government figured that if they were allowed to go to the wall it would be just that little bit too spectacular to happen so they’ve bailed them out. One wonders how long it can be before we see if the UK government have a similar view of HSBC although that might be quite a while from now as HSBC management dumped the problem HFC quite some time ago and that’s where a lot of their high risk loans lay.

But when you’ve the situation of the largest banks in the world at risk like this it sounds to me that it’ll be quite some time before we get ourselves out of this particular financial mess.

Open education is becoming an increasingly popular thing for various universities around the world to produce these days.

The quality of what’s on offer varies enormously of course. Normal redbrick universities will put on anything from small samplers through to pretty much entire courses in the case of Yale. Ironically, the sample from the more open universities is at the other end of the scale with, for example, the Open University offering very small segments of a wide range of courses in contrast to Yales complete versions of a small number of courses.

Why the difference?

For Yale, the course samples on offer are something of an advertisement for the university and creates quite a bit of good PR too as segments of some of the courses currently on offer have been used by a range of educational establishments to liven up their own course presentations. The situation with the Open University is quite different. They’re not so much advertising the university as the courses themselves thus whilst in the Yale selection you’ll find the complete introductory pschology course (which is absolutely fascinating), from the Open University you’ll find just four units from their equivalent course.

The “problem” with all of these offerings is that they’re quite addictive and it’s tempting to seriously consider signing up for the full thing. Now, that “full thing” is $35,000 a year in Yale (that’s for 8 to 10 courses similar to those that you’ll see online ie around $4,000 a course) or around $4.500 for the full credit course in the Open University (assuming that you’re paying the full price, $2,000 if you live in the UK and get the subsidity). Interestingly, it’s actually cheaper to do the course in America which is contrary to what most people would expect.

With the credit squeeze in full force many people are finding it difficult to source short term borrowing when they need it to tide them over to the next paycheck. This is where payday loans come in and, of course, there are more and more of them on offer every day.

In principle they’re fairly simple in that they are:

1. intended to be repaid from your next paycheck (although you can usually roll them over to the one after that);
2. don’t require a credit check;
3. are from around $100 to $1500
4. require you to be in regular employment of at least $1000 (usually for at least the previous three months);
5. require you to have a normal checking or savings account (usually for at least the previous three months); and
6. be over 18

Approval is very fast and even quicker now that online checks can be carried out by the credit company ie no more faxing of documents.

Although payday loan advances are fairly simple, the sheer number of them that are around means that a little guidance is handy and don’t forget that the rules change from time to time too.