POLAND'S CREDIT CRAZE

Polish bank's are outdoing each other in a bid to get Poles to borrow. One bank's even got a TV advert that shows a cash loan being dished out and weighed on a scale like fruit at a greengrocer's. Anotehr bank says it will lend anyone off the street 5,000 złots even if they've got no proof of a steady income. The lifestyle based not on one's earnings but on credit has spread to Poland and people are being urged to take out credit cards, get mortgages and loans for cars, holidays, kids' schooling, appliances, whatever.

Is this not going the same way as the US? Yes, there are corrupts banks and inefficient government bureacrats but isn't the bottom line oridnary people talked into instant gratificiaton? You don't save up for anything -- you must to have it here and now!!!

I know that this is a dangerous path to tread, but on the other hand... I bought my flat, car, washing machine, and computer on credit and paid them all back on time (not all at the same time, of course!) ;-)

It is somehow much easier to buy something and then pay back your loan than save-save-save for ages and then find out that the item you were saving for is not longer available or its price has gone up...

I guess as long as people remember what credit is - a loan, someone else's money - they will be fine.

The task maker has arrived!
The more you resist it, the more it holds firm and forces you to deal with it. Our leaders will be forced to become public servants.

A true ‘Public Citizen’ and presidential candidate, who must not be ignored, commented about the U.S financial crisis. One of the demands he proposed is, "the repeal of the Glass-Steagall Act, separating traditional banks from investment banks, helped pave the way for the current disaster. It is time to re-regulate the financial sector. The current crisis is also leading to even further conglomeration and concentration in the financial sector. We must revive and apply antitrust principles, so that banking consumers can benefit from competition and taxpayers are less vulnerable to too-big-to-fail institutions, merging with each other to further concentration."

"What should be done to limit banking institutions from investing in high-risk activities? And, “What is being done to protect small investors?”
This is relevant to what is happening in Poland, I see those bank ads on TV about lending money. Nie rozumien, nie mowie po polsku, but I do see posters and advertisements for KREDYT, now I know what “credit” means.

No other nation the U.S. had it so good for so many years, much of it was squandered away, the U.S. dollar is a piece of paper and I don’t understand its value. You can’t trade for gold.

The U.S. is beginning to find out about purging itself from all the greed and consumerism.

In the US I saw these late night TV commercials with "Crazy Morty" willing to give anyone a loan, no job, no money, no problem. Poland is not like the US. I am an American living in Poland and Poles are much more conservative with their money. They are much more down to earth and practical, and even though many Poles are taking easy credit to buy not only home but consumer goods many are not.

yes I have to agree with you on that one. Things will tighten up here credit wise when the wave of economic downturn does finally reach here although it will be less powerful than in western europe the banks will still raise the interbanking credit rates. the commercials that are funny in the us are the loan consolidation ones. where people are in debt from like 5 credit cards and dont even know how much they owe! sad but true

Many Poles have had to learn how to manage with less. However, much more conservative? More maybe. There are still many lavish types here. Money is splashed out quite a bit.

The reason the banks want you to take loans is to spend money in your economy..if this fails to happen people will lose jobs..prices will rise then u come into a recession

A friend of mine in Poland


I know several of people in poland who have done this. Simply shocking.

i know when i have been to wroclaw it seems there is a new bank opening all the time.look at the state of the usa,uk and ireland now.

The Irish were much more conservative with their money also. Then suddenly our economy improved, more credit was available to us. We convinced ourselves we were rich because of the incredible rising values of our homes. Now we are the most in debt people in the world to banks, credit companies, finance arrangements etc and to make it worse we are in a recession. Poland is the new Ireland, once banks start throwing money at people . . . . its all downhill.

Agree with you 'theblueenigma'. (..as an irish man)
I cannot get over the amout of banks that have openend here in poznan, 2 coffee shops have closed and in their place new banks have opened.

I have heard though that getting a mortgage is getting harder.

Credit is necessary, How are people on low wages supposed to buy 150" plasma TV's without it?

I do think Poland will go the same way as the UK and US in future years, The sheer amount of credit people take is ridiculous even by UK standards.

I've always wondered how so many Poles drive new cars when on a low wage.

Eg the average office worker admin person would earn around 3000 pln per month.

To buy a new car ie Skoda fabia, base model it would cost around 48,000 pln,
Monthly payments would be around 1500 pln over 60 months, Then rent 1800 pln, food, bills etc I have no idea how they do it

Do without - if you can't afford to keep up with the Jones' then don't try.

I think most people who are older than say late 40s are pretty frugal here. It's the kids and 30yo yuppies who are the materialistic snobs.

No, this is not going the same way as the US. The problem in the US is two fold: a decade long policy of cheap credit, under Greenspan, and a Gov (and FED) policy of forcing banks to lend money to sub prime borrowers in a suicidal drive to promote home ownership.

If and when you see polish interest rates come down to, say, 2%, in a bid to "stimulate" the economy, u can bet ur house that serious trouble is lying ahead.


That is because real life inflation is way higher than the official interest rates which means u r better off borrowing, buying now and repaying later.

Everybody feels and understands this even if they don't have a clue about economics.

That's the reason for the current borrowing binge.

Inflation is evil for it gratifies instantaneous spending and discourages people from saving.


You got it the other way around. Saving IS what makes an economy stronger because that means there are more savings that banks can lend to entrepreneurs which means more capital which means productivity gains, wage gains and overall wealth gains.

When there are no real savings to lend, banks create money out of thin air which ultimately leads to inflation and bankruptcies.

Germany's wirtschaftswunder is due to their high rate of savings. The UK and US's current misery is due to their borrowing and spending, and lack of savings.

PJ

thanks for that pj. economics in a nutshell.good post.

Oh you are sexy when you get all serious ;-)

Aha... ur romantic side... :)

See all women get turned on by talk of money ;)

silly comment ,respect!!!!!!

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See even the killer animal is a female! She has udders. Somebody much have taken her expensive shoes. But good to see she still has her fancy sunglasses.

I refer you to my US Website, in particular to the 'America First' party President's Innauguration Day address...Your comment about the Glass-Steagall Act prompted my reply... kultureamerika.weebly.com/1/archives/05-2008/1.html

Money, credit & gold are merely 'control mechanisms' as they exist now...You must ask: 'Who controls the credit, who prints the money, who owns the gold'?...Of course, credit is absolutely neccesary for the economy to function, but is credit an instrument to help the average person, or is it used as a means to make him a 'debt slave'?

My parents are in shock how much in debt Poles have gotten themselves into. I have a cousin who's building a house in Oława for 400,000 złoty. He drives VIP's between Poland and Germany as his main source of income. He's basically an above average taxi driver. My parents say his kids will be paying off their mortgage in the future.

True as a stand alone statement, but it is consumer spending / confidence and credit the push an economy forward and upward also. Put simply easy credit is both good and bad for the economy. What we are experiencing now is the negative effects of easy credit and deregulation of the banking system etc. Both must not happen again, but of course will eventually

I live in an 'osiedle' that is rather new and the neighboring osiedle as well. I have always been amazed by the amount of small businesses that have popped up here and that is basically good. But what is strange to me is that in so little area, there are quite many (haven't counted but it is more than three) beauty spas, hair dressers and restaurants etc.

Overall, people seems to have things going really well, the parking lots are full of mostly new cars and the people seem trendy. Is it really like this in Poland? Do people spend a lot on eating out and beauty treatments?

Banking is one of the most regulated businesses out there. In the UK, Banks are regulated by the Bank Of England And The Financial Services Authority. In the USA they are regulated by the FED, the SEC (Securities and Exchange Commission) and a multitude of regional level regulatory bodies.

On top of that, they've got their internal auditors and the chartered accountants who issue the annual report.

Well, How much more regulation would you like to have ?

Lehmans went down while having a balance sheet of $ 630 billion of assets and $ 600 billions of liabilities. A mere 5% drop in assets value would have wiped out its shares value. This was not hidden info. Its Balance sheet is in the public domain. Everyone knew this.

The problem is not the lack of regulation, the existence of regulations is the problem.

As Ronald Reagan once famously said: "In this present crisis, government is not the solution to our problem; government is the problem"

PJ

Funny you should mention Reagan, it was he who first started to deregulate banking. Banking today has one of the least regulatory systems in place found across any spectrum. The very idea you propose that regulation itself is the problem is absurd ! Regulation is sorely needed on hedge funds and derivatives. This shadow market is a ticking time bomb that may be in the process of exploding very soon. Easy money was necessary but not sufficient. If we had just had easy money interest rates would have gone down but financial institutions would not have found enough credit worthy borrowers to take out the loans and expand the economy. With deregulation or failure to regulate we created the illusion that the loans being made were going to be paid back and therefore move the easy money through the economy to fuel the expansion. The very fact little or no regulation existed, and banks were allowed to themselves borrow so much was a time bomb waiting to happen.

I am also aware that deregulation alone isnt the full cause of the current situation. Reagan's trickle down theory simply did not, and does not work. The rich became addicted to their largess (evidenced in the outrageous salaries of CEO's) and sought mechanisms to increase their riches. The bonuses bankers were on was and is outragious. At the same time the consumer was largely ignored. Jobs are outsourced to other countries and replaced with lower paying jobs driving consumers to rely on credit to finance the goods and services that were being pushed in ads on TV, radio, in print and on the internet.

Being in Poland a lot myself I do notice a growing acceptance of credit here. all mirrowing exactly what I have seen in Ireland . . . and all I suspect with the same end

Who can tell me more about poland? I think if I find a real Polish lover we'll be able to exchange environmental background info and get aquainted with each other.I'm a Zimbabwean living in Botswana but hoping to leap into Europe soon.

watch those credit lines and credit cards. If it sounds too good to be true then it's not true.
Look what happened to Americans. They are in debt up to their eyeballs.


Both are private organizations and any regulation by the government is an illusion. Federal Reserve is as federal as Federal Express. The FED was created by a bunch of private banks to counteract the banking trust in the the first decatdes of the 20th century. The trust was composed of exactly the same banks which offered to counter themselves by means of the FED. The FED is in fact a trust (which is illegal in the US). It is one big scam, and likely the main cause of the major market crashes.

you'e listening to too much Jim Corr...