Riga - the capital of Latvia. The biggest city in Baltic States
Thursday, 18 November 2010
Banks. The art of deception.
"Financial solutions for your welfare..." This is how it translates. It is funny how a word "solutions" is used for doing the exactly the opposite - creating problems by charging the interest. The question is - these are solutions for whom exactly?
2 comments:
Kristaps
said...
Credit has its place. Think of any situation where you have to spend the money now to enable yourself to earn more later. An example could be a starting out craftsman buying tools for his trade, or someone buying a car to get to work.
The car example is less of a necessity in Latvia, but in much of United States there is no usable public transportation and it can be very difficult to find a place to live and work if you can't drive. Well, you get the idea - those are the times when credit is the only solution.
The credit problem in Latvia is two-fold. First, Latvia being a relatively new finance market, most credit offered by foreign banks was on tough terms (high interest, high penalties). Secondly, many people borrowed more than they should have, considering their income and net worth. This could be either because of inexperience or the circumstances. Perhaps counterintuitively, borrowing works best for those who least need it.
There also seems to be a general lack of the understanding that borrowing from a bank is not like borrowing from your family or friends. The credit agreement with a bank is what it is and the bank will expect/force you to honor it no matter what happened to your job, your life or the economy. I've seen a lot of shock and disgust over this perceived indifference in Latvian news sources, but the fact is that's how banks must work to stay in business. Having spent my adult life in the US, everything that is happening in Latvia now, with the collections and the banks being "unfair", sounds perfectly normal. That's all I would ever expect.
That said, this is my first time commenting, but I enjoy your blog. My family left Latvia before its independence, but I still miss Riga and contemplate returning some day. :)
Thank you Kristap. I enjoyed watching this one. The interest charges are interest on nothing because money is not backed up by anything and is created out of thin air :D http://video.google.ca/videoplay?docid=6507136891691870450#docid=-8484911570371055528
2 comments:
Credit has its place. Think of any situation where you have to spend the money now to enable yourself to earn more later. An example could be a starting out craftsman buying tools for his trade, or someone buying a car to get to work.
The car example is less of a necessity in Latvia, but in much of United States there is no usable public transportation and it can be very difficult to find a place to live and work if you can't drive. Well, you get the idea - those are the times when credit is the only solution.
The credit problem in Latvia is two-fold. First, Latvia being a relatively new finance market, most credit offered by foreign banks was on tough terms (high interest, high penalties). Secondly, many people borrowed more than they should have, considering their income and net worth. This could be either because of inexperience or the circumstances. Perhaps counterintuitively, borrowing works best for those who least need it.
There also seems to be a general lack of the understanding that borrowing from a bank is not like borrowing from your family or friends. The credit agreement with a bank is what it is and the bank will expect/force you to honor it no matter what happened to your job, your life or the economy. I've seen a lot of shock and disgust over this perceived indifference in Latvian news sources, but the fact is that's how banks must work to stay in business. Having spent my adult life in the US, everything that is happening in Latvia now, with the collections and the banks being "unfair", sounds perfectly normal. That's all I would ever expect.
That said, this is my first time commenting, but I enjoy your blog. My family left Latvia before its independence, but I still miss Riga and contemplate returning some day. :)
Thank you Kristap. I enjoyed watching this one. The interest charges are interest on nothing because money is not backed up by anything and is created out of thin air :D
http://video.google.ca/videoplay?docid=6507136891691870450#docid=-8484911570371055528
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