Caroline Galea, Sta Luċija
Banking on financial discipline
The current world crisis in the financial markets is food for thought for all of us. It has become clear that easy access to credit, a marked characteristic especially of British and American economies, could fast become a recipe for disaster.
The "live for the day" culture is certainly corrosive both socially and morally. More than greed, it is a lack of proper discipline with one's finances. In Europe we tend to be more conservative with our money although it is apparent that these credit trends strongly advertised by banks and financial institutions are starting to creep into our lifestyles. Our traditional financial discipline of saving may still be strong among the older generations but probably not so much among our younger generations.
In the last 25 odd years, lifestyles and spending habits have transformed the Maltese character even more than in any other time before. It has been a long-standing tradition of the Maltese to be thrifty and sometimes overly so. At times scrimping and sometimes excessive hoarding could possibly have been a side effect of our isolation and perturbed past. This has definitely changed thanks to increased prosperity, political stability and a successful transition to the modern economic world. Today, thanks to political, economic and technological developments, we have access to possibilities unheard of up to a few decades ago.
There has been a marked improvement in our standard of living. We have more comfortable homes, nicer cars and 101 gadgets. All of this has had its side effects. One gets the sneaky suspicion that our personal financial management arrangements have probably slacked too much and this seems more marked among the younger generations. It seems to me that the spending patterns of many of our youths revolve around mobile phones, the purchase of luxury (and often useless) items and the quest for unlimited socialising. Of course, there's no harm in any of this! It's all part of being young and having fun.
What is worrying is that all this may sometimes lead to over spending and a growing disregard for saving for the future or a rainy day. Debt and unsecured lending through credit cards and other long-standing payment arrangements fuel the situation even further. As parents we are in duty bound to instil in our children the basic tools for life and setting oneself a budget and sticking to it must surely be one of those lessons. All this becomes more relevant when one considers that for most of us financial planning will eventually affect our future pension plans.
I sometimes get the impression that people often pay little attention to the tariffs and charges they pay. There is in a sense a weakness in our culture of looking for value for money in what we buy and consume. Possibly, we consume too much and can't be bothered! It is easy to point the finger at the usual suspect. The government and its agencies should always be vigilant, yet, we as consumers should not shed our responsibilities in doing our very best to get the best value for our hard-earned cash, thus, rewarding those service providers who foster this with our custom.
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Charles Camilleri
Oct 6th 2008, 19:31
Yes it is all true what you said Caroline but where would be world be without banks giving credits. Much of our well being is due to credit. Without credit nothing is possible. Industries which employ millions of workers work on credit.People get loans from the banks to buy their needs which are made by factories employing thousands of workers. So as you see so long as the wheel turns there is not trouble. Trouble as in anything else arises when we go over the limit. And this is what brought the present situation. This is as eating/drinking too much, or driving in excessive speed. What do you expect? But it would be wrong if we condemn the system of credit because it is the system that brought prosperity to the western world and is doing the same in others countries with low standard of living. It is important that everyone (individuals, business people etc) knows his limit and does not go over the border.
Liam Kelly
Oct 6th 2008, 13:06
Peter and Caroline....good and accurate accounts of the current situation.
It really didn't take a rocket scientist to forsee this current situation; an economy based on debt is not only a false economy but totally unsustainable long term: if banks, individuals or governments were too short sighted to see this themselves then quite frankly they deserve all they get.
But Peter, i totally disagree that this is 'a wake up call to revert to the good old financial accum of not going into debt'....infact there is not even any suggestion nor will in america, the uk, or anywhere else for the financial markets to be regulated so that excessive debt is punished. The only thing that governments and banks are interested in is getting rid of the current bad debt so they can start a-fresh to accumulate it all again.
That is the glaring error which has definatly not been learned from this crisis. Indeed it was Mr Brown himself who stripped the bank of england and FSA of its ability to regulate the banks in terms of the amount of debt permitted.
Lessons NEED to be learned.
Peter Murray
Oct 6th 2008, 11:01
The concept of living beyond one's capabilities ,abilities or means was a totally alien one in my youth and only in the past decade or so has this be made achievable through the rapacious and avaricious policies adopted and cultivated by banks and financial institutions.People should be more accountable and responsible it's true but without the wherewithal to procure easy credit this will help develope their mindset in this regard and also assist in not confusing the all too common mentality of greed over need ,when deciding where their priorities or financial limitations actually lie.The credit crunch is a wake-up call to revert back to the good old financial acumen of not going too much into debt or for long periods. and only to purchase what you can afford,much to the chagrin no doubt of the unaccountable elite,aka the banks. By the way, if the banks go bust here what levels of compensation are available to deposiitors and why is this not prominently or clearly made public?You would be surprised and appalled at the paltry and derisory amounts payable to Maltese depositors when compared to other countries levels of compensation in Europe and the rest of the world,