17 September 2007

Bye bye cheap credit

The weather last weekend continued to be horrible for anything beside staying home with a mug of hot chocolate (or a hot... well, you can imagine). It drizzled almost the whole time, and gusts of chilly wind blew away what had seemed like a prelude of a nice spring. I had dinner with friends on Saturday, then went out, and miraculously I didn't catch a cold.

The news, today, is the economy. You know that the real estate bubble in the United States has finally burst. As a result, the international markets went crazy and have been coming down for some time. Interest rates have soared, and financial investment options have become riskier. The problem in the particular case of underdeveloped countries ("emergent economies", they call us) is that what we offer in terms of financial investment (i. e. our debt bonds, the equivalent of Treasury letters and such) is rather risky to begin with. And there's this tiny stain in our payment records from the time when we defaulted on US$93 billion and paid back a quarter of the original debt years past due... So everywhere people are getting rid of Argentine bonds as if they were flaming potatoes, and it's more difficult to get loan money, and interest rates are climbing here as well.

This kind of thing goes unnoticed often, but not now. To the common citizen, the result which is already apparent is that we won't be able to buy so many things on cheap credit. Since the economy stabilized a bit, it became customary for department stores and shopping chains to offer goods cheap and expensive in installments with little or no extra charge. Many offered their own credit cards. It came to the point where buying a fridge or a computer in 12 monthly installments with the store's private card was actually cheaper than buying it in one payment, even in cash. In other cases the interest was simply insignificant. But that, we're told, is no more.

I personally haven't done any large purchases lately, and whenever I can avoid it, I pay up front with my debit card or in cash (if you pay with the debit card, the government returns 5% of the VAT-free net price to you the following month). So the news doesn't worry me. But I'm moving out one day, and that may be sooner than expected, say, at the beginning of next year. I'll suddenly need (at the very least) a fridge, a stove, and some furniture beyond a table and a chair (my bed I'll take with me!). So maybe I should be concerned... Damn the butterfly effect in economics!

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