We are now a year into the credit crunch in the United states and the UK. The US president and congress launched the biggest financial stimulus package in history designed to bail out the financial sector of the US economy and the auto industry and as a consequence the world economy. The experts wanted to save the financial world it was not a money saving plan.
The bailout does not seem to have done much to stimulate the economy in the US or the world. The cash for clunkers program was hugely successful but the bailout itself has not been successful. The government had to further supplement vehicle purchases to make it feasible for many people to buy a new vehicle and also to make lenders willing to loan money for vehicle purchases.
All the cash for clunkers program really did was stimulate sales for a short period which reduced inventories already sitting on lots around the US. It really did not stimulate the economy very much. Overall lenders are not willing to lend unless the borrower has strong credit and employment in the US with no benefit to the UK and the rest of the world.
Relatively speaking there are not that many people that meet the criteria lenders are looking for today because so many millions of people got burned by the mortgage crisis and the huge number of layoffs over the past year. Society has taken a step backward and the bailout has not succeeded in building society back to the prior living standard.
Further action is needed to get lenders to lend. The vast majority of car sales are financed. If people cannot get a car loan at a reasonable interest rate the auto industry will not recover. The US and other governments may need to come up with a formula to guarantee loans to a certain extent. In other words share in the risk with lenders so that lenders will be willing to lend. Perhaps other western governments could help out, since this is a global problem. The UK, for example, could have a similar program to help stimulate its economy, which is a big part of the world economy.
If the US government were to put up say 2 billion per year to guarantee auto loans for people who could not otherwise get a loan this would stimulate vehicle sales tremendously. There would be a minimum credit score for such a program and a credit score where the guarantee would not be needed. People that fall into the range where the guarantee is needed could be required to pay a onetime fee at the time of purchase (for example $250) to help fund the program. The guarantee would cover a certain portion of the loan which would reduce the lenders risk of a bad loan. The same type of program could work in the UK, scaled to the needs of the UK. It could be required to have a credit reference agency rate the applicant, but under a different criteria established by the program.
This type of program may be what it will take to revive the auto industry. Such a program would cost only a tiny fraction of the amount spent to bail out Wall Street but could potentially do much more to revive the auto industry and put people back to work. The auto industry has always been one of the strongest pillars of the US and World economy, supporting millions jobs throughout the US and the World. The auto industry may never fully recover and will certainly be much different than in the past, but it can recover many of the lost jobs.
Also, the housing market will not recover much until people are back to work and can afford to make house payments again in the US and the UK. The decline was a chain reaction and the recovery will be as well. By following our expert money saving tips you can protect your finances today.
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