Economic policy based on rising house prices and the availability of consumer credit is doomed to failure
Chris Payne, guardian.co.uk – 11 November 2008
So far the financial crisis seems to have been about big investment banks and complex derivative financial instruments that no one, often including the people who were trading them, understood. Even the woes of the US housing market are being blamed on financial “innovation” that enabled far too much money to be borrowed. But what about the real economy? Politicians are so worried that they are trying to outdo each other by offering tax cuts, and certainly these cuts are worth a try.
But the task being given to tax cuts is herculean if they are meant to offset consumers’ lack of willingness to use their credit cards to spend, and lenders’ lack of willingness to lend. The real issue is that resuming “spending as normal” is almost impossible.
The problem is that it is not just the financial world that is over-extended, it is consumers too. Yesterday, little noticed, American Express joined the long line of once-great financial institutions that have gone to the Federal Reserve of the United States cap in hand, desperate for money. Full Article
The government trying to borrow it’s way out of trouble is both a terrible example to set and doomed to failure. Borrowing against borrowing cannot work. Has nobody yet realised this is a path to destruction for this country? Gordon Brown is single-handedly wrecking the nation and yet he is up in the polls for destroying his own policy, come on people, think what you are doing!
Comment by David — 12/11/2008 #
I agree totally with the previous comment by David. All the Government will acheive by borrowing more is to burden us more and for years & years to come. Quite simply, Goverment should do as most of us are already doing and pull in thier belt. If that has to mean cuts in services, so be it, there are many we ccould do without.
Comment by tony — 14/11/2008 #