I'm no expert on economics and have long struggled with the strange notion that when house prices fall they say it is a bad thing. Common sense would dictate that when house prices fall more people will be able to afford to buy a house, therefore it must be a good thing. I appreciate that when people have borrowed a high percentage of the price of a house and then the value drops, and then they want to sell, they are rather stuffed, but surely a house is something you buy to live in, not to make money on?
But this week's goings on seem even stranger. We are facing a severe "credit crunch". The main reason for this seems to be that for a long time people have been spending too much. And to fund that spending they have been borrowing more than they can afford to pay back. Now pay-back time has finally been called, things go pear-shaped. So what does the Government do to try and help? It reduces VAT with the declared intention of encouraging people to spend more! Are they mad? Are they really so short sighted that they have forgotten the fact that we are only in this mess because people spent too much in the first place? They should be encouraging people to only spend the money they have got, not encouraging the financial institutions to lend them even more.
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