Archive for January 8, 2009

Would you buy a drink for an alcoholic?

No and nor should any responsible person encourage over-indebted consumers to borrow more.

The standard phrase these days is to say that it is worse to do nothing than do something. That to me smacks of panic thinking. Let’s take a step back.

The crisis is due to 2 decades of irresponsible lending. Reducing the cost of borrowing makes life fractionally easier for those on variable rate mortgages but does nothing to stimulate lending. In fact it has the opposite effect in that it reduces bank margins. In any case, stimulating lending is like buying a drink for an alcoholic. Wrong medicine!

When the private sector stops spending and the economy goes into deep recession the only answer is for the Government to step into the breach and spend in their place. This Government is tinkering and wasting money around the periphery, put together 4 very large long-term projects that will bring a step-change in efficiency and growth to this country when the upturn comes.

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