Serious Stuff....

Dear Messrs. Brown and Darling,

I just wanted to take a moment of my time to personally thank you for all your effort over the last twelve months. This year has been quite an accomplishment: One I would not have dared thought possible. Allow me to elaborate.

I am a sensible individual, pragmatic and careful how I spend. However, I admit that in my younger years I was lured by the golden fleece of credit and consequently saught to live beyond my means. Over the years I am sorry to say I built up a reasonable cushion of debt, which, when faced with tough times, I was unable to afford. It has taken me several years but a couple of years ago I became virtually debt free. Thanks to you, I now realise the error of my ways.

There I was, mistakenly thinking that the way to be secure and able to survive any crisis was to minimise my personal debt. But I am thankful to you for showing me the light. Of course I should spend every penny I earn, and more. If I want a new car, I should buy one. That expensive Radley handbag? Why not? A Gucci watch , PRADA sunglasses, and the two week long haul holiday to go with them? Definitely! It makes so much sense now - the way to survive a recession is to spend, spend, spend. We can always pay for it later, right?

So thank you for showing me the error of my ways. And also thank you for helping me to 'hit the ground running' with my renewed responsibilities by ensuring I have a £22,000 personal share in the national debt. You two are bloody geniuses!

Yours,
Kat Middleton
No-longer a Labour voter

A Licence to Print Money

Today, the Bank of England has made the decision to print more money.... because this tactic worked so well for Zimbabwe! The really troubling thing, however, is that it seems they don't actually print any more money. Instead the BoE presses a button and, by magic, the UK suddenly has £75 billion more than we had a moment ago. Can I have some, please?

It reminds me of something we were discussing at work recently. A colleague proposed that instead of pumping the billions into the banks who, lets be honest, have failed us all, we should rather give £1,000 to every UK citizen - man, woman and child. At a current UK population of nearly 61 million, that would only be £61 billion. Bargain! Especially when we consider that the banks have already cost us over £100 billion! Imagine having a grand gifted to you, right now. What would you do with it? Some people will spend it, blow it on a holiday or a shopping spree. Retail is saved! A family might pool it's cash and use it to put a deposit on a house, or to buy a new car. The housing market and manufacturing industries get a boost. Others will invest it in pensions, stock, or savings and the banks get money to lend to the rest of us. It's almost as magic as printing more money!

But seriously, regardless of the action taken thus far in the UK and abroad in the face of the recession, there is one thing that continues to bug me. Ultimately, the situation that we're in right now is because the culture and economy of the UK (and many other nations!) is built on credit. We're living in a throw-away society and we're groomed from an early age to get into debt. From the moment we enter college or university, we're offered student loans, personal loans and credit cards and the average student will leave a three year degree with over £17,000 of debt, even before they have a mortgage. As of the end of January this year, total UK personal debt stood at £1,457 billion (£1,225 billion in secured loans and £233 billion in consumer credit). When and where will this end? The government is desparately trying to get the banks lending again: why? So the UK population can get further into debt? I am by no means an expert in economics but I do know enough to realise that strong growth is not possible without an eventual correction - a crash. Therefore, it seems to me that we're standing on a precipice: we can choose to take a step back and put the breaks on spiralling personal (as well as national and commercial) debt, or we can do the opposite and run forward towards the edge at full speed.

Even if 'printing' more money works and eases the recession, I worry that all this action will amount to is the financial equivalent of plastering over cracks and hoping for the best.