torsdag 17 april 2008

It gets worse

Gordon Brown may not be to blame for all that has gone wrong with the economy over the past nine months, because things would have been little different, whoever was in power and the same problem has occurred in many countries.

But the government's handling of the situation is certainly going to make matters worse. The latest proposal is to swap mortgage debt for government bonds. This will leave the taxpayer with the losses if things go wrong. But they definitely will go wrong, because the economy is slowing, defaults will increase, the bottom will fall out of the housing (in reality, land) market and the collateral for this mortgage debt will not be worth its present book value. Which will mean that the government will end up having to print money to cover it all - in other words, we will get severe inflation, on top of the inevitable severe recession.

If the government leaves the private sector to suffer the consequences of its own stupidity, at least the inflation can be avoided.

The least painful way out is to go "cold turkey" and get things over as quickly as possible.

Inga kommentarer:

The Journey East #3

The local situation The Catholic church in my part of the world is apparently in quite good shape. However, the liturgy is resolutely Luthe...