MemberDecember 29, 2010 at 10:35 am
The value of money had to appear to go down, because people weren’t spending enough. I don’t mean borrowing enough, I mean spending enough of what they already had. New money needed to be freed up, making people believe it wasn’t worth holding onto is the best way of achieving that.
If someone had for instance 50k in the bank, they’re likely to get at best £30 a week interest for it, less if on 40% tax. So what do they do, keep it, buy a new car and have a couple of decent holidays, treat the kids/grand kids. We now are developing a situation where that starts to seem logical.
If you buy something now, be it another property, classic car, build an extension etc, you will have your asset in one form or another even if it’s value drops. When this all hits the fan, so to speak some things will be very expensive, but some things will be ridiculous bargains. There will only be a certain number of people who can clear them up.