The Bank of England has slashed its base rate to 2%, matching the lowest level in its 314-year history. The last time the base rate was this low was in 1951, when Winston Churchill was in power, and the country was recovering from its massive war effort.
The battle of 2008 is The Great Credit War or The First World Recession. Individuals and businesses have too much debt. Banks are not willing to lend, for fear of exposing themselves to yet more bad debts. People are not spending, instead they are hoarding whatever spare cash they have. (Ed: It’s called saving, stupid, an ancient pastime last seen in the early 1980s!)
House prices continue to fall, plunging an annualised 16% in the year to November, the fastest rate in 25 years. With unemployment on the rise, banks unwilling to sell, some house prices being temporarily propped up by the government’s ridiculous emergency rescue for middle-class mortgage defaulters package.
But think ahead. Think ahead to the days when the economy gets back to some level of normality. Believe it or not, it will happen. Think about mortgage rates of maybe 4%. Think about how attractive the dividend yields on shares are compared to savings rates.
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