We’ve been warning for three years that there are only two ways to get the economy growing again:
1) Allow banks to create more money when they make loans. This would push up house prices and leave families with even more debt.
2) Get the Bank of England to create new money instead. This new money would be granted to the government, who would spend it into the real economy where it can create jobs and support businesses. (More here)
But the government’s taken the first option. Even though the crisis was caused by banks creating too much money and debt, the government think the answer is to get them to do it all again! They’ve put in policies to encourage banks to create more money for mortgages, but no policies to increase how many houses are built.
That means that house prices will get even further out of reach for ordinary people, while banks get to collect ever greater amounts of interest on money that they created.
Even the City-focused free newspaper City AM are warning against the blow up of another housing bubble in London:
In an interview yesterday, Osborne said: “I don’t see the evidence of some housing boom out there. What I see is not only house prices 25 per cent lower than they were, but mortgage approvals half what they were, transactions two thirds of what they were. In other words, we are a long way from a housing boom.”
However, according to shocking figures released by the Office for National Statistics (ONS), London house prices skyrocketed in the year to July, up by 9.7 per cent, nearly ten times as fast as wages.
They join the Institute of Chartered Surveyors, Estate Agents and many more people, who are realising that mortgage lending is a completely ridiculous way to get the economy going again.
If we try to get out of this mess by the way we got into it, we are likely to be laying the foundations for another financial crisis! But there is a better way! Read here