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The Credit Cruncher was conceived to help you to keep up to date with credit crunch and recession developments, it provides some helpful credit crunch advice and it addresses personal debt. The Credit Cruncher also seeks to explain how the credit crunch started and shed some light on the worldwide recession. Recently, we have begun to look at how BREXIT will affect the UK economy. Please feel free to leave comments where relevant.

16 Jul 2008

Is Government Intervention to be welcomed?

Let's be quite straight here, the Western Economy is built on a free market which is supposed to rise and fall based on supply and demand and the many other factors that may effect a free market. Intervention is a dirty word and goes completely against the philosophy of a free market, whether it be intervention from influential capitalists or from Government, this type of activity is not conducive to a free market and can only have a disastrous effect.

During the current credit crunch, both the US and UK Governments have sought to put policies in place to shore up the economy to fight the relentless tide that is a natural 'market low' resulting from the over-inflating of the market caused by the sub-prime mortgage problems.

When you build a dam to stop an inevitable tide, what happens? When the tide eventually breaks through the problem is far worse than if you had allowed gradual ingress and fought the problem where it would have naturally occurred.

So why do politicians try to intervene? Simply because they are on a four or five year term and they don't want the credit crunch to happen on their term of office. If they can stave it off until after the next election it maybe somebody else's problem - this is the worst side-effect of our ailing democratic system.

So what about Northern Rock, Fannie Mae and Freddy Mac? Trying to keep these institutions afloat is going to cost taxpayers a fortune, and for what? So that politicians can say they did something...but the truth is that if these financial institutions need to go to the wall as dictated by the free market, then that is exactly what should happen and the credit crunch would be over that much faster. Shoring up these crippled companies only prolongs the agony for the rest of us. I don't want to seem unsympathetic, but these companies basically bought bad debts thinking they were good debts. Instead of being bailed out by the taxpayer, they should now face up to their mistakes otherwise where does this intervention stop??

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Credit Crunch News
The Multiplier

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