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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.

23 Nov 2008

The cost of economic rescue

Governments around the world are listening to Gordon Brown's ideas of how to borrow and spend our way out of financial crisis, but the real cost will be in the long-run.
Normally, the boom and bust economy model allows for a relatively short 'bust' period which may lead to recession like the situation we find ourselves in now. However for some time, government intervention has been staving off the inevitable instead of letting the market take it's natural course.
Now there is no guarantee that things would have been any better if they had left it alone, but there will now certainly be a cost to pay for the short-term fixes that will be put in place. National debt is set to rise to unprecedented levels and that means just one thing, these debts will have to be paid.
How do governments pay off their debts? TAX TAX TAX - oh yes in a couple of years we will ALL be paying the price of this bailout with increased income taxes and maybe even VAT. By all reports there is likely to be a package of deferred tax rises announced very shortly by Gordon Brown at the same time as he is announcing the short-time tax-cuts. What does that mean for the general populace?? Well, just when you think you've survived the worst of the recession, you will be clobbered by huge tax hikes - and the danger? The thing that is confusing is that the bailout is supposed to raise expectations and rebuild confidence to encourage spending - the likely tax announcements are going to have exactly the opposite effect - I for one will be holding onto every last penny to make sure we survive not only the recession, but the years of excess taxation which will follow it.

Related posts:
Gordon Brown rescue plan
The Bush plan is approved
The Bush rescue plan begins
Government Intervention

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