Should we worry about the Credit Crunch?
All we hear in the media is impending doom and gloom, but will the credit crunch and financial turmoil and potential recession effect us all?
It is already effecting me. I own the commercial premises from which we operate, last October it was worth an estimated £1.3 million, today if it needed to be sold I would be lucky to get anything over £1 million. My residential property I purchased in May 2007 is likely to be worth less than I paid for it.
However as that is paper money and does not effect how I trade, how does that effect me apart from the feel good (or feel bad!) factor. I still have the same mortgage payments on both my commercial and residential properties, so it does not effect my income or outgoings.
Well banks lend on asset value, property often being the main one, as it is something tangible that they can quickly sell at auction if you can’t make the loan repayments. With 30% wiped off commercial property value, that reduces small and medium sized companies ability to raise capital.
And all this in a time when banks are reluctant to spend.
My worry is that this will spiral, sending companies bust, reducing property values further, meaning good solvent companies are starved of funds they need to invest and grow the economy.
How can we stop this? Well take politicians out of the loop to start with. They are not really interested in the long term, and are seldom entrepreneurial financial types.
Government needs taxes to pay for social infrastructure, so a downturn effects them just as much, so they need to boost the economy in times of strain.
My way for the
Do let me know if my idea is ludicrous!
Tags: credit crunch, property prices, recession, stamp duty