The credit crunch
In the first of a regular series of columns, Martin Lewis talks us through the current credit crisis, what it means and how we can still make the most of our money...
Martin says: "As you read the papers at the moment, we're told we're being hit by something called the credit crunch. Actually, that's a load of nonsense, what we're being hit by is what I like to call the four financial horsemen of the apocalypse."
"The credit crunch means it's more difficult for banks to borrow money which means it's more difficult for us to borrow money and when we do, it's more expensive."
"But that's just one element, the next horse is inflation. You'll have heard, gas and electricity prices up massively, petrol up massively, food up massively. After that you have economic slowdown. Now, this particular horse isn't actually that big."
"The economy is still growing, albeit slowly. We are not in recession. Having said that people are worried about their jobs, about low pay cuts and that personal concept of a lack of security that things aren't as stable as they used to be, means we all retrench slightly. And that in itself means less money goes in the economy and that helps push further economic slowdown."
"And the final horseman is house prices, which are falling rapidly, now in some cases that's great because it means for some people they can finally get on the property ladder. But for people who own houses, we've all conceptually felt that our wealth is built on bricks and mortar. "I own a house, it's worth a lot, I'm rich.!" Now that's dropping in price, we're feeling less rich."
"So we've got the credit crunch meaning it's more difficult to borrow, we've got inflation meaning prices are rising, we've got economic slowdown meaning we're feeling slightly less stable and we've got house prices dropping meaning we're all feeling slightly less wealthy and these four horsemen combined, is the problem."
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