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Good news for the prudent: we’re heading for recession

Richard Northedge

Wednesday, 9th July 2008

Richard Northedge says those who did not overspend during the boom years will soon be able to buy whatever they want at bargain prices, perhaps even with borrowed money

The same argument applies to shares. They are cheaper than last year but why buy now if they will be cheaper still in future? For contra-cyclical buyers there are undoubtedly companies whose shares have fallen too far, possibly including some of the house- builders and retailers, but buying them is a greater risk than snapping up their knocked-down products.

The credit crunch may be largely respon-sible for our descent towards, or into, recession but, ironically, some debt-laden companies see credit as their salvation. Car-makers have long specialised in zero-per-cent finance; now not only are housebuilders providing interest-free mortgages, but furnishing stores are offering zero-interest sofas to boost sales. Central-heating systems that once cost an arm and a leg now come at the price of a single limb, and the utility companies don’t want to be paid for 12 months.

Meanwhile, who do the lenders favour? Homeowners with low mortgages and negligible credit-card balances who did not overspend in the boom and who are able to buy bargains today. So why use the cash you prudently saved when you can leave it in the bank earning interest rates elevated by the credit crunch and by a Bank of England worried about the economy? Why not borrow a little spending money?

So open the cut-price bubbly and celebrate. If the economy is sinking like the Titanic, let’s go down in style. It is our duty to help those companies with high debts and high overheads that need to dump stock cheaply to the few people still willing to buy. Recession is no reason for depression.

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