Credit crunch a-comin'?

On Wednesday the MPC voted 6-3 for another rise in the base rate - the fifth in the last year, to 5.75% - and today comes the grim news from Federal Reserve chairman Ben Bernanke that the US sub-prime mortgage crisis could cost America as much as $100bn. Yes, $100bn. That's a lot of greenbacks. If, as the old saying goes, London really does catch a cold when New York sneezes then we are surely in for a heavy dose of summer credit flu.

Last Updated: 31 Aug 2010

If it were not too severe, such a squeeze might not be a bad thing - here at MT we think that there is far too much unsecured debt and easy credit out there, both on the high street and in the corporate markets. A bit more living within their means would do many people and companies the world of good. Sorry to sound like your Dad but there it is.

But there are plenty of doom-mongers out there who say that things are already too far gone for that, that a tipping point has been reached and the whole economy will soon start to topple like a run of dominoes on Record Breakers.

Presumably these are the same types who keep their larders well stocked with long-life goodies in case sudden global economic collapse causes an interruption in the supply of mineral water and tinned foie gras. But despite the fact that economic predictions are notoriously somewhere in between weather forecasts and palm readings in terms of accuracy, it seems increasingly unlikely that the UK will escape from the current situation without at least a significant tightening in the credit supply. So lay off the plastic this weekend…

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