Another day, another rate cut…or so it seems at the moment.

Who would have thought 12 months ago that we would be in this position now? Economic measures are known to take a while to affect the economy, but with lending remaining tight, many believe it is not and will not be the required dose. However, with the intriguing news that house prices have surprisingly risen in January, are rate cuts the answer or should we really try something different?

Well, to answer the property surprise, it is likely that falling prices are more to do with renewed demand than a drop in rates.

Why? Well it is clear that the lower prices mean the market is now reachable for a new generation of first time buyers still eager to own their own home now they can afford to. That and the fact that successful Buy-to-Let investors are taking advantage of the value on offer are the key reasons. With interest rate cuts not being passed on by the lenders, this cannot be the overruling factor.

With the UK making a strong case for being bankrupt right now, the argument must therefore turn to other avenues for increased liquidity.

My argument is a simple one borne from experience in selling international property investment. There are plenty of people out there with surplus funds looking for something to do with them. Nothing they turn their attention to seems to work today. In today’s climate the area of funding may be the answer.

Therefore, I propose that Co-Op funding groups are formed (not fund run) to offer alternatives to institutional funding. Businesses which work in downtime growth markets making good margin but in need of quality funding are the natural avenues to pursue.

This why businesses that should survive and are well-run can benefit from the community and benefit the community with its produce; it’s win-win basically. We managed to put together a similar project for an ambulance stockist as many of you will know, with excellent results.

The idea is not new and has been used successfully through the centuries. So why not try it again? We’re all after a sense of community and forming these groups could significantly help local businesses and local economies get on their feet again. Co-op funders could be venturing with groups finding growth markets in a recession to ensure funding was funnelled in the right directions, maximising job potential.

It’s time to stop moaning about lack of tools to change the situation and start coming up with solutions. Just a thought…

I have woken up to the news this morning that the US bailout has been, at least temporarily, rejected by US congress.  Amidst the highly volatile global financial situation, what does this mean to us ordinary Brits?

It really is difficult to say, but it would appear to be a case of short term pain versus long term pain.  If the banks are bailed out by governments, the short term injection of capital would surely see some sort of recovery.  However, with the tax payer kindly footing the bill, with a reported $5,000 per US taxpayer required, stateside it is likely that ‘man on Main Street’ will be increasingly economically inconvenienced in the long term through higher taxes.  If a bailout is confirmed in the US, it would be foolish to bet against a similar plan over here.

If the banks are not bailed out and are allowed to fold, the loss of short term liquidity and any remaining crumb of confidence in our financial system would disappear.  On top of this, savers would lose their deposits, investors would be hard hit by plummeting share prices as well as suffering further property woes.

It is arguable however, that these banks should not be helped for the mistakes they have made.  Why should the tax payer bail out the banks and not even own what they are paying for?  A sensible solution, if a bailout is needed, could be to offer a debt for equity solution to the taxpayer.  The taxpayer does pay, but he also owns a slice of the company he is paying to help stay afloat.  In the event of economic recovery, the taxpayer’s shares have risen and he is able to profit from his ‘investment’.  It could be an interesting solution.