Quote:
Originally Posted by Aliantha
People can't put off purchases forever. Eventually they have to start spending again. Usually that's when house prices drop so low that any old person can afford to buy one, so first off you have a whole new group of people buying houses which promotes growth in economic terms, but also in terms of labour. More jobs equals more spending equals more purchases equals more jobs etc etc etc. Inflation starts to rise and we all jump on the same merry go round again.
It's a cycle. It will correct itself eventually. Maybe some people will make wiser decisions next time round.
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People are only spending on the bare necessities though. Housing price will probably continue to fall for another year or two. People may be able to afford them, but getting the loans has become a much more daunting task. I was speaking with a client who is in that field and he was explaining to me how much more paperwork and scrutiny the applicants are dealing with. I'm not really sure thats a bad thing either. Perhaps the banks shouldn't have loaned just anyone money.
I have begun to wonder how any of these plans are going to work. Be it tax cuts or massive spending. IIRC, The Soviet Union spent massively during the cold war and that didn't work out so well, nor did Japans plan to get out of it's issues a decade a go. They tried to spend their way out and that failed.