If rate cuts aren't working then why make them?

Mervyn King the Governor of the Bank of England has admitted that rate cuts are not working to re-start the economy.

The theory is that lower borrowing rates will help businesses and individuals by freeing up cash that would otherwise be servicing interest on borrowings. Sounds sensible, but even if the average tracker mortgage borrower does feel a bit more flush there is not much evidence to suggest that this spare cash is finding its way into the UK's till.

People are worried about job security, they are worried about getting a mortgage, they are worried about their credit card companies and banks calling in their overdrafts and credit limits, upon which they have probably over relied in recent years. With all this in the back of one's mind, it is no surprise at all that we are not all running round the shops on spending sprees or planning our next exotic holiday or house move.

I really think that the government will have to resign themselves to the fact that this will take time. We the general public will have to regain the confidence that has been lost.

I don't think it is beneficial in the long term for people to get used to unrealistically low borrowing costs, and I also think savers are getting a pretty raw deal at the moment, so let’s not have such low rates if it doesn't have the desired effect. A fair deal for all would be a better place in my view and with base rate at say 3.5% that would probably be achieved.

So if rates are not going to get us out of recession, what is? Well I think it is positive attitudes and thinking, which is why I was drawn to the story today about Claire Robertson, the manager of a Dorset Woolworths which closed when the firm collapsed who is to re-open the shop she worked for under the new name Wellworths.

Good on ya Claire!!!!