What will the British Public do with this extra disposable income, they will start spending again.

Punish the Banks, not the Public.

Would a conservative government do anything to prevent another house price boom? We had one in the late 80s under a conservative government and it led to a pretty unpleasant recession in the early 90s. We are about to have on now and, amongst other things, it seems to be threatening the entire banking system. It is clear that relying on house price growth as the engine of the economy is not a good idea. Would you agree? What would you do to prevent another boom after this one has corrected? We cannot allow banks and the market to let this happen again.

Reply: Yes, current house prices are preventing some young people buying their first home. It needs to be corrected sensibly, not by a crash. I would want a future government to tighten money supply in the upswing of the cycle – not to relax on the upswing as this government has just done.

If banks are a special case – they are essential to our economy – they why aren't their lending practices regulated? The conservatives de-regulated consumer spending in the 1980s and, whilst this may or may not have been a good thing, the way that lending has got out of control in the last few years has been, surely, utterly irresponsible and reckless. Did the banks really think house prices could go up forever? Surely a child of 5 knew there had to be some affordability constraints and that when they were reached the housing market, being a MARKET, would likely correct and put some of that lending at risk. Northern Rock and many other banks were recklessly lending people 125% of the price of a property. How insane! Yet no-one said a word – until they ran into trouble.

The proposed bail-out sends the wrong message to the banks. Perhaps lending and banking services need to be separated.

There are many private companies that are essential to our economy. All the utility companies leap to mind. But they are heavily regulated – yet the banks aren't. Brown has enjoyed boasting about growth and, being financially illiterate, thought it would go on forever and that he was immensely clever creating growth in the economy. The man was and is a fool and I am annoyed that the conservative voices were strangely quiet as the average British consumer was led into a noose of debt by Brown and the banks.

Reply: I made a strong atack upon the switch from RPI to CPI for inflation targetting, warned that it would lead to interest rates being too low and explained it was probably designed to do that ahead of an election.

Reply: Please see my views on this under the Northern Rock tab – I agree with your thoughts.

The one on the left has a massive current account deficit, the one on the right has a little surplus. Politically I am confused; is the one on the left being right wing? The one on the right being left wing? Answers on a postcard please.

While your thinking, listen to Axel at http://www.merkfund.com/about-us/news/2008-04-10….

BTW; Radio station KNX 1070, does not mention "the pound" much nowadays.

Financial crises happen when prodctivity falls below the level required to service the debt burden. In general these are caused by matters external to the financial system, such as oil price shocks, natural disasters, wars, famine etc.

This crisis is caused by massive malinvestment in non-productive housing, with simultaneous underinvestment in productive industries. The "shock" was that investors and the Government didn't notice the problems with this. Low interest rates encourage speculation in favour of productivity; borrowing over saving.

The last thing this Government should be doing is propping up this system. The bust is the cure for the malinvestment of the boom. The quickest way out of this would be to hike interest rates to kill inflation, and provide stimuli for production (tax cuts, investment). We can help the banks short term, but they MUST take their losses, and they must refocus lending on production and away from speculation.

The working population are becoming very demoralised. Speculation has been the only game in town for 10 years, it needs to be stopped before people abandon saving, or worse, abandon the country.

Lowering interest rates in light of inflation is a short-term fix, for the long-term health of the economy they should go up. We need a recession to correct the imbalance, I understand for a politician to say this would be political suicide.

Houses prices need to come down and homes need to be seen as a place to live and not an investment.

We have an economy which is now based on debt. Without ever increasing debt we have no growth. Anyone could see that this state of affairs could not last forever yet, during the last 11 years the conservatives have been strangely quiet about this. When was chancellor Brown ever called to account and ridiculed over his boasts of 48 consecutive quarters of growth? It's easy to get growth against a benign background of low inflation courtesy of Chindia's emergence as the world's manufacturer because, as we all know, when interest rates are low people will borrow more.

When did the conservatives call Brown to account for the endlessly fiddled inflation figures? Even now we're told inflation is 2.6% when in fact it is well above 5%. The whole thing baffles me. There has been utter silence from the opposition of the last 5 or 6 years when it was obvious that debt was getting out of control. Brown has doubled tax revenues over the last 10 years and stood by and watched consumer debt more than double from 650 billion to 1.4 trillion. Yet no-one has been screaming 'this will all end in tears, you cannot have debt based growth forever'. If the conservatives had been calling the government to account for this, now your warnings would have been vindicated.

But instead of saying 'let the banks sort their own problems out, it is not the government's job to use taxpayers' money to bail out banks that have lent recklessly (and which, even now, will not admit the extent of their mistakes)', you are saying 'let the bank of England take toxic debt as security for taxpayers' money'. This is wrong in my book and will simply prolong the agony.

A 3 bed semi near me (in Wokingham) is currently on the market for £345k. How are my children ever going to be able to afford a house as humble as that. As we are at the moment, there is no future for youngsters in this country. They leave university with debts around their necks and face the prospect of having to take on mortgages of hundreds of thousands of pounds just for a shoe box to live in. The sooner we have a house price crash and get back to some reasonable relationship between house prices and salaries the better. Let the banks burn.

Reply: I did oppose the change of inflation index and have regularly pointed out that true inflation is at least RPI level, not CPI. I have also opposed the great run up in government spending and debt.
I do not favour letting the banks burn, as we all use banks to carry out our business and pay our bills. We need solvent and liquid banks. I do want the Bank of England to make more cash and bonds available, but on terms which means the taxpayer does not lose. That is the proper role of a Central Bank. Many jobs outside banking rest on getting this right.