What is the credit crunch?

What is the most important impact/effect of the credit crunch on households?

• I need to focus on the households, not businesses or the government: • Explain how low interest rates and subprime lending due to greedy banks have led to the current situation of credit unavailability; • What a threat of recession or even a real recession would mean to the households; • Explain what government measure to support households there are and how successful they may be. • Possible effects are: unemployment due to lower consumer spending, no credit available (mortgages, loans, credit cards), less money to spend, no demand for houses and therefore house price falls. Long detailed answers please as this would be greatly Apprecieated!!!

• Answer:

  Can only speak about my own situation. My partner and me are pensioners in our late 60s. As a result of the reduction in the interest rate by the Bank of England we're now £5,000 pa worse off from the interest on our life-savings, all of it in Income Bonds backed by the UK Treasury and Bank of England. Safe, solid, dull and boring - now earning point five percent of interest pa. Just so crap. What has this meant for us? We're still having our three holidays a year abroad but we no longer eat out at the usual expensive restaurants which we like. We now only ever take a £10 note when we go to the pub - once that's gone, we go home. Thus by example an army of quite well of pensioners are no longer spending as freely as we were and this must have a bad effect upon the economy. Last meaningful purchase, some iron garden funiture from Jones Bros of Chelsea. We cannot afford to shop there now or Harrods or anywhere else which a quality name and history. What the banks and our government have effectively done is to destroy the remaining few years of fun which we had worked hard for and planned for. Death to Brown and double death to the bankers.