"No warning can save people determined to grow suddently rich" - Lord Overstone

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Thrift

A long time ago, in a Galaxy, far, far away, people understood the concept of thrift.

If there was a thing which cost more than they could immediately afford, they economized elsewhere on their budget and - slowly, but surely - built up their savings until that last triumphant day when the item they so cherished could at last be bought.

Thus, there was a world where the great mass of the people were savers, not spenders, and creditors, not debtors.

Naturally, these people found inflation abhorrent and so their political masters were usually forced to heed them and to allow their money - usually based on gold by the legislative endorsement of the people's own free choice - to appreciate a little in value (something we, today, foolishly abjure as 'deflation').

This would happen, in those halcyon days, through the benign means that most of those savings would be temporarily invested in making tools and equipment, which in turn helped make Nature even more bountiful and honest labour even more fruitful.

Because people were prudent and because money was hard, governments found wars difficult to finance and thus they tended to be limited in scope and certainly never involved the mindless slaughter of millions, in the manner we know all too well in our time.

Furthermore, the concept of state-mandated welfare to replace the exercise of private, voluntary charity toward the truly needy was an anathema not to be reckoned with either, and so there were few inducements to abandon a proud self-reliance, or to forego the warm glow of community-based altruism whenever it was required.

Thus there was peace, free trade and liberty - on balance - for a brief flowering of days.

There was also an upsurge in prosperity and general well-being as had never been seen in all history

Though there were such things as central banks - in one or two, but not all, countries - their role was usually to manage what relatively little government debt there was and - occasionally - to put interest rates up (NEVER to force them down) to stop gold draining out of the country when what little inflation could arise under this system made imports temporarily too cheap and exports too expensive.

Even then, this positive action was only a reinforcement, an intensification, of what would naturally have occurred as the outflow of specie served to contract credit in the overheated region and to expand it in the cooler one, automatically governing the flows through adjusting relative prices in the free market.

As such, even this intervention hardly represented the sort of uninterrupted meddling with which we are so sadly familiar.

So, now move on through space and time to the world of today, where money is what the government says it is, where credit is created effortlessly at the touch of a keyboard and where personal borrowing, to take just the UK as an example, rises by 1% of income every month, far outstripping any residual saving being undertaken.

This is a world where Total and, a sorry novelty this, PERPETUAL wars are waged.

A world where the only argument about the £40 billion spent on the socialized and perennially underachieving (a tautology, I know) health service, or the £400 billion or so spent in total by the State each year (a sum approaching two-thirds of all payroll outlays), is not whether to do it, but merely how best to.

A world where personal freedoms are daily undermined to the benefit of the great Collective at the centre and where responsibilities are submerged under rights - and not the natural rights inherent to Man's existence under heaven, either, but only those revocably and expediently granted by the grace of those who happen to be in power at the moment.

Now this may seem a long preamble, but a general appreciation of where we are is indispensable to an understanding of the specifics which affect us in our daily lives.

Thus, for example, as symptom of this crazy world we have fashioned for ourselves, we see that, on this side of the Atlantic, a Mr. Bob Jackson, the chief executive of the Cambridge Building Society (a UK S&L-type institution) last week told a meeting of business leaders that the present credit inflation has so distorted property values that many potential first-time buyers could not afford a deposit on a home.

So, should they follow the example of their grandparents and wait until they have saved enough (something which might also have the effect of bringing those prices a little closer to where they can afford them)?

No, don't be silly!

The BBC reported that the good Mr Jackson - anxious to keep up his flagging business volumes, no doubt - suggested that to reverse the rapid fall in the numbers of first-timers, these would-be homeowners should turn to their parents and ask them to reduce one of the few assets they hold not to have plummeted in value of late, by getting them to re-mortgage their own homes for the purpose.

"Most of the young people we see need a lot of help to get a mortgage and we as parents have benefited from the rise in property values over the years, so it is up to us to help them," Mr Jackson said.

Mr Jackson suggested that parents could act as guarantors for their children's mortgages or even borrow against the increased value of their own home to raise money for a deposit.

As independent financial adviser Colin Jackson pointed out to the BBC, this was a suggestion fraught with danger.

"Acting as a guarantor can be dangerous as ultimately you could end up losing your home if the person you are acting as guarantor for defaults on their payment," he told BBC News Online.

"As for re-mortgaging, many parents are unwilling to do this as it involves taking on extra debt at a time when they may be nearing retirement," the financial adviser said.

Quite.

But, hey, all this gloom and doom is surely misplaced in any case?

After all, following up on what was agreed behind closed doors at the Bank for International settlements last month and what he himself told us would be the case in his interview with the Times last week, the Bank of England's new Governor, Mervyn King, ended his first policy meeting by delivering the ninth rate cut of the cycle, pushing the level down to 3.5%.

So now, with the rate at a five-decade low and at its slimmest margin over the officially-measured pace of price increases in twenty years, things are bound to improve, aren't they?

Aren't they?

Oh, well. At least Mum and Dad won't have to fork out quite so much on the repayments when they risk the security of their retirement by indulging their kids' impatience to plunge into the last gasp of the housing bubble.

This demonstration that American policy makers have no monopoly on error should keep Mr Black laughing all the way to the building society, but the rest of us might be more inclined to grimace at this pernicious deprecation of thrift.

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