Don’t pass the buck, Gordon — this is your mess! Would you lend money to someone who might soon lose their job and not be able to pay you back?

Probably not. But what if they offered you some sort of collateral, which you could sell if the loan turned bad? Well, maybe… but not if that collateral could soon be worth less than what you’ve lent to them.

This is the proposition lenders face at the moment. The economy is weak; recession looks more and more likely. We have an over-inflated housing market, meaning house price risk is firmly to the downside.

So is it any wonder that the British Bankers’ Association (BBA) today reports a 46% year-on-year fall in the number of mortgages being approved? Yes, banks have been burned by the credit crunch. But there are more fundamental reasons why it’s just not in their interests to do a lot of lending right now.

Everyone’s terrified of a housing crash. But I think a slowdown in consumption will be what tips us over the edge (afterwards, of course, we could well see the dreaded house price meltdown). Nearly half of all mortgages aren’t to buy new houses. They’re remortgages, and the BBA says they’ve been hit too.

Remortgaging allows those fortunate enough to own an expensive house to turn their equity into ready cash. For years now people have been, in effect, hitting the shops and spending their houses.

But now we’re wising up. That equity could soon be diminished — better not blow it all, then. Especially not if you might lose your job.

As lenders and consumers draw in their horns, expect to see spending slow. So far official figures have defied this logic. But today, perhaps we’re seeing the first cracks in the dam.

The Office for National Statistics today reports retail sales volumes fell 0.4% between February and March. That’s not a huge amount, but it may be the start of something rather unpleasant.

The fact remains that Brown’s claims of being ‘good at the economy’ were based on a credit-fuelled consumer binge. A child could tell you that you can’t live beyond your means forever.

Now a correction is inevitable. Everyone seems to realise this — everyone, it seems, except the government. Brown and Darling are still insisting it’s the fault of those stingy lenders. ’If only they’d give people more money, everything will all be OK!’

This is buck-passing — and it won’t wash. Boom and bust never went away, despite what our leaders may once have claimed to the contrary.

Yet they were happy, as politicians always are, to bask in the false glory of the good times. Of course, no one forced consumers to borrow what they couldn’t afford, nor lenders to lend it to them. But the Government was more than happy to encourage such unsustainable behaviour — it had elections to win!

Now, all those claims of economic genius have come back to bite our glorious leaders, and they’re desperately running for cover. What a shameful spectacle!

Manraaj’s late-night caller…

Manraaj Singh, our emerging markets man, looked bleary-eyed this morning.

“I got woken up by a phone call at 3am,” he said.

Normally this would make Manraaj livid. He’s a man who works hard, and sleeps harder. But last night’s phone call made his day (or, rather, the middle of his night).

“This is the breakthrough we’ve been waiting for,” he said. “The tide has turned in Asia!”

Manraaj reckons Asian markets have been unfairly tarred with the western credit crisis brush. But that could now be about to change…

“Once sentiment turns… pow! Asian markets will bounce right back where they belong. And we’re going to ride that wave!”

So why is Manraaj so optimistic? It’s all to do with a desperate move the Chinese government has just made.

An apology to business people everywhere

“How dare you say that politicians run the country as they would a business,” writes one reader in response to yesterday’s email. “I’ve been in business since the late forties, and this lot especially couldn’t run a whelk stall on a cash basis!”

I have to admit, he’s got me bang to rights!

I was writing about Brown’s now infamous U-turn yesterday. The Government now proposes to rebate all those made worse-off by the scrapping of the 10p tax rate. But, of course, they’ll have to wait for their money — not an ideal solution for the cash-strapped.

I said that politicians “treat society the way they’d run a business — as long as all the numbers add up at the end of the year, it’s all OK”.

I stand by my belief that they’re out of touch with the people they claim to help. But I realise that my comments were a massive slur on the business community!

I know I’d take umbrage at being compared to the Brown Brigade. So I’d like to issue a full and unreserved apology to business people everywhere.

When it comes to our glorious leaders, the only fair comparison is with other politicians…

Until tomorrow,

Ben Traynor