Calling Dr. House...

Do you watch House, the US medical drama series?  In it, the team, ably led by the wonderfully acerbic Hugh Laurie as the eponymous head doctor in the Department of Diagnostic Medicine, solve puzzling medical cases through a range of medical tests, brainstorms and lateral thinking.

We need an equivalent person, and department, to help us get out of this economic mess.  As far as I can see, so far the economic doctors, discovering that the medicine of lower interest rates hasn’t worked, have not taken a step back and thought that maybe the symptoms were masking a different problem, but instead continue to carpet bomb the economy with yet more rate cuts, in the process killing off the only healthy part of the body – those with savings.

Maybe a Department of Diagnostic Economics might choose to look at the problem from a different angle – that people aren’t spending because they have too much debt.  Reducing interest rates might give them more money in their pockets (if they’re lucky enough to still have a job), but the rate at which they can pay down their debt to manageable levels with that extra money is still too slow and, until they do, they aren’t likely to start spending again.

Perhaps they would try a different cure – removing the debt at the borrower end.  Maybe one way they could try is a kind of shared equity scheme, whereby people with an unmanageable mortgage can sell some of the equity in their house to the Government.  In return for a share in the property, the Government would pay off a portion of the loan.  So, for example, a couple with a £150k mortgage on a £120k house could sell a 75% stake for £90k.  This would reduce their mortgage to a manageable £60k, which would mean they have a) more money to spend and b) a much lower mortgage to worry about.  With the current rate reductions, how long would it take them to get into such a position?

Sure, lots more would need to be thought through with regard to the above scheme, and I’m not saying at this point that it would work, but it’s this type of more in-depth thinking about the nature of the problem that we need.

Do we have a Dr. House equivalent out there?