An excellent piece of employment law/finance advice from one of my friends to another this week. Friend A finds herself in the midst of a dispute with her employer but has no trade union representation to fight the employment law battle for her. Enter Friend B, who does work for a union, and thus knows all about this stuff. His advice was to check their home and motor insurance policies, as these often have access to legal advice thrown in - it's a little sweetener to encourage people to buy policies, but one which people rarely take advantage of. This, ironically, is how they are able to throw it in for free of course. Friend A is now delighted to find she can afford a lawyer to take on the case.

The BBC's 'Property Watch' this week made fairly terrifying viewing, as a succession of BTL investors were wheeled out to explain how they had borrowed millions of pounds at the top of the market, and now found themselves living under cardboard boxes while trying to sidestep the repo men. One remarkably cheerful woman had jacked in her local authority job to become a full-time landlord, borrowing £7.5m to fund 50-odd properties, many arranged as HMOs (houses of multiple occupancy). It's all in the edit, as they say, but if the properties they showed onscreen are representive of her portfolio then even the rats would be packing their bags and leaving. Worryingly, the efferverscent 'investor' said that she was 'just waiting for the upturn' to refloat her financial boat - and that if she could get her hands on some cash she'd be getting back into the market. Arrrgh! There is a not very fine line between property investment and mental illness and I fear this woman had crossed it long ago.

So lots of horror stories of people trapped in negative equity and people struggling to get onto the housing ladder. But 'Property Watch' found itself with the perennial problem of what angle to put on the slide. Rising prices, a buoyant market are good right? We want our investments to grow, we don't want to owe more than the value of our houses. Yet it's just this buoyant market that cuts first-time buyers out - hence the bearish insistence by the likes of 'Money Week' and 'The Guardian' that this collapse is an adjustment or a correction rather than a problem. A fall may be painful, but it brings property prices back to affordable multiples. To hammer home this point we saw James, 27, desperate to get himself into debt so he could 'afford' to buy a £159,000 house on a £12,000 income. I apologise for the rash of quotes here, but irony feels the only recourse when you're viewing this sort of insanity.

Patrick Collinson in 'The Guardian' has no doubts. We've become brainwashed into seeing rising prices as a good thing, when what we need is a drop. He quotes a 'Property Watch' ICM poll which found that 64% of us want prices to stay the same or fall, with younger people wanting a fall. Well yes, and I'd quite like a lifetime's supply of free beer and my own private car lane around London but that doesn't mean I should have them, nor that it would be a good thing for me and the rest of society if I did. Price inflation got out of hand and put property at unaffordable multiples, but that doesn't mean deflation is better.

A growing economy needs a level of controlled inflation - it's a stimulus to further growth as people invest with a reasonable expectation of getting a return - not to see their house as an equity release cash machine, funding holidays and new cars, simply a reasonable return. You can have a deflationary economy if you like but it's also a dead economy - witness Margaret Thatcher's baleful effect on Britain in the early nineties before Nigel Lawson brought in his own bubble to get things moving again. And though young people may want house prices to fall so they can afford them, do they then want them to keep falling, thus finding themselves in negative equity and thus with more expensive mortgages or with a property they are unable to sell when they want to move up to a larger house (as they will). And where is the incentive for professional landlords to buy and invest in improving property when that asset is going to fall in price? To be fair, Patrick hates BTL landlords anyway, but they aren't going away and they do fill a necessary role in the UK housing market - all those people certainly aren't going to get council houses, Mrs Thatcher sold em off remember?

So enjoy the correction if you are trying to buy your first home, you may get a bargain. But don't pray for continuing falls. Ask instead why we don't have a policy in this country of building enough affordable homes (to buy, part buy or rent) for everybody who needs them. That alone would prevent the next property bubble from inflating.

Terrific article in today's Guardian, and one which scoured from me any vestiges of sympathy for complaining MPs. Written by Heather Brooke, who is largely respsonsible for the sea of ordure currently engulfing Westminster MPs. The Daily Telegraphy may have got the story (sometimes the chequebook is the only thing that works) but it was Brooke what set the whole process going with her FOI requests (persistently blocked by Speaker Michael Martin.

Yes, most of the MPs ARE clean, and much of the Telegraph coverage uses guilt by association (he’s a claims crook and an MP; this guy’s also an MP and he claimed for this; ergo he’s also a crook). I can also accept that the claims system is an opaque mess not even understood by some of the MPs, so some of them WILL have made genuine mistakes and misjudgements (though Elliott Morley’s craven mea ex culpa of ‘it’s a really complicated system guv, so I didn’t know you couldn’t claim for mortgages that don’t exist’ is pushing it a bit). But this has been rumbling for years - how many of those who are now complaining were demanding more transparency when they started getting prodded through ROI requests.

Welcome to the imaginatively entitled 'Money with John Rennie' podcast. Today I ask Is Britain going to inflate away its debt problems? While you're pondering that one, I ask whether making stuff is all it's cracked up to be, and I look at the struggles of Guardian readers and writers to cope with the credit crunch. I kid you not, these guys are suffering and I'll be holding a collection at the end of the podcast.

The recession has created a whole new sub-genre of journalism at the Guardian and Observer newspapers (which these days are run out of the same stable). They are excellent titles both, and the natural home of liberal thought in the British press, but my god there's a self-satisfied middle class smugness about the writing at times. Now I may be on dodgy ground here. After all, any journalist is looking for good copy in the events of the day, they have to write their words knowing their readers, and these days they increasingly mine their own lives for material. However...

Suspect 1: Observer magazine, Sunday 1 March, How I learned to live with my frugal husband by Harriet Green (her real name). Harriett writes how she is having to forgo spa treatments and trips to Liberty because husband Jean-Paul is 'frugal'. Instead of taking the kids to Nando's, he's out foraging for nettle leaves and dandelions, reclaiming wood from skips that he can then knit into furniture, and repointing the house with his own excrement. This is a husband who cuts up his apple then saves each pip saying 'each one is a potential tree'. Leaving aside that the correct response is to wrest the knife from his hand and plunge it into his spleen, there are constant reminders that, actually, this couple aren't struggling in any way at all. Jean-Paul grudgingly visits John Frieda to have a haircut, accepts that the 'hugely expensive Paper Denim & Cloth jeans' that Hazza makes him buy are actually better than the ones he's made from old pizza flyers. The overall impression is of an affluent couple playing at poverty ... and isn't it all fun.

Step forward suspect 2: Graham Snowdon in the Guardian 'Money Blog' of Wednesday 4 March, who professes himself 'Dazed and Confused' by 'the heap of neglected bills, bank statements and other correspondence sits festering on my bedside unit. I stare at it hoping it might disappear – or at least get smaller – by sheer force of will, but it refuses to budge'. Graham witters on upon unopened credit card statements, a demand from his optician that he get his eyes tested before they 'release' his contact lenses and then the killing line - which shows that we're talking real poverty, not just your boring northern underclass, never worked, never will, malnourished stuff. Graham has 'two fee statements from my son's nursery'. Graham builds his bills into a Jenga tower and professes himself 'overwhelmed. Where should I start, any suggestions gratefully received'.

Pro bloggers will recognise this canny disingenousness as the come-on to generate user-generated content so beloved of the UK broadsheets. I seed the subject, you write loads of choleric replies, we get free content. We might even run some Adwords down the side to monetise the thing. And Guardian readers, bless 'em, respond in droves. Here's a tip Graham. Pay the bills and stop pretending to be poor.

Suspect 3: Guardian 4 March My Big Green Wedding. Full marks for eco-awareness here, as the Guardian recycles this headline from a similar piece in 2004. Here, five 'ordinary' women talk about how they are going to reduce the cost, carbon footprint, waste and enjoyability of their special day. 'Transport was a green priority and, fortunately, Fishers Farm Park were prepared to supply us with a Shire horse and antique hay wagon. After the wedding I crushed the empty champagne bottles and put them in our kiln to make cheese plates' writes Becci of West Sussex. Great tip Becci, and one people will be copying across Britain. Kristie and Anthony reduced costs and carbon by serving seasonal food 'wild duck, which we captured on site'. I'm off into my own garden with the catapult to 'source' some squirrels and feral cats for the kids' tea. 

'Even the confetti was grown in my garden' writes Caroline Flint bafflingly. I scan my own garden for clues. So that confetti would be ... leaves? grass? dog shit? Let's move on. Melissa and Alastair of North Devon 'use organic caterers who promise entirely biodegradable equipment. The plates will be made of palm leaves, the cutlery of local wood and the glasses of corn starch. We're going to travel to and from the wedding on a horse which will help reduce our footprint. The cider is going to come from Devon's finest breweries. Wood burning fires will provide all the energy we need for the wedding.' Not sure about that last bit Caroline ... I'd check what the guests are inhaling in the toilets to give them that extra little burst of energy needed to carry them through to the early hours. Bewilderingly, Caroline refers to her honeymoon as 'relatively local' (ie not local) as they travel from Northampton to the Lake District, and boasts that 'all the home grown materials also helped keep the costs below £10,000'.

What seems to have escaped our contributors and the Guardian itself, is that to most Britons, recession means fear of unemployment, tough decisions on how to feed the family, horrible uncertainty about the future and the realisation that their pension and savings nest eggs ain't going to hatch. Not marginal decisions on how to spend on luxuries such as £10,000 weddings, children's nurseries and £50 haircuts. Such stuff is not only laughable but weirdly out of tune with the times.

One of the lazy 'givens' of the post-Crash UK is that the country is sunk, in large part, because we don't make anything anymore. If we were a manufacturing heavyweight a la Germany, China or Japan, we would not have been laid so low by the dissolving of a candyfloss economy. But Margaret Thatcher swept away British industry in the eighties, after decades of post WW2 industrial decline, poor goods and appalling industrial relations. In she ushered the shiny new age of first the services and then the information economy. Our factories and jobs went overseas to countries unencumbered by old equipment and plant, moribund management ideas and, most crucially, redundant notions of decent pay and job protection.

There are a couple of problems with this thesis of course. First, that Britain IS still a manufacturing nation: indeed we are the seventh largest exporter of manufactured goods in the world. To put that in context, the UK is only the world's EIGHTH largest economy by GDP, so we are already punching slightly above our weight; we export more than Euro competitors France, Spain and Italy. And we export in greater quantity than countries much more obviously reliant on an extracting and manufacturing base, and less reliant on services (I'd point you at Russia and Taiwan for two).

So we make stuff and we sell it abroad. And that's the way out of this mess right? Well no. The clever countries, who have industrialised heavily on making stuff (see Germany, Japan and latterly China) are suffering because nobody is buying their clothes and cars. And Germany can complain as much as it likes that it has been hoist by a recession not of its making - much of those countries' booms have been export-led. A lot of those BMWs and Chinese fridges have been bought with money generated by the housing/credit booms in the UK, the US and elsewhere. Demand in their domestic economies has been lagging way behind output, as people have saved rather than spent.

Come to think of it, the US is the world's biggest economy - buyer, seller and exporter, and is based not just on candyfloss credit, financial services and the rest, but on a huge (if eroding industrial base). GM, Ford and Chrysler don't look like digging the US out of the recession anytime soon. So the idea of 'making stuff' to haul us out of the red doesn't look such a sure thing. And that's leaving aside the ecological cost of increasing the broken earth and smokestacks.

So here's a heretical thought. Maybe, with its generation of expertise in banking, financial services, business services and all the other white collar, clean hands industries, Britain could be among the countries BEST placed to profit from the upturn. The world may be going to end during 2009-10, but at some point it will be back ... and at that point its going to be finance and services that will make stuff happen.

It's that time again - the first Thursday of the month is fast approaching, the day when the Bank of England's Monetary Policy Committee decides whether to twist or stick on interest rates. Many are predicting another reduction, though with the rate currently at 1% there is nowhere much to go - zero interest rates could at last be here. Appealing though 'free' money is (though borrowers always pay a premium above base rate, as I am painfully reminded every time I look at my mortgage payments) there is a price - inflation.

But hang on, wasn't inflation last year's thing. A spotcheck of the financial news surely confirms that the only pressures on the economy are deflationary (alongside deflation's baleful cousin, deleveraging or degearing). The Dow sliding below 7000 points for the first time in 12 years; the FTSE 100 plummeting below 3700 to levels last seen five years ago; AIG and HSBC announcing record losses; UK manufacturing output falling for the tenth month in a row. And not least, the continuing stagnation in the housing market, with selling prices dropping like a stone. Many observers worry that the enormous fiscal stimulus (both the UK and US governments pouring money into the economy through quantitative easing (printing banknotes in effect) and using the resultant cash to buy up debt and invest in capital projects), combined with monetary easing (the cut in interest rates) cannot be other than inflationary.

At the moment, the governments are merely trying to halt the decline, but the aim is of course to reflate the economy. The difficulty is, once the medicine starts to work, controlling the beast of inflation. Many countries have a visceral fear of inflation. From the Tory years of Margaret Thatcher it was seen as the great evil, eroding the value of savings. The Germans of course have the horror of 1920s' hyperinflation seared into their psyche. But nobody seems too bothered about the poor old savers at the moment. Despite being the prudent souls who saved their pennies while the rest of us lived on credit, and borrowed to fuel the property bubble, they are now getting punished, by seeing the interest on their savings slashed - to nothing if the Bank's MPC does cut again this week.

But maybe there is a sinister method to the madness. If inflation does kick in, it will not simply be a sign of the economy getting moving again, it will also handily deal with the asset bubble. All those overpriced properties sitting on the market will soon look a whole lot more affordable as a healthy dose of inflation cuts the real cost of a £200,000 apartment. Price falls will do their bit to bring sellers and buyers back to a meeting point - but maybe our governments are relying on inflation to do the rest.

A roundup of financial news from around the UK this week, with a look at Gordon Brown's attempt to emerge well from the recession, a fatal flaw with credit card protection, the return of the carpetbagger and a Council Tax whammy for landlords.

I'm not sure the 'buy to let party is over', as one UK national paper had it this week. Serious landlords have always been into property for the long haul, and that means troughs as well as peaks, not my idea of a party! And the ten-year bull market in residential property was never going to continue. But news this week that rents are on the way down adds to a triple whammy for anyone who bought in over the last three or four years.

During last year, many were glibly asserting that as nobody was buying, they would all be renting instead. Pressure on rental properties would thus mean prices rising. Except of course, many of those who couldn't sell were simply dumping their properties onto the rental market, these 'accidental landlords' raising supply and so reducing rents - simple supply and demand. Then, there is the more nebulous element of reduced economic activity. The economy is slowing, deflating, with fewer people taking on new jobs and moving to new cities to do so - all this can only depress demand for rental property, and of course those who do want to rent have smaller salary deals, so will pay less or move downmarket.

Now if you bought into the market late, and so are operating on sub-5% yields, any reduction in rents can take you into a monthly loss. If you're on a fixed rate mortgage (or if your lender is tardy about passing interest rate cuts on, as we know they have been) then there is no equivalent cut in costs to offset lost income. Bad enough for you yet? Now to pour water on a drowning man. You're less likely to smoothly reduce rents to meet the new equilibrium rent than simply find that your flat stands empty for a while at the end of its tenancy - price in the rental market is inelastic like that. So no smooth adjustment of finances but a sudden hole punched in your monthly balance sheet. And to add insult to injury, you're now having to pay the Council Tax that the tenant previously paid. On a one-bedroom London flat that might mean the loss of £1000 pcm rent plus an additional £100pcm in Council Tax.

The smart move? Cut rents to get that void filled as soon as possible.

Poor old Gordon Brown, caught in an impossible situation of trying to fix the UK economy without actually admitting it was all his fault in the first place. Gordon of course is not the only culprit, but he is certainly guilty of encouraging the credit bubble, based on residential property, that is now so painfully deflating, with grim consequences for the UK economy. But one thing you can't fault Brown for is his barefaced nerve in attempting to exculpate himself. Clear away much of the wreckage and we have a dual problem, with one root.

Problem 1? Much of the fuel of our banking system over the last decade has been funds generated by securitised loans, the sliced, diced, repackaged and sub-prime mortgages on overpriced properties 'owned' by under-capitalised punters who from 2006 on have increasingly been defaulting on their mortgages. Result? Confidence in the products disappears, swiftly followed by confidence in the banks, meaning a drying up of trading. Result? Liquidity disappears.

Straight on to Problem 2. As liquidity disappears, so Joe Punter can't refund his mortgage as his fixed rate deal comes to an end. Or new buyers find that the super multiples of 5x earnings and 100% loans aren't there to haul them up to the elusive first rung of the ladder. So the market disappears and so prices tumble, exacerbating the problems with negative equity, and making it harder to hit the new, tighter loan-to-value requirements of the banks. You may have bought a flat at £200,000 on a £150,000 mortgage, but as the market price plunges to £175,000 you find you miraculously have an 85% mortgage rather than a 75% one.

And so the market and the wider economy deleverages and thus deflates. Now Brown has to work the impossible balancing act of trying to encourage people to spend their way out of the recession (for we truly have no option, whether it's you and I buying new cars or banks and companies buying financial products from each other, which is what our shift to quantitative easing is all about), while simultaneously urging prudence and frugality. Brown this weekend told banks they shouldn't be offering 100% mortgages anymore. That is, firstly, comical - has he looked in the marketplace for a 100% mortgage recently? If he can find one he's doing well, they've disappeared by default. Secondly, he is instructing the banks to remove the fuel that he needs to get the economy motoring again. And if he can resolve that conundrum, he's a smarter chap than the last 12 years of economic mismanagement would suggest.

But it goes deeper. Brown's lecture is staggeringly hypocritical when you realise that his 'economic miracle', the NICE decade that came in with Labour, was driven by a determined creation of the property credit bubble, masking the fact that apart from financial services and personal debt, Britain was increasingly not generating products, sustainable wealth or anything very much at all. For a superb and readable critique of the Brown timebomb, read Graham Turner's The Credit Crunch.