Is this the beginning of the end of the world's economic woes? Well it definitely seems like the cavalry has arrived.

London markets awoke this morning with the news that the government has agreed a £50 billion bail-out for the UK banking sector. Half of the fund will be given to eight of the UK's largest banks and building societies including: Abbey, Barclays, HBOS, HSBC, Lloyds TSB, Nationwide Building Society, Royal Bank of Scotland and Standard Chartered. The remaining £25bn will be made available to other struggling firms.

In order to try and return liquidity to the market a further £200bn will be offered to banks in short-term loans and the government will guarantee all inter-banking lending.

This was followed at noon today with a surprise interest rate cut by the Bank of England along with the Fed and the European central bank. The BoE were due to meet tomorrow to decide on interest rates and although a cut was expected this snap decision a day ahead of schedule is unprecedented and the half-point cut is the first such move since the aftermath of the 9/11.

Within an hour of the announcement both HBOS and Lloyds TSB have passed on the 0.5% cut to lenders and others are expected to follow suit.

So what does this mean to you and me?

Governments around the world have been jolted into action and by todays simultaneous rate cuts have showed a united front in the face of the financial turmoil. What I found quite interesting in listening to the interviews with Gordon Brown, Alastair Darling and Mervin King is the frequency they used the phrase "whatever it takes". It was contained in almost every answer to every question by all 3 of the kingpins in the UK economy. The message is loud and clear: The government will do whatever it takes to kick start the economy and increase confidence.

Their broad plan is as follows:

• By pumping £25bn into the banking sector and guaranteeing inter banking lending they hope that banks will start lending to each other again on reasonable terms.
• Once liquidity returns to money markets the hope is that banks will start lending to the man on the street in the form of mortgages, loans and credit cards. With more money available confidence should return and the public will start spending again on homes, cars and consumer goods.
• Businesses will profit, wages will increase, unemployment will decrease and house prices will stabilize.

Will it work? Unfortunately only time will tell whether this is the cavalry arriving in the nick of time or the final charge of the Light Brigade.

Mike Smuts
Property investor and Managing Director of Smuts & Taylor.