Where is the recovery?

The recovery is in the financial markets, in the banks and maybe even in the property market, but where it is NOT, is the more telling news.
The recovery HAS NOT and WILL NOT hit unemployment figures, GDP and the general population for a while yet - maybe in 12 months time we can talk about the economy being on the mend for those other than in the privileged banking sector.
There is merit in 'talking up' the economy to help build up confidence, but we mustn't behave like the problem is over, as for many families, the problems are very real or may even be yet to come.
The UK and the US are bracing themselves for record unemployment figures which can only lead to misery, poverty and financial ruin for many. This crisis is being freely described as the worst since the Great Depression, but the situation we find ourselves in is very different from the 1930's. For a start, the abject poverty of those days was characterised by ill-health, death and homelessness. The lack of material goods suffered included clothing and the basic needs that today we take for granted. Without a complete collapse of the Western economy, we will always be in a position to prevent a repeat of the poverty of the Great Depression simply because even our poverty is wealth compared to the genuinely under-privileged.
We in the West are outrageously wealthy in world-terms and we would do well to remember that when we complain about how badly things are going for us. Similarly, we would do well to remember that when we have a chance to voice our opinion on the way bankers are paid, and the general growth of greed throughout our society. So no, the crisis is not over, but even the poorest of us is still better off than the majority of the world's population. There is a slim chance that the financial crisis has enabled some people to re-evaluate their priorities and put money into perspective - if not brace yourselves for another crash in a few years time.

New Banking rules to be phased in...

The FSA (financial services authority) is to give banks time to phase in alignment with the new rules on liquidity. The upshot of the new rules is that banks will be required to hold a better equity-to-risk ratio, however time is being given so that banks are not prevented from lending to aid the long-awaited economic recovery. After the concerns following the Icelandic banks collapse, the new rules will apply to foreign banks that have branches in Britain.
In tandem with the new rulings, the Bank of England will be expanding deposit facilities to smaller banks, thus preventing the need for smaller banks to keep deposits with larger commercial banks who themselves may suffer at the hands of a future financial breakdown. The smaller banks have been dependent on commercial banks for liquidity, in future they will be able to access funds directly from the BoE.

Competing for Business

There is no doubt that the current economic climate has not been kind to companies that cannot react quickly to changes in the market place. Competitive companies that have been able to adapt their operations will be the survivors, able to take a larger market share due to the demise of the competition.

One of the ways in which the surviving companies will win through, is that they will create the right impression throughout their business. The marketing budget may come under close examination, but it is worth noting that creating the impression of a clued-up dynamic company is not expensive and should not be an area of spending that is compromised.
Joined-up thinking in the area of a logo that appears across all your stationery and your website, your business cards etc.., consistent themes and colours, text, icons, graphics and fonts all combine to give the impression of a well-thought-out individual image which supports the idea that your products and services are solid and worthwhile.

If your company is heading towards an identity crisis, don't immediately head for the free business cards ads, get some professional help in sorting out a suitable image for your company that tells your clients something they want to hear. It is not prohibitively expensive to have some professional outside input from a reputable company, and it could well separate your company from the competition.

All talk and no action?

The G20 Pittsburgh summit winds up and it is a struggle to work out exactly what the point of such a meeting is... Over the last few years, the G7 grew through G8 and ended up as the G20. The truth is we are now looking at something like the 'G20 and friends', nobody is counting any more. The talking shop is now even bigger on talking, and naturally, with so many more points of view, decisions are harder to come by.
Imagine an ever-growing jury which must deliver a unanimous verdict. You may get a verdict from twelve good men, but twenty, twenty three?, twenty four??
So what has been achieved in Pittsburgh? Plenty of talk about reining-in the banking community, plenty of resoultions to 'do something about it', nothing in terms of concrete limitations forthcoming.
In the meantime, jobless figures continue to rise, bankers seem set on fleecing the markets again and the environment, arguably a far more important issue, remains the time-bomb that no-one wants to de-fuse.

Steady as she goes

The Bank of England has held base interest rates at 0.5%, the lowest rate it has ever had for the sixth consecutive month. There are also no further plans to develop the quantitative easing program despite Mervyn King's desire to pump more money into the economy.
Despite hope of a recovering economy, it would certainly be too soon to take any steps in the assumption that the market is robust. My feeling is that the financial houses see the wider economy and the stock market as being the same thing... As long as markets are buoyant they are happy regardless of the effects on the population. The truth remains that a lot of people have lost a lot of money, a lot of people have lost their jobs and this is not a pendulum swing that can swing the other way overnight. It takes a lot longer to establish a business than it does to close one down!

Personal money troubles

There are two main aims of this blog, one is to report on the global economic crisis, the other is to talk about personal debts with emphasis on using 0% credit cards to pay off debt.
I recently got very close to completely wiping out my own debt using 0% interest deals but have had a bit of a hiccup when I was within sight of my goal. I reverted to using my credit card safe in the knowledge that I would (soon) be able to clear my debts, but unfortunately have been adding to the balance at a greater rate than I am paying it off. I am resolved to be more disciplined before the onset of the expenses that will precede Christmas...
In the meantime I have been grappling with my household fuel provider (dual gas and electric) and began to think about how creeping household bills have helped to build up debt without many people even realising what is happening to their bank balance.
The scenario goes like this:
House fuel bills have been growing at an alarming rate and as most people pay these bills by Direct Debit, they have not really realised how much is leaching out of their bank accounts (recently my provider tried to increase my payments by 60%). The upshot of this is that a lot of people just accept their increased payments (or more likley don't even notice until it's too late). My own approach is to have all my outgoings in a spreadsheet which makes them easier to manage.
My questions to the householder who has just received a huge increase in their Direct Debit would go as follows:

• Have you had a corresponding rise in income? (I expect the answer to be NO)
• Have you adjusted your outgoings to allow for this extra expenditure? (In reality I would also expect this answer to be NO)

If the two questions above are answered in the negative, there could be a problem when it comes to reconciling income with expenditure, and the pressure valve in most cases is the good old credit card. I would realistically expect credit card spending to take the strain of the increase in household bills and this applies to food, insurance or any other expense that can creep up on you unexpectedly.
There are only two answers to the problem:

• Increase your income
• Cut your spending to allow for the increase

Otherwise you are heading towards debt that could take an awful long time to pay off.

Related posts:
the decline of my debt
where did it all go wrong?
how to get out of debt
Are we in too much debt?
credit card warnings

G20 prepares for recovery

The G20 leaders are acknowledging the changing state of the global economy, but are being urged to pursue a co-ordinated approach to the winding-down of the economic packages.
Ministers are being urged to continue with the stimulus packages that they are already committed to (a global total of US$5 trillion), but one of the sticking points has been the mechanism for accurately measuring the end to the crisis. It is proving difficult to get agreement on what parameters will be used to track the levelling out of the crisis.
Many promises have been made about requiring banks to behave more responsibly over pay, but the main emphasis now is focussed on how to prevent another crisis as opposed to previous meetings where the emphasis has been fire-fighting the crisis itself. Banks will be required to set aside more capital as a buffer against future hardships and they may face limits on speculative acquisitions defined by the value of their reserves.

Less than was absolutely desirable was agreed with regard to a G20 response to Global Warming because of deep divisions between developed and undeveloped nations. IMHO it is the developed nations that have to bite the bullet on this one seeing as they have created the best part of the problem in the first place.

Related posts:
Recovery or false dawn
IMF recognises recovery
Is the credit crunch over?

Recovery or false dawn?

I admit that my outlook on the current crisis is fairly dark and negative, but I think it's worth countering the spin that is being raised to paint a rosy outlook for supposed economic recovery.
These are the elements that are being cited as signs of recovery:

• Rising house prices (remember THIS is what got us into the mess to start with!)
• Recovering bank profits (sound familiar - see above...)
• Steady growth in GDP (hopefully this will be evidenced soon, but this is not the ONLY thing the economy needs - see below)
  

The real indication of a healthy economy would be:

• Stable and progressive public spending (UK borrowing will approach and unbelievable 80% of GDP this year)
• Steady rising of employment figures (We are approaching critical levels of unemployment)

It is only when the economy has stabilised (don't forget the Government has yet to reveal how it is going to pay for all the craziness thorough possibly crippling taxation), and employment levels are manageable that we can be satisfied that our economy will not go into free-fall. The danger is that this short-memory economy will rely on rising house prices to prop up spending again, it does not even bear thinking about the consequences of a similar crash before the effects of this one have been ironed out.
Can we be so stupid as to allow this to happen again? My answer is that yes, we are possibly on the verge of doing exactly that.
What have the banks learned from dragging the economy close to oblivion? They have learned that they can personally profit from such a crash and will do so again...
This is the sad state of human nature, now the profiteers have seen and tasted the good times, they will want to go there again and again to personally satisfy themselves regardless of the growing unemployment queues. Our only hope is that the Government have legislation lined up to prevent the financial community from profiting from their greedy nature - Sorry, still dark and foreboding for me - I really hope my skepticism is unfounded, but I think we have seen what can happen and I think we may be powerless to stop it happening again - Welcome to the combination of the powerful Free Market and the equally powerful sense of Human Greed.

Related posts:
G20 prepares for recovery
IMF recognises recovery
Is the credit crunch over?

Making your money work for you

If you have not done so recently, there is no time like the present to review your financial position - even if you have done this in the last 12 months or so, there is every reason to take another cold, hard look at your outgoings and take advantage of some of the recession-inspired saving that can be made...
Firstly, take a look at those Direct Debits to see where savings can be made, the obvious ones are to shop around for lower cost insurance, and get rid of any outgoings that are less than essential. Consider the cost of your car insurance to see if you can get a better price - make sure you check if there are reductions for keeping the car off road or in a garage overnight. Check those insurances that offer reductions for households that have more than one car.
Consider also the life insurance and critical illness policies etc. that you might have and check to see that you are getting the best value for money - remember the financial market is squeezed and there are savings to be made now.
Talk with your partner about whether now would be a good time to overpay your mortgage with mortgage rates being so low (this is something that I have been doing this year) this could mean that you pay your mortgage off a lot earlier than expected. Consider the all the options for every Direct Debit that you have and set yourself the target of slicing at least 10% off your overall outgoings, you will be surprised at how easy that is...

Let's put the record straight on the NHS

I know that this is more of a political issue than an economic one, but it is hard NOT to say anything about the current attack on the NHS by US politicians funded by private insurance companies.
Let's face it, the NHS was a Utopian idea which has not quite reached the pinnacle that some may percieve it was aimed for, but nevertheless is an absolutely fantastic institution to which many, many people owe their health and their lives.
Sure, there are queues for non-emergeny procedures, but then the option to go private is there for those who want it. On the other hand, when you are rushed into hospital from the site of an accident or as a result of illness, at what point in a British hospital are you asked for your insurance details? Answer: NEVER! There is never any question about who is going to pick up the tab for your visit to the doctors surgery or to outpatients or A&E it's all free - and how on earth can you knock that??
How on earth does a privately funded commercial enterprise even come close to the NHS? the same NHS that takes in private patients when the private hospitals mess up and suddenly have to rush their customers to the nearest A&E... Yes, for those who have not considered this before - what do you think happens when things go seriously wrong in the private operating theatre? The answer is that they rush their clients into the nearest NHS hospital and let them pick up the peices. How can they do this? Well the NHS is free for every UK citizen (even those with a private health plan) and the surgeons are of course trained in NHS facilites and NHS procedures and have contacts (if not actually a position) themselves in the local NHS facilities. It is easy for them to get their private patients admitted to an NHS facility when things go wrong.
There are even NHS surgeons who have been known to get their NHS staff to assist in private procedures and then get their 'overtime' approved as if they had done the work in an NHS facility - they basically use their NHS-acquired knowledge and skills, not to mention materials and staff for personal gain. This could be the next great scandal to follow on from MPs expenses if there were any media-interest...
However I digress, my point is that criticsism of the NHS from a country that only has privately funded healthcare is completely ludicrous and is inspired by fear from the private insurance companies. The possibility of free healthcare has shaken the very roots of the insurance companies that pass themselves of as healthcare professionals - this is very big business and business with a lot of influence, after all every Senator, Governer, professional politician and commentator (in fact anyone with any influence) HAS private healthcare and regards it as their right because they can afford it. They don't want to take a hospital bed next to a car mechanic, a housewife or a road-sweeper and are concerned that their life will be somehow cheapened by free healthcare available to anyone that needs it.
Take a moment and consider the people who are turned away at the hospital door, those who are discharged too early and those who do not even attempt to get any healthcare because they know they can't afford it - these are not the people with influence but these are the people who need healthcare the most. These people don't live in pristeen germ-free houses on guarded private estates, working in air-conditioned offices kept apart from the streets and their dangers. These people do not have membership of a private Gym and do not have their heart and cholestoral intake monitored on a weekly basis. These people are more likely to live exposed to violence and disease, eating the worst kind of food and exposed to pollution on a daily basis. These are the people without a voice in this debate and these are the people that would massively benefit from a free health service.
My fear is that despite Obama's attempts, middle-America will reject these plans to help those who are worse off than themselves, without appreciating what they are throwing away. The worst aspect of the debate is that the NHS is being slurred without any justification. I personally rejected private healthcare offered by my employers simply because I see no need for it. Any time I have needed a medical professional I have been able to turn in full confidence to the NHS and have found an institution which entirely meets my needs. Any time I have needed attention, attention has been there free and immediate, efficient and without consideration of cost. I have had a few short days in hospital as a child, X-rays, eye exams, help with tinitus, innoculations and the friendly advice of a GP or nurse any time I have needed it. I have been patched up at A&E departments around the country and have taken others to be attended with never a thought of cost to me personally - all I can say is 'Long may it continue' and to those in the US, I grieve that you will probably reject free health care - a more perfect example of 'throwing the baby out with the bath water' would be hard to imagine....

IMF announces start of global recovery

Although recession is still a reality for much of the global economy, the IMF has recognised that there are signs of growth. In fact a handful of economies are already officially out of recession already including France and Germany.
Olivier Blanchard made the announcement which is due to be officially published tomorrow, but takes the opportunity to urge caution against a false dawn which could happen if support in terms of support from Governments ceases too soon. He recognises that the economies emerging from this abnormally steep financial crisis will carry the scars for many years.
This comes at the same time that the Department for Children, Schools and Families statistics is announcing unprecedented levels of 'NEETs' amongst it's young population (Not in Employment Education or Training). It is believed that by the end of the year the number of youngsters in this bracket could rise to a million. This level could continue to rise for a sustained period leaving a legacy of a generation of aimless youth which could give rise to some severe social and economic problems.
The conclusion must be that we are 'not out of the woods' by a long way and the consequences of this financial crisis could effect a generation despite Governments and the IMF telling us that the 'crisis' is over, in many ways it has just begun...

Related posts:
G20 prepares for recovery
Recovery or false dawn
Is the credit crunch over?

Is the Credit Crunch over?

The banks are reporting high profits, and house prices are on the up - does this mean the credit crunch is over?
Not according to the Bank of England who have expanded the quantitative-easing program in a step that implies that further measures are required to get the economy back on track. By contrast, the European Central Bank has taken a more optimistic approach believing that the Euro economy is gradually correcting itself. Both banks have left their base lending rate unchanged.
High street banks have started to behave as if the recession is over, but whether this is leading to them extending significant amounts of credit to borrowers again is yet to be made clear. Estate agents are also keen to publicise the fact that house prices are on the up again, but a short-term rise in prices, may cause a mini-peak if significant amounts of sellers rush to flood the market with properties.
What is it then that makes the BOE so cautious? Possibly the fact that bank revenues are not being converted into lending for businesses, possibly the fact that despite a recovery in consumer and business confidence, the UK unemployment figures are set to rise after surveys revealed the following statistics:

• One firm in ten (of the 450 surveyed) confirmed certain redundancy plans yet to be actioned
• Four out of ten are considering making job cuts
• The Chamber of Commerce is set to announce unemployment figures close to 2.5 million and experts are predicting a possible peak of 3 million unemployed this year.

Even if house prices are going up and banks are reporting billions of pounds of profit, the continuing unemployment trend will require significant investment if it is to be 'bucked'.
Businesses who are not used to having to make redundancies or lay workers off may have been slow to respond to a drop in orders, the effects on these businesses will take longer to trickle through to the economy and it could be months and months before they are forced to take action. The smart ones will have to move quickly, the less smart may end up with closing down entirely if they do not cut their wage bills to suit the orders coming in.

Related Posts
Banks return to bonus culture mind-set
UK Inflation results
House price recovery?
BOE questions national debt