Let’s look at what happened
1996 - deregulation in lending and easy borrowing arrives.
1998 – housing market takes off. Everyone can get a loan now.
1999 – recession forecast but averted by Jap economy picking up (our demand for their goods on credit) and .COM US economy pulls UK into overdrive.
2001 – lending crazy. We have more credit card debt than the rest of europe.
2004 – we’ve peaked off in our lending, housing market still rising but cooling in London
2008 – the Northern Rock bank goes bust, banks around the world are in trouble. And we’re hit with the onset of rising living expenses.
Yes recessions are part of capitalism. Countries such as France and Germany prefer a steady economy with no sudden moves. But US and UK prefer the unregulated free-for-all economies which can grow quite but collapse quick also.
The credit crunch has been onset by bad lending and basically 1 bank conning a group of investors (another bank) into taking a goody bag of variance debts with varying risks.
OK, so what. Well, now we have a situation where we have a downturn. Fine, those in private sector jobs will be under threat and no doubt there will be redundancies – Jessops closed 1/2 it’s shops, as did Currys Digital. 4000 estate agents lost their jobs in the last 12 months. So industries directly related to the credit crunch (financial, property) will be hit first.
What remains to be seen is wether the rising cost of base goods which is going through the roof is going to make this recession absolutely crippling. Take into consideration some nasty ‘additives’ to the recession :
- petrol up 30% a year. Wood up 50% last 12 months
- Iraq war still draining the government
- freak weather patterns which may easily affect the economy as they did 2007
- weak currency, poor £/euro exchange rate. Since we export very little, we cannot take advantage of our weakened currency. Even the polish are going home now as the currency has devalued / cost of living rising.
It remains to be seen but this could be a recession where everyone gets hit.
Everyone duck!