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Society & Culture15 mins ago
Into the Recession
15 Answers
Who do YOU blame for the economic state in which this country now finds itself?
How are you going to manage YOUR affairs to try and come out of the recession unscathed?
Will you be spending more (as the government wants us to do ) or saving more to prepare for harder times ahead?
How are you going to manage YOUR affairs to try and come out of the recession unscathed?
Will you be spending more (as the government wants us to do ) or saving more to prepare for harder times ahead?
Answers
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For more on marking an answer as the "Best Answer", please visit our FAQ.I peronally think the rot set in years ago when it was made too easy to borrow money one way or another, and then ultimitely the banks for being greedy by lending more than they should.
I don't spend now anyway, but that is because I haven't the money. I have credit facilities of �5000 plus, but as I can't afford to repay, I don't use them.
I don't spend now anyway, but that is because I haven't the money. I have credit facilities of �5000 plus, but as I can't afford to repay, I don't use them.
I don;t think 'blame' is necessarily an option here.
Domestic and world ecconomies are fantastically complex in their interaction, and the media look for simply solutions and scapegoats, when in fact it seems to be a combination of circumstances which could not have been forseen as interacting and aligning in the way that they have.
We have taken a chunk of savings and used them to pay off part of our mortgage - better in the property than the savings account. Will continue to top up ISA's as and when cash is available.
Domestic and world ecconomies are fantastically complex in their interaction, and the media look for simply solutions and scapegoats, when in fact it seems to be a combination of circumstances which could not have been forseen as interacting and aligning in the way that they have.
We have taken a chunk of savings and used them to pay off part of our mortgage - better in the property than the savings account. Will continue to top up ISA's as and when cash is available.
-- answer removed --
Thatcher did us no favours by allowing the building societies to convert to banks. This was done in the name of competition and now we end up with less competition. We closed our coal mines and privatised the power companies - now most of our power is in foreign hands and we do not have the capability to build a nuclear power station. Brown sold off a large portion of our gold reserves when he came to power. The banks were not monitored closely enough and their greed has led them to near collapse. All in all I think the British public has been miserably served by politicians of left and right.
I have been around a long time and fear for the future of my daughter, granddaughters and great grand children. There are many things which have gone wrong in this country, and many are due to our MPs. Many of them, today know in their hearts that many things have gone wrong. I think they are keeping quiet for the sake of their jobs. Which of them of the government will stand up and denounce or question decisions which ultimately go wrong and the country's infrastructure and people suffer because of it. Where is their integrity? They are supposed to represent the opinions of their constituences. Perhaps the Cabinet have such a tight grip on what their MPs say or do, perhaps threatening to refuse to acknowledge them as a member of their party, so to keep their huge salaries they won't put their heads above the parapet.
Firstly, there cannot be continuous 'boom' without 'bust'. Anything that expands quickly will be overstretched, and will snap back to a more acceptable equilibrium.
That said, the Sub Prime market in the USA is generally blamed for the World recession. The real truth is that it was not so much the debt itself, but the way it had been constantly re-packaged and sold on amongst different banks that has led to problems. In the end, noone knew how much bad debt they were actually holding. This meant that banks figures were innaccurate, and they all felt they were better off than they really were. This was a clear failing of the Financial Services Authority (a QUANGO which took over responsibility for regulating and moderating the banks from the Bank of England, when the BofE was made responsible for interest rates). Putting the FSA in charge was Gordon Browns decision.
Additionally, suspicions should have been raised over the Enron/Anderson affair in the USA. Anderson were the biggest auditors in the US, and fiddled the accounts of Enron for it's chiefs. If Anderson were willing to do this for one high profile customer, they would no doubt have been willing to do so for others. This would mean that the US major stocks could well be overpriced on Wall Street. Why were Anderson having to do this during economic growth, is a question that was not asked, and probably implied that the US economy was not as strong as thought. This is borne out by the massive collapse across the big companies of the US.
However, and there is a lot more to the UKs financial system and failure than the USA. Domestically, 2 important signs were missed; spending on credit cards was larger than by cash for the first time in history 3 years ago, and domestic debt reached 4 times the GDP of the nation. This meant that the growth in industry was not being paid for by money, but by debt, that would need to be paid. The growth for the last 5 years was 'on the never never'.
That said, the Sub Prime market in the USA is generally blamed for the World recession. The real truth is that it was not so much the debt itself, but the way it had been constantly re-packaged and sold on amongst different banks that has led to problems. In the end, noone knew how much bad debt they were actually holding. This meant that banks figures were innaccurate, and they all felt they were better off than they really were. This was a clear failing of the Financial Services Authority (a QUANGO which took over responsibility for regulating and moderating the banks from the Bank of England, when the BofE was made responsible for interest rates). Putting the FSA in charge was Gordon Browns decision.
Additionally, suspicions should have been raised over the Enron/Anderson affair in the USA. Anderson were the biggest auditors in the US, and fiddled the accounts of Enron for it's chiefs. If Anderson were willing to do this for one high profile customer, they would no doubt have been willing to do so for others. This would mean that the US major stocks could well be overpriced on Wall Street. Why were Anderson having to do this during economic growth, is a question that was not asked, and probably implied that the US economy was not as strong as thought. This is borne out by the massive collapse across the big companies of the US.
However, and there is a lot more to the UKs financial system and failure than the USA. Domestically, 2 important signs were missed; spending on credit cards was larger than by cash for the first time in history 3 years ago, and domestic debt reached 4 times the GDP of the nation. This meant that the growth in industry was not being paid for by money, but by debt, that would need to be paid. The growth for the last 5 years was 'on the never never'.
The government also hamstrung itself and the Bank of England, by making the BofE responsible for setting interest rates. This meant that the BofE had to focus on fighting inflation, whilst the housing boom spiralled out of control. As I stated at the being of this piece, nothing can expand rapidly forever. Now that housing represents its real value, most mortgage holders owe more money than their house is worth. After 20 years of paying, they may still not have got their moneys worth. Also, and because of the credit card condition mentioned above, controlling the flow of cash (ie the amount of genuine currency in circulation) no longer has the impact it used to. This was all predictable, yet Gordon missed them.
As house prices exceeded the value of the property, some UK banks were offering mortgages of 125% the market price. Even if house prices had stayed constant, this would be toxic debt. It was a stupid step, but the banks were falling over themselves to fight for our debt. This has nothing to do with the USA, and should have been stopped. Gordon did nothing.
Inflation has spiralled out of control, peaked and is now collapsing towards deflation. Keeping interest rates low for business, and causing the housing boom, has proven a pointless activity.
As house prices exceeded the value of the property, some UK banks were offering mortgages of 125% the market price. Even if house prices had stayed constant, this would be toxic debt. It was a stupid step, but the banks were falling over themselves to fight for our debt. This has nothing to do with the USA, and should have been stopped. Gordon did nothing.
Inflation has spiralled out of control, peaked and is now collapsing towards deflation. Keeping interest rates low for business, and causing the housing boom, has proven a pointless activity.
The rise in oil prices pushed inflation out of the BofEs control. Everyones fuel costs (private and business) rocketed. Now oil prices have fallen back massively (virtually a quarter their peak price), but Gordon has made Britain so unattractive to investors, that our currency has collapsed against the dollar and euro. As oil is priced in dollars, every country is now getting proportionately cheaper oil than we are. Gordon claimed we were better placed than other economies to weather the recession, and has refused to support the pound, or more likely - he doesn't have the funds to support the pound, he gave it all to the banks. Unfortunately, only the Cabinet believe we are in better shape than others, or are just in denial. The World Bank, IMF and speculators worldwide, all of them disagree with Gordon.
As such, we are at a disadvantage to the USA and Eurozone, who are paying less for fuel, which will benefit their businesses.
Gordon Brown earnt the image of being frugal at the beginning of Tony Blairs government, by exercising cut backs and economising in government departments. He promised that the savings would be used to help regenerate the country. Manchester was promised an extension to its Metrolink service by Transport Minister Stephen Byers, who resigned in shame. He was replaced by Alistair Darling, who re-iterated the proposal twice, before running out of money and cancelling the whole plan. This week, Manchester voted no to a referendum offering us the same improvements Manchester had been promised, but this time by having a congestion charge area 10 times larger than Londons! All the money Gordon saved, he squandered, and it never went where it should have. Now, government wastage is just as bad as it was under the Tories. If things were so good, why did this money just drip away, shoring up other spending? Because, they were false economies in the first place.
As such, we are at a disadvantage to the USA and Eurozone, who are paying less for fuel, which will benefit their businesses.
Gordon Brown earnt the image of being frugal at the beginning of Tony Blairs government, by exercising cut backs and economising in government departments. He promised that the savings would be used to help regenerate the country. Manchester was promised an extension to its Metrolink service by Transport Minister Stephen Byers, who resigned in shame. He was replaced by Alistair Darling, who re-iterated the proposal twice, before running out of money and cancelling the whole plan. This week, Manchester voted no to a referendum offering us the same improvements Manchester had been promised, but this time by having a congestion charge area 10 times larger than Londons! All the money Gordon saved, he squandered, and it never went where it should have. Now, government wastage is just as bad as it was under the Tories. If things were so good, why did this money just drip away, shoring up other spending? Because, they were false economies in the first place.
Finally (well it is a complex issue!)
I have spent the last 5 years paying off every penny of debt our household had, because this was all too foreseeable. As such, I am looking forward to an overseas holiday in January & May & September. My fridge and freezer have never been fuller, and I can't wait till the Champagne season comes around. It won't have been this cheap since America had 'Freedom Fries' and boycotted French products after the invasion of Iraq.
I have spent the last 5 years paying off every penny of debt our household had, because this was all too foreseeable. As such, I am looking forward to an overseas holiday in January & May & September. My fridge and freezer have never been fuller, and I can't wait till the Champagne season comes around. It won't have been this cheap since America had 'Freedom Fries' and boycotted French products after the invasion of Iraq.
Greed was the basic problem. Those lamenting the loss of their savings after investing in the stock market were all too willing to rake in the capital gains during the bull market.
The tens of thousands of small investors jumping onto the stock market roller coaster during the upswing artificially boosted demand causing a positive feedback situation. The more the market rose the more wanted to get on board.
Meanwhile CEOs were being rewarded with share options and insane bonuses based on the market value of the company. Little wonder they did whatever they could to boost the impression of success.
Conservative managers who planned for the long term were pushed aside to give free rein to the adventurous risktakers who had never even experienced a market downturn, didn't see it coming and hadn't a clue how to cope when it happened.
In the persuit of profit the banks engaged mortgage brokers to write irresponsible loans to people who couldn't afford the repayments. They assumed the property values would continue to rise so they would be secure. This artificially inflated the property market further encouraging those looking for a big return on their money.
The whole world economy became dependent accelerating growth. Resource prices spiralled and their stocks boomed. More investors jumped on to make the quick buck.
Then it began to crumble as such efigies must and the ensuing collapse was spectacular. Confidence is gone. Many will never touch stocks again in their lives even if they still had the money to invest. The stock market will stay depressed for years.
The tens of thousands of small investors jumping onto the stock market roller coaster during the upswing artificially boosted demand causing a positive feedback situation. The more the market rose the more wanted to get on board.
Meanwhile CEOs were being rewarded with share options and insane bonuses based on the market value of the company. Little wonder they did whatever they could to boost the impression of success.
Conservative managers who planned for the long term were pushed aside to give free rein to the adventurous risktakers who had never even experienced a market downturn, didn't see it coming and hadn't a clue how to cope when it happened.
In the persuit of profit the banks engaged mortgage brokers to write irresponsible loans to people who couldn't afford the repayments. They assumed the property values would continue to rise so they would be secure. This artificially inflated the property market further encouraging those looking for a big return on their money.
The whole world economy became dependent accelerating growth. Resource prices spiralled and their stocks boomed. More investors jumped on to make the quick buck.
Then it began to crumble as such efigies must and the ensuing collapse was spectacular. Confidence is gone. Many will never touch stocks again in their lives even if they still had the money to invest. The stock market will stay depressed for years.
Definitely blame Labour for this. They say it is a world wide problem, ok, so it is, but wer'e being hit harder than other places, why? It will get worse, as unemployment rises it will have a spiralling effect.
Labour are now trying a quick fix to this (disaster), like trying to patch a leak in a dam with a plaster meant for your thumb. This will only build up the pressure which will then burst out at a later date. The UK has to adapt to the fact that everything is moving to India and China, over the years slowly our economy has begun to rely on the East for services and support.
How to fix this? Invest long term in jobs for the people of the UK.
Labour are now trying a quick fix to this (disaster), like trying to patch a leak in a dam with a plaster meant for your thumb. This will only build up the pressure which will then burst out at a later date. The UK has to adapt to the fact that everything is moving to India and China, over the years slowly our economy has begun to rely on the East for services and support.
How to fix this? Invest long term in jobs for the people of the UK.
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