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  • Mortgages & Finance

    Bank Hurricane Not Over - We're in Eye of the Storm ....

    Analyst: Bank Hurricane Not Over -- We're in Eye of Storm
    Posted Apr 20, 2009 11:09am EDT by Henry Blodget in Investing, Recession, Banking
    With several big banks reporting profits this quarter, pundits are saying the bank crisis is over. The Dow is up nearly 30% from its low, Goldman and other firms are rushing to pay back the money the government invested in them under the bank bailout program, and financial stocks have soared.
    Keep dreaming, says Josh Rosner, managing director at Graham Fisher, an independent financial-services research firm.
    Rosner thinks the quarter the banks have just reported may be their best of the year. There's bad news looming just over the horizon, he says--when losses on the loans banks made during the housing boom really begin to hit home.
    The deterioration of construction and development loans, the bread and butter of regional and community banks, will soon spread.
    Says Rosner:
    “We’re about to see the [losses] really start in earnest. I think [this period is] actually where the bank crisis spreads from the 19 or so of the largest banks into the 8,500 banks in our country….”
    “I think [these losses haven't] been accounted for in [the banks loan-loss' provisions heretofore very acceptably. And I think the loss rates are going to be staggering. And I think that’s where we going to realize that the crisis is redoubling upon itself.”
    In order to put the banking crisis behind us, Josh says, the government will have to recognize that it can't save every bank. It will then have to draw a line in the sand--helping the strong firms and winding down the weak ones. At best, this process will take another two years.
    Click here to watch a good video on this subject with Josh Rosner.
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    Good video - in summary - it comes down to 'not what's happened - but how you deal with it'.
    Frankly - banks should NOT be sacred cows - we've seen massive changes to all industries across the developed world in the last 3 decades. From fishing & agriculture - through manufacturing and logistics - to technology and science.
    If banks per se have run their businesses badly (which I think the general consensus is now that they in the main have) - then they will need to de-layer, cut out diseased limbs and step back up on the stage when they've been through that process. Most important - they need to do the white-water rafting exercise when falling out of the raft - yes - participate in their own rescue! A certain bank I'm having dealings with overseas has just doubled their base interest rates. I would have thought they'd be better off cutting them like a lot of other countries and helping ease their client's pain a bit. It's as if they still live in the 19th century - not the 21st!
    What I've found odd is the enormous variation in different government and central banks attitude to easing the banking crisis. We got a lot of (UK) media coverage at the recent world G20 summit in London about police brutality in the crowds rioting and Fred Goodwin's (ex-chairman of one of our less well performing UK banks for our overseas readers) broken windows at his home.
    What I would have appreciated far more would have been to see what exactly we are doing consistently around the planet to drive a common worldwide recovery plan as this is the first true globally connected financial crisis and ensuiing recession. That piece of information (unless I've missed the elephant in the room) is not at all clear to me.
    IMHO - its only when we start seeing that fall into place - do we have any sort of science around how long a recovery may take and what actions us mere mortals can safely begin to take in our own lives earning our crusts!
    Richard
    https://tigeraqua.ning.com
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    It may be because I am in my own property bubble but why, when I read these articles, is there not more coverage on a second phase bank crisis brought about by the raising of interest rates? I know there is reference to it on various forums but, in my mind, it seems such a biggie – why so few column inches?
    The article refers to losses ‘made during the housing boom’, but what about the future losses incurred by people who are on currently on cheaper SVR’s? If these people do not have sufficient money put aside - to subsidise their LTV’s when the time comes to remortgage - how will they survive if interest rates rise to 7%? If you just have a single property you could probably cover the excess but what about the landlord who hasn’t been cashflow orientated, how will they survive?
    It makes me think we are going to see a double dip; the first low within the next 6 months, followed by a ‘spluttering’ along the bottom before we have a final dip caused by the raising of interest rates and the subsequent mortgage defaults.
    What am I missing?
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    Hi Marcus,
    I agree with you about the second dip. I have heard of a so called property guru who bought over 100 props no money down, and did a "deal" and bought himself a massive mansion for £4million. The mortgage was £25K a month. He's now had to let it out and is getting only £13K a month rent, so he's massively subsidising it. What will happen to people who have constructed the portfolios on capital growth/equity release when interest rates go up? Their portfolios will go under.
    I think for those people, now is the time to be paying down mortgages with any excess cash flow or jumping on the social media bandwagon and starting a new side business to generate cash flow to survive when interest rates start to rise.
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    Please pay heed to this!
    IMF warns that world slump will be deeper than thought ....
    The savage slump in the world's leading economies is set to be even deeper than previously feared, with recovery unlikely to materialise next year, the International Monetary Fund (IMF) said yesterday.
    In a grim assessment of global prospects, the IMF again drastically cut its forecasts for key economies across the world. It blamed the continuing blight from severe financial stresses for a worsening global outlook.
    For Britain, the fund inflicted a double blow to Alistair Darling minutes after the Chancellor unveiled his Budget. It forecast that the UK economy would shrink by 4.1 per cent this year, markedly worse than Mr Darling's new projection of a 3.5 per cent decline, and said the recession would drag on into 2010, with a further drop of 0.4 per cent in GDP next year. The Chancellor has predicted a recovery with growth of 1.25 per cent next year.
    The fund's report warned that, despite the far-reaching official efforts to bail out banks and stem financial turmoil, governments had failed to halt a downward spiral as intense financial strains and deteriorating economic conditions feed off each other.
    Calling for still more forceful action by governments on both sides of the Atlantic, the IMF said that halting the slump in the global economy and restoring growth depended critically on official efforts to heal the financial sector.
    But a day after the fund predicted that cumulative losses from the credit crisis for banks in the US, Europe and Japan would hit $4 trillion, it warned that, even if economic recovery was secured, it would be anaemic and “sluggish relative to past recoveries”.
    The latest IMF forecasts, in its twice-yearly World Economic Outlook, project what it says will be the worst world recession since the Second World War marked by a worldwide plunge in economic output (GDP) of 1.3 per cent. That compares with its January forecast, which foresaw meagre world growth of 0.5 per cent, still weak enough to be classed as a global recession.
    In the leading economies of the West, the IMF expects GDP to plummet by 3.8 per cent this year, down from the 2 per cent drop it expected in January. It also expects no revival next year, with the advanced industrial economies set to stagnate with zero growth. That contrasts with the recovery to 1.1 per cent growth that the fund envisaged four months ago.
    The bleak new assessment cut forecasts for every Western economy this year. The US economy, at the eye of the global financial storm, is forecast to shrink by 2.8 per cent this year and then to stagnate next year. The IMF has abandoned its hopes of a resurgence of American growth to 1.6 per cent next year and cut its US forecast for this year by a further 1.2 percentage points.
    In the eurozone, the report said that the plight of Europe's big economies would also worsen, with the 16-nation bloc suffering a 4.2 per cent collapse in GDP this year, shrinking by another 0.4 per cent next year.
    Germany is tipped to be worst hit with a GDP plunge of 5.6 per cent this year and a further 1 per cent next year. Only France is predicted to see some imminent relief from the gloom, with a 3 per cent decline in 2009 forecast to be followed by modest 0.4 per cent growth after the new year.
    The IMF said there were dangers that even its grim new assessment could be too rosy, if what it repeatedly called the “corrosive” downward spiral of financial and credit stresses aggravating economic woes were not arrested. “A key concern is that policies may be insufficient to arrest the negative feedback,” it said.
    The fund attacked failures by governments to tackle the banking and credit crisis effectively enough. “Announcements have too often been short on detail and have failed to convince markets; cross-border co-ordination of initiatives has been lacking, resulting in undesirable spillovers; and progress in alleviating uncertainty related to distressed [toxic] assets has been very limited.”
    It renewed its warning that an angry public backlash against banks and the financial industries could prevent governments from taking the extensive action needed to stem the threat.
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    Found this VERY SCARY article via Twitter. Sobering to say the least. Whilst it is about America, this will have a knock on effect to the U.K.

    How to barter your way through the depression
    from itsnotrealmoney.com

    Four years ago most Americans believed only good economic times were ahead. We were all swimming in equity. Financial markets constantly tested new highs. Being unemployed was mostly a choice. Aside from the unfortunate circumstance of war we found ourselves in - all systems were good-to-go.
    Today, most Americans see only uncertain economic times ahead. No one is swimming in equity. Financial markets constantly test new lows. Unemployment lurks around every corner. And unfortunately we still find ourselves in a state of war.
    What lies ahead on the economic horizon is anyone’s guess. Looking back, the path to this catastrophe began in the Clinton administration, cruised through Bush, and has now landed on Obama’s lap, who has surrounded himself with the Clinton alumni that helped set the course into our present quagmire. Our leaders in government, at the Fed, and in the private sector failed miserably in their responsibility to see this crisis coming. They were asleep at the wheel. Catatonic as the car careened off the cliff even now they would deny the crash ever happened if they could manipulate the data well enough. So if our leaders failed to see the proverbial curve in the road, what makes you think they have any clue about what lies ahead?
    There exists such a vast disconnect between the power base in America and the rest of us that I don’t think too many people would disagree there are in fact two Americas - a small concentrated one that rules, and a vast subservient one that obeys. I don’t know about you, but that’s not the America I signed up for in grade school. That a small ruling class now controls our government through the strong arm of centrally planned monetary policy and finance capitalism should be apparent to anyone with a TV or Internet access. And that this ruling class now lacks the common decency to provide the public a clear picture of what our future most likely holds is not only shameful, it’s criminal.
    Pundits argue that it would be irresponsible for government to warn people about the possibility of economic collapse. They would argue that it is the government’s responsibility to remain steadfast, to act as a calming force, to remain level-headed in the face of adversity so that people might not panic and demand their money from the banks or hoard food. If that’s the case, then what good is government? If they can’t warn us of a known impending catastrophe, one that they created no less, then what the hell do we need them for? To impose martial law when panic hits the streets?
    So what does the future hold? Anyone with some common sense can deduce that unemployment is going to get downright scary. Shadowstats.com already has real unemployment at 20% and rising. That’s one out of every five adults without a job. Imagine one out of four, or one out of three. You know what happens to shopping malls then, they close down and their parking lots turn into flea markets and barter towns. Jobs are the backbone of social stability in the US. Take the jobs away - stability goes with them. These are the things our government should be preparing us for. And if you think I’m insane, think again. Because I guarantee you that tucked away in some corner of CIA headquarters at Langley, Virginia, in a room where five brainiacs used to conduct mock missile exchanges with the Soviet Union, those same guys are now theorizing about what would happen in American cities if unemployment hits twenty-five or thirty percent by the end of 2010. Let me tell you, they’re not thinking we’re all going to come together and hold hands in a circle around the campfire as we belt out passionate renditions of God Bless America. They’re thinking about how to round up our guns.
    As unemployment climbs throughout 2009 two things will occur. One, those people still employed will spend less. Two, the newly unemployed will burn through their savings. When the savings of the newly unemployed dries up, when there are no more 401k funds to tap, when the Pee-PiP plan and all these other hair-brained schemes have transferred another trillion or ten in equity loss from the banks to the public, when your neighbor’s house is fire-selling to a carpet-bagger for half what you owe on your mortgage, when people just flat out refuse to pay interest on overpriced assets anymore, that’s when you see collapse. ARM resets are coming. The jobs situation is becoming obvious. By the end of 2009 the American economy will have deteriorated to the extent that there is no more hiding it. Our government will be talking deal on our external debt. Holders of US dollar reserves will be pissed. Think China. Dollar collapses, US debt defaults, bingo, game over. USA bankrupt.
    Look at the American experiment as one big bubble. Rome was a bubble. The British Empire was a bubble. Nazi Germany, bubble. Soviet Union, bubble. USA, bubble. Here is our situation. Public debt is out of control with federal expenses going parabolic while tax revenues are plummeting. The combination of which renders the Obama administration deficit projections for fiscal year 2010 and beyond laughably incorrect. Furthermore, the bailout costs are much worse than anyone is willing to admit. Even if we did skate by without an all-out collapse when you tally up the real numbers on; mortgage write-downs, consumer credit write-downs, derivatives losses, direct bailouts and stimulus, municipal bailouts, (you know those are coming), and other bailouts and stimulus that we haven’t even imagined yet but will most definitely rear their ugly head, we’re flirting with five, seven, maybe as much as ten trillion dollars that will be added to the US Treasury’s debit column. When George W. took office the national debt was $5.7 trillion dollars. When he left office it exceeded $10 trillion. Are you ready for $20 trillion dollars of national debt? You better be, because it’s coming. You can bet your paycheck on it – Obama just did, literally, he bet your paycheck on it. My question is this. What are the Federal Reserve and US Treasury going to do when the waiter brings the final bill to the table? Pass it to us? Sorry Ben, my credit card’s tapped.
    A PhD economist friend of mine, Paul Boyce, aka Doc, sent me an essay written by Dmitry Orlov titled Post-Soviet Lessons for a Post-American Century. It’s the kind of reading that sticks with you for a day or two - and not in a good way. The essay exposes similarities and differences between the pre-collapse Soviet Union and present-day America. A few things jumped off the page at me. One, those vodka-chugging Russkies sure got a lot of oil. They’re energy rich. Two, nobody got displaced from their homes when big red collapsed - they were all living in government housing to begin with. Three, the USSR’s centrally-planned cities had good public transportation that everyone simply continued using even as their world crumbled around them. And four, Russians were pretty much used to life sucking anyway. I mean let’s be honest, they never had as much stuff or as much freedom as us Ugly-Americans. The point is this. When our system collapses we don’t have any oil. We will be displaced from our homes. Our mass public transit may as well be two pregnant donkeys and a busted cart. Face it, we’re not used to life sucking. So when a collapse hits you’re going to see a lot of stunned folks walking the streets mumbling about how the Federal Reserve was supposed to maintain stable prices and economic growth. No one will understand that the Debt-Taxation-Inflation model the Fed used to perpetuate their siphon-from-the-bottom scheme was in fact the cause of all our ills.
    2009 is shaping up to be the year of reckoning. 2010 could be the year of civil unrest. Here is where we should take our lesson from the Russians. Go buy cases of bar soap and staple toiletries. Razors, condoms, tampons, the kinds of things American soldiers used to bring over from the states during World War II to lure French chicks into bed. Pile canned goods in the closet under your stairs. Buy it all in bulk and get ready to be the guy on your block everyone comes to in trade. And remember, women will do anything for 2-in-1 shampoo and conditioner. I’m talking about chores you pervert.
    The question of our time is this. Will the injection of trillions of dollars through stimulus and bailouts into the US and global economies stave off disaster? As I said before, our leaders didn’t see the crisis coming, they miscalculated it when it hit, and their only answer has been to throw newly printed money into the credit funnel. Anyone could do that. To believe that our leaders have a realistic handle on the ultimate outcome of these acts of desperation is to believe Rush Limbaugh is a closet liberal.
    If you take away one thing from this read take away this – it was the credit-based monetary system that got us into this mess. Why pour more money into the top of that funnel? We don’t need more bank credit. We need more real money at the bottom Mr. Obama. Now that would have been an act of Change. All those trillions of dollars you’ve committed and will continue to commit to the planet’s biggest losers, the banks and corporations that have taken so much from our world, you could have just written checks directly to the American people. But I suppose when your Chief of Staff Rahm Emanuel worked for the primary dealer Dresdner Kleinwort and your Chief Economic Advisor is Larry Summers, no background needed there – he’s the devil, then the idea of helping the little guy first really isn’t an option, is it? The jury’s still out on you Mr. Obama, and they’re getting restless.
    Within the last few weeks a surge in political activism has overwhelmed the nation. For now the mainstream media, with the exception of Fox News, has painted the efforts of disgruntled Americans as mostly coming from the right. I disagree. I attended a Tea Party and I can tell you firsthand the majority of people there were simply fed up with a power structure that continually holds the public down while we get gang-raped by the moneyed elite. The fight this nation faces is not a fight between the right and left. It is a war of the people against the fusion of money and government – you know, those two bedfellows inextricably glued together by the Federal Reserve.
    My battle is to get people on both sides of the political fence to lay down their conservative and liberal monikers and just be Americans, at least until we reign-in the Fed. On that note, the esteemed Peter Schiff gave a keynote address at an Abolish the Fed rally in New York City, April 25th. Schiff had this to say, “The Federal Reserve was behind all of it and we’re not going to get to the root of our economic problems unless we get to the root cause, which is the Federal Reserve and the phony monetary system we now have.”
    Personally, I am neither Republican nor Democrat. I am not a Libertarian. I am not left or right of any persuasion. I am a God damned human being. And most importantly I am a freethinking realist. And I don’t have any control over what the thin layer of authority in this nation is doing to our future. Did I say thin layer? I meant Ben Bernanke, Larry Summers, and Tim Geithner. They’re running our country in case you weren’t aware. It’s time we woke up and started acting like responsible citizens. It’s time we realize we are one people. We The People – doesn’t anyone get chills when they hear those words anymore? I do. I recently read the US Constitution and Bill of Rights. You know what I learned? Thomas Jefferson is the most brilliant son-of-a-bitch that ever lived. His words are the reason that so many millions of people over the last two hundred plus years have done anything in their power to escape the clutches of tyranny in lands far away and made arduous journeys just to set foot on our soil. I am so proud of my country when I think of what our forefathers penned on those pages of hemp and gave to the world at risk of their own lives.
    After I’d read our Constitution and Bill of Rights there is one truth I know. No one will ever separate me from my fellow Americans - not Rush Limbaugh, not Sean Penn, not Ted Turner, and not Ann Coulter. I agree with no one who puts their politics before the beliefs of other people. We all come from such a diverse landscape of experience that shapes who we are and what we feel. These are the things we should value in one another. These are the things we should embrace. Our diversity is our strength. But the manufactured political frequencies emanating from our flat screens and newsstands only divide us. Show me one major media outlet that aims to unite us and I’ll show you a direct lineage to our founding framework.
    The Federal Reserve counts on two things for its survival. One, our ignorance with respect to money creation and the Fed’s Debt-Taxation-Inflation model that erodes our wealth and inflates the moneyed class’s balance sheets every minute of every day and two, our ignorance again with respect to the moneyed class’s manipulation of the media, of which they control, into dividing an entire nation right down the middle with both sides hating the other, blinded by hollow rhetoric that when you strip away the façade reveals people that aren’t so different after all. But we’re too afraid of each other to admit it.
    The Plutocrats count on our ignorance for their survival. They believe we’re too stupid to understand the complexities of modern banking - so best keep the Fed meetings secret. And we’ve never had an original thought in our lives so why not feed us a bunch of blue and red hype through the left and right media and then sit back while the masses bicker amongst themselves over trivial social issues. Meanwhile, they rob an entire planet blind. And when the bubbles pop they whack us over the head again with the government bailout stick.
    If we really want to do something about our future, if we really want to take back the liberty we know has been usurped from us by the moneyed elite and their bidders in congress and the White House, then you have to take down their power base – the Federal Reserve. Without the Fed, sound money can be restored. Boom-bust can become a notation in history books. And we can all sit back, drink wine, cast a line in a stream, go hunting, save a tree, or do anything else it is us crazy Americans do in our spare time.
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    This article just arrived in my inbox, fits in with my 'double dip' vision of the market. It also agrees with the thoughts in this thread - more grief to come as banks are massaging their figures:
    Housing recovery? Only in estate agents’ dreams
    Also, good points at the bottom of the page.
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    I just spoke to you briefly at the end of Nicks' Social Media course and as you were out last night, missed Dispatches - the UK version of the link to the American Website (Josh Rosner) - I have felt this for a long time (ie, we are in serious trouble) The incongruencies with Darling (and he didn't even know it) was shocking. I love the fact they 'allowed' Lloyds to go against regulations and the law because it was the lesser of two evils. it proves to me..........these people do NOT know what they are doing. absolutely frightening. Being a consumer activist (a female Ralph Nadar) I am for taking over. ie, we public who are financially held to ransom - I SHALL start a blog on this in the near future.
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    May I also add, after sitting at HSBC yesterday talking about their mortgages.........."the banks are still not loaning to each other" - if the banks do not have confidence in each other, what chance do we have ?
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    Here's a great resource on the current financial crisis and where it is heading. https://www.conspiracyoftherich.com/ this is the latest book by Robert Kiyosaki, it's a very interesting read, but be warned it's quite a bitter pill to swallow.
    I urge every one to read and your comments would be welcome.
    Regards
    Mike.
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    Is Britain's economy heading for the perfect storm ... ?
    Is Britain's economy heading for the perfect storm?
    Posted by The Independent
    Tuesday, 28 April 2009 at 05:13 pm
    Author: Sean O'Grady, Economics Editor

    The signs couldn't be much bleaker. The switchback in sentiment since the credit crisis began in the summer has been violent. The Nationwide Consumer Confidence Index recorded its largest drop yesterday, and joins the GfK/NOP survey earlier this week in suggesting that a wave of pessimism not seen for years is washing over the economy.
    House prices have begun to fall, albeit slightly; commercial property is seemingly on the brink of collapse on a par with that seen in the early 1990s. The buy-to-let market is vulnerable. The Bank of England has, unprecedentedly, voiced concerns about the grim prospects for real estate. And the Financial Services Authority has warned of the "very real prospect" of the global credit crunch getting much worse. It is that bad.
    Shopkeepers are looking forward to a black Christmas. Sir Philip Green, the boss of Top Shop and BHS, said last night on Sky TV that "business is very, very tough". The British Retail Consortium says that sales grew only marginally in November, having slowed markedly in October. JD Sports, ScS furniture and Greene King are the latest household names warning of setbacks. About 4.4 million credit-card customers still haven't cleared debts they ran up last Christmas, according to MoneyExpert.com.
    We're less ready to spend, particularly on "big ticket" items furniture, fridges, cars and so on. We're more pessimistic about our finances. We don't want to take on more debt and we want to rebuild our savings. The credit markets are seizing up again. That means banks are becoming much, much choosier about who they lend to, and are charging ever higher rates, despite the efforts of the authorities to keep money markets functioning normally. No lending; no spending.
    That unwillingness to lend the credit crunch has started to affect businesses too, though firms remain generally more upbeat than consumers. Manufacturing firms, and in particular those in the car industry, are happy, a veritable ray of sunshine. However, manufacturing makes up only 15 per cent of the economy. In the financial sector, responsible for more than half of the recent growth in the UK's GDP, the mood is glum.
    After months defying gravity, share prices have suffered some dramatic falls. City bonuses will be cut this year and next along with recruitment and investment. Barclays, HSBC and other banks have reported billions in losses, while the future of Northern Rock is uncertain.
    Growth in the construction sector eased to a 14-month low in November, according to the Chartered Institute for Purchasing and Supply. The gentle rise in unemployment over the past 18 months may accelerate. The accountants KPMG say that "what we are seeing is that the credit crunch is tightening its grip over the economy... an underlying weakening, with both demand for permanent staff and vacancies down on the levels earlier this year."
    Everyone from the Treasury to the IMF has trimmed their forecasts for UK growth; from close to 3 per cent for 2008, down to nearer 2 per cent. The IMF says that even this is now too optimistic. Is it time to start talking about the "R-word" recession, and the possibility that the economy might shrink?
    The difficulty is that the credit crisis is a process that feeds on itself rather than an event that can be declared "over". It began with the collapse of the US sub-prime mortgage market and the housing crash there, problems which are intensifying. As more sub-prime customers default because of the credit crunch more banks record losses and stop lending, and more properties are dumped on to the depressed US housing market. That depresses confidence and spending, and the screw turns again.
    On this side of the Atlantic we feel the chill because our banks are exposed to sub-prime and because the US economy is the world's biggest. If it slows, it drags us down with it. And the mood of economic gloom Northern Rock, headlines on house-price crashes, higher prices for fuel at forecourts and food at checkouts is reinforcing itself. Confidence is the magic ingredient in any economy; it is evaporating fast. There's no knowing how bad it could get.
    The most pernicious aspect of this downturn is how it could turn not so much into a recession, but into "slowflation" slow growth plus inflation. A depressed economy can co-exist with high inflation, as the world found in the 1970s. Low demand and high input costs (such as oil at $100 [48] a barrel; wheat prices at record highs) squeeze profits and employment and cut the real value of wages. It also makes it tougher for the Bank of England to allow interest rates to drift lower.
    But the really bad weather would arrive if the Chinese economy stumbled. Next year, more than half the world's growth will derive from China, India and other emerging economies. Were they to falter say because the Shanghai stock market bubble burst the world would almost certainly lurch into recession.
    In all events, the worst of the slowdown will hit us towards the end of 2008, going into the spring and summer of 2009; the point when a general election is due. By then the public finances would be well out of control, though that may be the least of ministers' worries. Gordon Brown might not have sowed the seeds of the coming economic storm, but he may well reap the whirlwind.
    Business as usual?
    Keith Bowan: Equity analyst at Hargreaves Lansdown Stockbrokers
    "There is an air of unease among stockbrokers at the moment. In recent weeks the market has been trying to factor in the credit crisis and what it means going forward. Obviously this has affected the bankers most, but it has trickled down to other areas. People in property have been severely hit, as have house building stocks. But further down, even the pub operators have faced trouble. There's certainly an air of caution that has descended on investors ever since Northern Rock there's no doubt about that and I'd say the mood is still cautious going into 2008. The stock market acts as a barometer of where things will be in the next six to twelve months, so investors must broadly expect conditions going forward to be difficult."
    Ron Turnbull: Finance director of SCS Upholstery, Sunderland
    "Clearly our sales have been worse this year than we forecast, and significantly down on the same period last year. We've been suffering for some time from the interest rate increases, and these are now filtering through to the customer.
    "The effect of turmoil in the American sub-prime sector has had a big influence on the confidence of consumers over here. But it's not just that they're feeling more anxious because they see savers queuing up outside Northern Rock; they've actually got much less disposable income than they've had for a long time."
    "Banks are less willing to lend to customers, even cutting down on lending to each other. Meanwhile essential spends like utility costs and council tax are rising way above the rate of inflation. All of this is coming together to make consumers much more cautious with their spending, and it is businesses like ours, which are vital to a healthy economy, that are suffering the consequences."
    Barnaby Stutter: Store worker, Brixton Cycles Co-operative
    "Like any other, our business is not 100 per cent recession- proof. But partly because we're a workers' co-operative, and partly because we've got a lot of fluidity, I think we'll survive any coming troubles. We can move from selling bikes to fixing them; pubs and restaurants, who really are suffering, don't have that sort of option.
    "There's a snowball effect: the more people worry about it, the worse it becomes. Our culture seems to thrive on anxiety and people are ready to panic about what they're told to panic about. But retailers on the high street expecting a big Christmas bonanza are going to be disappointed.
    "Realists always sleep well at night, and being realistic about the forthcoming festive season means lowering our expectations of it."
    Carl Lester: Birmingham fashion boutique manager
    "People do seem to be spending less at the minute. I've got two branches selling designer clothes in Birmingham, and overall the business is down.
    "I think people who might once have shopped here once a month are coming more like once every two. Also, customers seem to be thinking more about what they already have before they spend.
    "We've talked ourselves into a recession, and all of a sudden it seems like we're going to get one. I'm not too worried, as my business survived the same thing happening in the 90s."
    Tony Brooks: Owner of the Cluny pub and restaurant, Newcastle
    "I'm in no doubt that this is the start of the worst trading conditions in the 28 years I've worked in the industry. If you read the trade papers they're full of terrifying figures about the difficulty of the current climate. But in reality it's even worse than they make out.
    "The pub trade in particular is coming under heavy attack from the Government on several fronts. Supermarkets selling ridiculously cheap alcohol make it impossible for us to compete, while the smoking ban has been a massive drain on our appeal. And new planning regulations are so tough it's proving harder than ever for us to make money. Some weeks, pubs are down 20 to 30 per cent on the same period last year.
    "The broader economic conditions are making our life hell. Higher interest rates and unaffordable mortgages mean that disposable incomes are fast shrinking. Every consumer has priorities; our industry relies on there being some change in people's pockets after those priorities have been met. Today that spare change is disappearing.
    "I'm not exaggerating in saying the next few weeks are going to be very painful, and 2008 will be the worst year ever for our industry, with more than 2,000 pubs almost certain to close."
    Peter Clayton: Chief executive of the Association of Professional Recruitment Consultants
    "As with any sector, there are noticeable trends in recruitment that are an indication of the health (or sickness) in our present condition. What we've seen over the past few months is a move to contract placements rather than permanent placements, which is a sure sign that employers are feeling shaky. Permanent placements have dropped by about 30 per cent in the last quarter a massive shift.
    "These trends haven't been such a prominent factor in the recruitment sector for several years. Employers on the whole are feeling very anxious and less willing to increase their payrolls by expanding staff numbers. Businesses are starting to recruit themselves rather than through agencies which, again, is a sign of anxiety."
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