The skies are falling! The skies are falling!

There’s a reason I don’t blog about work, money and economics. Generally after I’ve been talking about money, people decide they want to jump off the nearest bridge. Don’t say I didn’t warn you.


A big black thunderstorm is looming over the world’s economy.

Last week the IMF cut its predictions for world growth, and slashed its US forecast to a six year low. It warned of “a major risk to the global outlook.”

Things are getting worse in many differing types of markets. September housing starts in the US have slumped to a fourteen year low. Oil prices are off the scale. Corn prices are rising, as are those cheap Chinese imports which are no longer so cheap as Chinese workers cotton on to the fact that they should be paid a decent income. There are reports of several industrial market sectors already being in recession. Strong rumours are circulating that both US and UK banks are trying to hide their debts. Balance sheets are looking very poorly, profits are shrinking, and earnings are heading south. No it’s not just me being melodramatic - anyone who follows modern economic or business bulletins will receive new global-doom reports on a daily basis.

Everyone knows that US and Western consumption has powered the world for the past decade, but now the party’s over. The majority of US and UK consumers have run up huge debts, mainly by borrowing against increasing property prices. It’s been a classic case of “Buy now, worry later”. But now the burst of the US property bubble (and the new UK credit crunch) means that bank lending has tightened, and folks have simply run out of money. After all, they can’t keep spending forever. As Paul Krugman said, “unsustainable situations usually go on longer than most economists think possible. But they always end, and when they do, it's often painful.”

Both the US and Britain are in a mess. Sure, the UK is a year or two behind the US, as our property boom is currently at its peak, but the recent credit crunch has turned the tide. UK property prices (currently 40% overvalued) fell last month for the first time in years. Businesses are strapped for cash, and can’t borrow from the banks. UK banks are now no longer lending recklessly to companies or individuals - and so people just can’t borrow any more. Rising interest rates, plus huge taxes and runaway inflation over here (the unofficial "real" inflation, rather than the government figures, which mean diddly-squat because they are manipulated) mean that people simply can’t afford to manage their debt, and they can’t afford to pay their monthly bills.

The UK is on a precipice - it’s only a matter of time.

As for the US, many economists say it’s already too late, and a recession is inevitable.

There’s a storm brewin’ folks. Next year, most likely.

Time to batten down the hatches.

Anyone wanna jump of that bridge yet?
I really should stick to talking about art ‘n’ nekkid chix huh?



Lilmummy, after talking to me about the economy.