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A Recession in 2008?
For years the US and UK have been living beyond their means.
Governments have taken on ever more debt as a result, and at a personal level, individuals also
have taken on increasing amounts of debt, partly fuelled by the property boom.
So is it all coming to an end, with recession for all of us?
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Recession
or
Soft Landing?
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The opinion of the experts:
The US sub-prime crisis has triggered several events in the finance sector, including the Northern Rock saga in the UK.
The doubling of oil prices and other commodities are creating pain for other industries like transport,
which will feed through to higher consumer prices, just at a time when debt becomes harder to negotiate,
and more expensive.
We're already seeing an increase in bankruptcies and repossessions...
However, that doesn't mean we are definitely heading for a recession this year.
Based on newspaper opinion, and the experts they call in, the consensus is that there is
a strong risk of recession, maybe even 50%, but it is by no means certain.
Have a look at some of the quotes below, and make your own mind up.
If you believe the odds of recession are high, now is the time to get out of equities, if you can.
Look at the investments particularly in any pension fund or ISA, and if you want to reduce risk, switch them from equity
funds to things like indexed linked stocks, or even cash if the scheme permits.
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RECESSION IS
LIKELY
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George Soros: worst to come for UK economy
Telegraph: 24 May 2008
Financier George Soros has warned that the UK economy has yet to feel the full impact of the
global credit crisis. Mr Soros said that while the "acute phase" of the credit crunch was over,
the fallout has still yet to be felt.
Speaking to the BBC's Today programme, he also disclosed his surprise that
it took the Bank of England so long to bail out struggling banks in the city
following their hit by the US sub-prime crisis.
Mr Soros said: "I think we are past the acute phase of the liquidity crunch,
the credit crunch. But it is the job of the authorities to provide liquidity and
it was actually quite remarkable how long it took them to find the right
ways of doing it. It took much longer than I expected. But that is now largely behind us. The
fallout, the impact on the real economy, is yet to be felt."
Mr Soros, who in January said the world was facing its worst financial
crisis since the second world war, labelled the claim that the US would ride
out the current crisis by the end of the year as "without foundation".
But while he said the US recession would be "more serious than currently
anticipated and certainly longer," he warned that in the UK "the situation
is in some ways perhaps worse than for the United States." He blamed the UK housing boom
and the economy's heavy reliance upon the financial sector as the main causes for fragility.
IMF gives bleak warning on dangers of global recession
Times: April 10, 2008
World prospects have deteriorated sharply, with the US economy tipping into recession and a
one-in-four chance of global recession, as the toll mounts from the “largest financial shock
since the Great Depression”, the IMF said yesterday.
In a bleak assessment, the International Monetary Fund said the world was in the grip of a major
financial crisis, fuelled by a US housing slump that continues full blast. It drastically cut
its forecasts for the United States and other leading economies over this year and next in its
latest World Economic Outlook.
Pointing to a series of dangers that could lead to an even worse outcome for the US and Europe,
the Fund said there was now a 25 per cent chance of global recession, defined as world output
growth falling to 3 per cent or less.
Hedge funds feel the pain
FT: March 31 2008
Hedge funds are having their worst start to the year on record after March turned into one of the ugliest months for popular strategies and several funds
imploded.
January had also been a very poor month for the industry, only partially offset by February’s recovery.
Japanese business sentiment at four-year low
FT: April 1 2008
Business sentiment at large Japanese manufacturers has fallen to a four-year low...
The survey showed a deterioration in confidence across a range of industries...
Recession fears rise as retail sales fall
FT: March 14 2008
Recession fears continued to grip the US yesterday as retail sales data for February
showed an unexpected decline, providing evidence that consumers have significantly
reined in spending.
With the housing market in turmoil amid rising foreclosures, soaring energy prices,
and a deteriorating job market, spending by consumers appears to be slowing sharply.
US recession looms as growth heads for zero
Times: March 21, 2008
The US economy is on the brink of recession, with growth grinding to a halt because
of what will probably be America’s worst housing slump on record,
the Organisation for Economic Cooperation and Development (OECD) said yesterday.
In the latest cuts to its forecasts of US prospects, the OECD predicted that
American economic growth would be close to zero in the present quarter ...
The OECD’s assessment came as a New York-based forecasting group, the Economic
Cycle Research Institute, said that its latest leading index of future American
conditions showed that the world’s biggest economy was “unambiguously” in recession.
Feel-good factor drops to lowest level ever
Telegraph: 29/Mar/2008
Households are losing faith in the Prime Minister's ability to weather the financial crisis,
a YouGov poll for The Daily Telegraph indicates. Their confidence in the economy -
the "feel-good factor" - has dropped to its lowest level recorded.
Sixty four per cent of people think their household's financial situation will "get worse"
over the next year and only 12 per cent of those questioned expect it to become better.
The feel-good factor - which monitors voters' confidence in the future of the economy -
stands at minus 52 per cent following sharp rises in mortgage, grocery and energy bills.
This is its lowest level since measurements began in 1981.
Even in the depths of the early 1990s recession it only dropped to minus 26 per cent.
More than half of those questioned admitted experiencing financial difficulties and only
a fifth believe the Government has the policies to tackle the situation.
Confirming the gloomy economic mood, Gfk NOP, a market research company, today reports
that its monthly barometer of consumer confidence dropped for the seventh month in a row, to the
lowest level since February 1993.
The British Bankers' Association said the number of new mortgages approved was
near a record low last month.
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RECESSION IS
UNLIKELY
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Rate cut may be needed to avoid UK recession
FT March 28 2008
The UK faces a slightly less than a one-in-three chance of slipping into a technical recession –
which is defined as two successive quarters of negative growth –
and the Bank of England may have to cut rates aggressively to avoid following the
US downward spiral...
In a report that reflects the increasingly downbeat view of the UK economy among analysts,
Michael Hume said on Thursday that the possibility of outright recession,
which is defined as a period of negative year-on-year growth, was now one in five.
Ten reasons for investors to be optimistic
Telegraph: 01/Apr/2008
The pessimism is overdone. The odds are that the current financial crisis is winding down and equity markets will stage a come-back over the remainder of 2008. Here’s why:
1, The US Federal Reserve has effectively pledged its own balance sheet to prop up markets...
2, Global liquidity is plentiful...
3, Equity markets are discounting a recession...
4, A hard landing may yet be avoided...
5, Corporations have been cautious about expanding employment and investment in recent years...
6, UK consumers are in better financial shape than generally appreciated...
7, Investor pessimism is extreme ...
8, While retail punters are bailing, US corporate insiders have stepped up buying...
9, Losses on US subprime mortgages have been largely accounted for...
10, The magnitude and duration of the fall in US financial shares is comparable with the decline associated with the savings and loan crisis of the late 1980s...
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If all this advice has got you worried, then what better to get a book on survival strategies!
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The 2008 Personal Finance Survival Guide:
25 Top Tips to Save Your House, Your Money and Your Lifestyle in the Recession
For many of us life can feel like a constant financial juggling act at the best of times.
We probably owe money on our credit cards, our living costs are going up,
and even the modest wish to have a secure income stream to pay for our home and to secure
our pension seems pretty ambitious. Besides, how much money is enough these days?
However much it is, progress is much more difficult in a recession.
Now's the time to get all those issues sorted, and this is the book to help you succeed.
It contains practical, easy-to-implement advice. There is absolutely no padding,
waffle or theory. Here are 25 brilliant ideas to survive the 2008 slump.
for more information, or to buy it
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A final thought: Don't forget that
if a recession does occur, then it could drag on for a long time, so don't jump
back into the stock market prematurely! We have all heard of the Wall Street
Crash of 1929, but the stock market didn't go back up for years afterwards...
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Some useful links to wotnext pages:
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Keeping Fit,
Investing,
Hobbies,
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Getting Value,
Security
For early retirement:
Where to live,
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Investing,
Hobbies,
Holidays,
Meeting People,
Getting Value,
Security
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©2001-8 wotnext.com
This information is for the UK
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