http://www.bbc.co.uk/news/business-15748696

It shows who owes what to who. An interesting overview.

The Labour statistic figures were released today and showed an unemployment rate of 8.3%, the highest since 1996. The total number of people unemployed rose 129,000 to 2.62 million, which is the highest since 1994. The release also showed that total pay excluding bonuses rose 1.7%, which is not so good considering inflation stands at 5%.

The Bank of England quarterly inflation report had a mix of good news and bad news. The good news is that they expect inflation to fall sharply in the new year, perhaps below the 2% target rate. The bad news is that the European woes have caused the global economic outlook to worsen. As such the Bank of England has decreased the UK’s projected growth rate.

Inflation has been felt by many in the recent months. Increasing food and fuel prices in particular have affected family finances. With wages failing to keep pace with inflation, it has been felt by many. Individuals experiencing bankruptcy and those in debt are perhaps the most affected.

The Bank of England has a target annual rate of 2%. Today’s figure is clearly well above that although it is expected to reduce in the medium term. It has to be said though, a large amount of uncertainty remains.

The price of fuel has reduced because crude is being priced lower on the market due to the current economic climate. This can very quickly change. Energy bills have increased. Food is lower due to good harvests and heavy discounting by supermarkets. The Office for National Statistics reported that the largest monthly change came from price falls for vegetables (2.4 per cent), fruit (1.6 per cent), milk, cheese & eggs (1.2 per cent) and meat (0.7 per cent).

This makes quite depressing reading as it indicates higher unemployment in the future. The latest set of unemployment figures are expected out in the next couple of days.

An interesting question that I often have in discussions with people is about protecting yourself. Is there anything that you can do? Many people in debt may be pushed further towards bankruptcy if they were made redundant. Knowing what to do is tricky. Some suggestions are:

• If at all possible keep funds available should redundancy happen
• Get advice regarding unemployment insurance
• If you are in debt, seek advice
• Try and identify if you are at risk
• If you are at risk then have a contingency plan. There is no harm in having the C.V. up to date and ready to go

It is understandable that these times of uncertainty are the biggest worry of all. By taking steps to protect yourself you may lessen the worry a little.

Today the Council of Mortgage Lenders (CML) made a press release stating that the number of repossessions for the third quarter of this year remains relatively stable and that the number of arrears has fallen slightly. All in all I would say that it represents a scenario of no change and probably at little or no surprise.

There are a number of reasons that I am not expecting the number to shoot through the roof.

Firstly, interest rates remain at an all time low. Although inflation and unemployment has recently began to bite a mortgage is usually an individual’s biggest expense. Therefore as interest rates increase it is likely to increase the number of repossessions. Of course, the longer inflation is high and unemployment continues the greater their impact on the repossession figures also.

Secondly you may remember a couple of years ago that the mortgage pre-action protocol was introduced. The effect of this protocol was to ensure that lenders and borrowers act fairly with each other.

Other factors, such a s asset prices have also contributed to the lower number of repossessions. The nature of this recession is very different to others. There is a shortage in supply of credit and banks have been hit hard. Asset prices have decreased.

Although I am no expert all of this suggests to me that repossessions are relatively low considering the scale of the recession. As previously mentioned though, interest rates will be the catalyst. With serious woes in Europe the LIBOR rate, which is the interest rate at which banks lend to each other, is increasing. Unfortunately this may have the effect of pushing up mortgage rates. This is something that we are starting to see now and we will not know for sometime to what extent this will affect us.

http://www.bbc.co.uk/news/magazine-15095191

http://www.bbc.co.uk/news/business-15059135

If this trader is correct we have a very scary issue on our hands! He predicts that a massive crash is on the way which will get very messy for everyone.

From news of 10% of high street shops being vacant to the woes of Euro zone instability and American trouble, it certainly feels like we are still in trouble. The most worrying element of this is that central banks and governments have already taken unprecedented steps to recover the economy.

As far as individuals are concerned only a small percentage have felt it bad as a direct result of the recession. As the weeks go by this small number appears to be turning into a much larger number. So if you are feeling the pinch, you are not alone.

So what is in store for us? Well, according to the Bank of England we have higher inflation in the short term. This means we can expect the cost of living to continue increasing. There is also going to be little growth in the economy, encouraging low interest rates for the time being. Whilst this may offer relief, low interest rates should be considered a ticking time bomb by some. The rates will eventually go up and when they do it will be too much for some.

Recent statistics have shown a lower number of people declaring bankruptcy. Is it likely to remain this way? In my opinion, no. As interest rates rise and inflation continues to bite more people will seek the relief of bankruptcy.

A number of global issues remain but perhaps they are not the only cause behind the recent turmoil. It may well be that our governments actions have now become the cause.

For some time decision makers have been more than aware of the state of economies and the reasons for their demise. Toxic assets, created by the banks and not prevented by the governments, have travelled the world causing a downturn unprecedented on a global scale. In the United States of America banks collapsed and the entire UK banking system came within hours of collapse. The answer was to pump more money in to the banks, more money into the economy along side austerity measures in the hope of a turn around.

Whether it will work I cannot say but I do have some opinions.

There is an eventual shift of wealth taking place from the developed to the developing and emerging economies. Is borrowing more as countries, such as we have in the past, enough to try and retain our wealth and economic growth?

I cannot see how we are going to get out of such a mess unscathed. Most people in the UK have until now been relatively unaffected. Interest rates have remained low and it is only now that we are starting to feel the erosion of our disposable income through inflation of living costs, some of the austerity measures and low wage inflation. All of this affects consumption. When we are feeling poorer we do not spend. When we do not spend we are not contributing to the growth of the economy.

There is a crisis taking place in Europe. The united states economic recovery is stalling, the UK’s economy is possibly stalling too.

I’m not even scratching the surface of the troubles out there and I am no economist. However, it is difficult to see the light at the end of the tunnel for the economy at present. I think it would certainly help if we were producing as a nation. We were in great economic times when we were manufacturing!

The report explains the risks facing the UK’s recovery from the financial crisis and states that although the recovery is in progress it is incomplete. There are a number of risks that can adversely affect the recovery, including:

• Housing valuation ratios, which are still 30% higer than their historical average. This can have the effect of surpressing consumption.
• Private consumption is weak because individuals have less disposable income. This can be attributed to low wage increases and higher inflation.

among others.

If you are interested in the UK economy then this report is certainly worth a look. Some useful summaries are also detailed on the BBC website.