Tag Archives: economic collapse

Are The Good Times Really Over For Good?

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For someone in their twenties it is hard to think of a time which has been harder economically than right now. But I do know that this is not true. There have been many booms and busts before, times much harder than this. Rationing, world wars, the great depression.

But what of the future? My generation seems to have gotten the muddy end of the stick. The OECD, a respected British think tank, said that Britain has slipped into a double dip recession and more pupils than ever are getting free school meals, the governments indicator of a child growing up in poverty. Tube drivers might be raking it in, getting paid £500 just to show up for work each day during the Olympics, but the rest of us are struggling.

Are the good times really over?We have become generation rent, unemployment is high, we not only have a harder time getting our dream job, but getting any job at all. I have friends that are moving out of West London where I live because they cannot afford it, struggling to find jobs and even if they have one, struggling to survive the squeeze.

Not getting to the nitty gritty. Tuition fees are up to a staggering amount, 9K a year for an education, transport costs go up above inflation every year; the Oyster caps at £10 per day in London. Then there is the fact that if you get an unpaid internship these days you are one of the lucky ones. It seems everyone is taking everything from the young. I am luckier than most. My education days are behind me and so are my internships: but if the children really are the future, then what of it? Are the good times really over for good? Everything from stamps and food is going up. Petrol is so expensive people cannot even get to work and the government is looking shifty after the cash-for-access scandal. Never mind the fact we don’t have any privacy anymore and they are trying to bring in web-monitoring.

Government debt is at a £988.7 billion. And who is going to have to pay that off? The decent, hard working people of Britain. Oh well. We can always print some more money.

What good will come from this? Lessons maybe. We lived in a society that saw the word ‘credit’ and did not take in the fact that actually means ‘debt’. Above all we will do what the British do: keep calm and carry on. You may want to cross your fingers too.

 

US Loses Triple AAA Credit Rating

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One of the world’s three leading credit agencies has downgraded US debt. Standard and Poors cut the US credit rating one notch to AA+ with a negative outlook.

The agency argues that the deficit reduction plan passed by congress didn’t go far enough in addressing the US deficit. Whilst the US debt to GDP ratio is already high at 65.2% of GDP, total government liability is actually far greater when including government agencies such as Medicare and Fannie Mae and Freddie Mac.

The two main other credit agencies said last night that they had no plans to downgrade US debt in the near future.
Officials in Washington were furious with the decision and claimed to have uncovered a two trillion dollar error in the agencies analysis. The impact on the markets remains to be seen. Given the panic of the last week investors have been piling into US government bonds pushing yields to record lows despite the US government debt problems. This latest downgrade couldn’t have come at a worse time but we will have to wait until Monday to see the impact it has on the markets.

Investors will be worried that the downgrade may impact the wider economy, president Obama has already warned of the impact a downgrade would have. The downgrade threatens the dollars status as the world’s reserve currency. The instability could have severe consequences for the world as a whole.

Debt Talks Collapse as Republicans Walk Away

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Debt talks in Washington reached a crisis point today as negotiations collapsed ahead of the August 2nd deadline. House speaker Republican John Boehner walked out of negotiations accusing president Obama of moving the goal posts by demanding bigger tax increases.

An angry Obama has said he and other Republicans are puzzled as to why a deal couldn’t get done. The president was offering to slash a $1 trillion in discretionary spending as well as cutting $650bn from Medicare and other entitlements.

People will be disappointed to hear Boehner just walked away at this time of crisis. Walking out at this stage cannot be constructive. It’s also extremely irresponsible with the spectre of a potentially disastrous US debt downgrade looming, to say nothing of a possible default. Republicans generally are starting to look increasingly rash as they unrealistically refuse to except tax increases.

If US debt were to be downgraded, even slightly, this in itself could have huge consequences. Many pension funds worldwide are required to only hold AAA securities and many currently hold large amounts of US government debt. In the event of a downgrade they would all have to sell this debt which could have a huge impact on the US dollar and the price of US debt, possibly causing a downward spiral, as yields rise and the US has to pay more interest on its debt in the future. The effects on the global economy and jobs could be huge.

A default is of course unthinkable and would lead to a worldwide financial meltdown.

It’s time for the politicians to stop thinking about themselves for once and to start thinking about the man in the street. It’s time to get this thing sorted. Each US taxpayer now owes almost $130,000