As the unemployment rate continues to climb and as the cost of imports, especially food, continues to rise at an alarming rate, what is happening to household budgets?
The jobs being lost to the economy today or in three main sectors. The service sector, which accounts for 70% of the economy is suffering badly at the same time as financial services goes into reverse and construction grinds to a virtual halt.
It is difficult to see a part of the economy that is able to step in and take up the slack left by these three huge sectors. It is even more difficult to see how the imbalances in the British economy will be addressed going forward.
It’s all well and good for Gordon Brown to tell us that we will have a green revolution. However, the jobs that the UK needs are manufacturing jobs.
Which entrepreneur in their right mind would choose the high-priced UK economy as a manufacturing base over the low cost, manufacturing bases of Asia? In this scenario, it is difficult to see what is going to stem the job losses.
As property prices continued to plummet, jobs are likely to continue to haemorrhage at an increasing rate. We were several months behind the United States in this recession and they seem to be picking up speed all the time to the downside.
More and more people today are making their mortgage payments using credit card debt. Already, the banks are scaling back this type of lending and it is difficult to see how a huge proportion of this debt is ever going to be paid back.
Many commentators feel that the next big problem looming on the horizon is credit cards. Should the government continue to print money, there are several other disasters waiting in the wings. Already, the stock markets has written down the share prices of all the major insurers and the recovery still seems quite a way off.
Should insurance companies have problems meeting their obligations, what will become of annuity holders and other pensioners?
Since the consumption and debt driven model of Western economies has finally and incontrovertible been proven to be false, how can we pay our way in the world and maintain our standard of living?
No one seems to have the answer to this question, but it is one that will be answered soon. Once the wheels come off the credit card debt, a chain reaction like the one witnessed in November 2008 is likely to be triggered. The pressures are building already and it’s going to be interesting to watch it.
