5 things that made me smile this week

· More rate cuts are on the cards. [The base rate has never been below 2% since the Bank of England received its Royal Charter in 1694, but there’s a first time for everything.]
· Speculation the Government may cut taxes. [Stop dithering. Do it now and do it big before it’s too late.]
· The Competition Commission will ban the selling of PPIs when people take out loans. [Well done CC, but what will lenders do in response?]
· George Osborne speaks out against Britain’s plan to borrow to get out of jail. [Finally, someone is prepared to speak up against the ludicrous idea that you can borrow so you can live beyond your means.]
· Alien worlds have been discovered in outer space. [I hope they have any money to lend planet Earth.]

5 things that made me frown this week

· Lenders can use a law dating back to 1925 to evict homeowners who fall two months in arrears without going to court. [Which Government minister took his eye off the ball then?]
· The Government plans to scrap council housing for life to cut waiting lists. [Wouldn’t building more affordable housing be easier?]
· The number of people out of work rose to 1.8 million in October. [When will politicians learn they can’t promise people full employment?]
· BT to shed 10,000 jobs. [GlaxoSmithKline, Virgin Media, Taylor Wimpey, RBS and Yell have already announced redundancies – who will axe jobs next?]
· One in five children shop online behind their parents’ backs. [What kind of society are we living in if you can’t even trust your own children?]

5 things that cheered me up this week

• Barack Obama becomes the 44th US President. It’s a vote for change. And boy, do we need it!
• Skipton takes over beleaguered Scarborough building society. Take note Mr. Darling, this is how consolidation is supposed to work in the banking industry.
• The audacious 1.5% cut in interest rates by the Bank of England. So, the MPC can act decisively if it needs to.
• Being sandwiched between mortgage titans Ray Boulger and Tim Wilson on this week’s Money Talk podcast.
• I found a £5 note on the pavement this week. Can you beat that?

5 things that disappointed me this week

• Three-month LIBOR dips below 4.5%, but it’s still 1.5% higher than the BoE base rate of 3%. Come on you bankers – give us homeowners a break!
• Gordon Brown has snatched £17,000 from every worker’s pension pot due to his decision to axe tax relief in 1997. Thanks Gordon. And by the way, what did you do with our money?
• A 26% jump in the number of firms going bust. Sadly things are going to get worse next year.
• There will be a global recession next year according to the IMF, and the UK could shrink the most in the Group of Seven nations. Didn’t Mr Brown tell us we were the best placed to weather the downturn?
• A packet of cigarettes could cost £76.41 in 2058. Give up now before you need to take out a mortgage just to light up.

It seems that everywhere you look the news is bad. Last week, the Ministry of Justice reported that 400 mortgage repossession claims have been processed through the courts daily. The suggestion is that over 100,000 people could lose their homes.

Elsewhere, the British Chamber of Commerce reckons that unemployment in the UK will rise to more than 2 million for the first time since 1997.

Meanwhile, the former chief economist of the International Monetary Fund, Kenneth Rogoff, has put the cat amongst the pigeons by predicting the collapse of a major American bank within months. He stopped short of revealing the vulnerable bank, but most pundits have good a idea as to which one he is referring to.

But here’s the question: Can we really talk ourselves into a recession?

The simple answer is no.

Whether an economy expands or contracts is governed by the underlying economic health of the nation. And because it is nigh on impossible to control economic growth at a uniform rate, such things as production, consumer spending and household income will necessarily fluctuate over time. It’s called an economic cycle. And no amount of well-intentioned flannelling by politicians can prevent an economy from sliding into recession when growth stalls.

Of course it can be argued that we could try to spend ourselves out of a recession given that two-thirds of the economy relies on consumer spending. But doing so is tantamount to believing that we can fly if we flap our arms hard enough. A quite preposterous idea!

What we are witnessing is an economic downturn that was inevitable following a decade of strong growth. For some people, it will be the first economic slump they have ever experienced. For others it is just another economic slowdown. But the surest way of surviving the recession, any recession, is to hunker down, reduce spending, and pay down debt that we have accumulated.

Some people believe the recession could be long and drawn out, and they may well be right. But it will feel a lot longer and more drawn out the more debt you carry.

Welcome to my blog page, in which I will share with you my personal thoughts about anything and everything that takes my fancy.

If you are after anodyne comments then you won’t find them here. This is a no-hold-barred blog page, where we word-wrestle on topics that include the rights and wrongs of short-selling, the ups and downs of the property market, and the ins and outs of what I talk with studio guests about when the microphones are switched off.

Let’s not forget the good and bad of millionaire footballers, the light and dark of green products........ Edited at 2008-07-24 07:25:12