What can be done now insolvency figures have reached an all time high?
November 6, 2009 | Leave a Comment
Official figures relased by the UK government for this week relating to the third quarter of the year show insolvancy figures to have reached an all time high. This news should hardly surprise us considering the numbers of people who were cheerfully swaping zero interest credit card deals as a means of managing debt and avoiding the inevitable. The credit crunch has a noosehold on this approach as more and more people try to borrow their way out of debt. Add to that the pressure of recession led redundancies and reduced household income and insolvancies are bound to increase.
So what is the extent of insolvancies now in the UK?
In the three months to he end of September, the Insolvancy Service repos that 35,242 people became insolvent. This represnts a 7% increase on the previous quarter and 28% on a year ago. In the same time period, just over 4500 businesses went into liquidation. However, despite these high figures, there is evidence of these statistics slowing down compared to the increases of the second quarter of the year.
What options are open to me if I might be close to insolvancy?
Dealing with insolvancy means examining your situation on several levels:
1. It may be that, by changing how you spend your money, that you can regain control of the situation and avoid insolvancy. Living on a Dime is a great little set of inexpensive books that take the reader through the steps to settle debts, manage money and to live and cook frugally. The tips you’ll pick up from this book will more than cover its cost in just a few days if you put them into action.
2. If you have developed spending patterns that are drawing you deeper into debt with accumulating posessions and enjoying holidays etc then are you left with that hollow feeling of despair that not being able to pay for it all brings? If this rings bells then Christian Financial Freedom offers sound and reliable advice to liberate you from these behaviours.
3. If you are really feeling that insolvancy is a real risk, the acclaimed book Eliminate Debt Fast without Bancruptcy or Debt Consolidation is well worth a read. Nobody wants the humiliation of insolvancy proceedings so to have the guide that will take you though the highly effective and discreet steps of negotiating and implementing debt resolution as quickly as possible is a great asset.
These are the three key resources that Credit Crunch Helpdesk recommends to its readers for assisting to manage finances and resolve debt in the recession and its aftermath.
Bankruptcy for Blockbusters?
March 3, 2009 | Leave a Comment
Another key High Street name, Blockbuster, is the latest casualty of the credit crunch and recession. Whilst, understandably, unwilling to comment, it appears that Blockbusters is exploring bankruptcy.
Edward Woo, Wedbush Morgan Securities, said: “Blockbuster has been facing some liquidity issues for a while now and this is one of the options they have. It’s not a great one.
“I don’t think it’s going to result in a liquidation like Circuit City, but if you’re doing business with them, it’s not a great thing,” he said.
Like many key retail businesses in the current financial crisis (Woolworths being another notable example), Blockbusters has been trying to re-invent itself in order to reduce the negative impact of online dvd and video game sales upon their business. With many online rental schemes available in the U.S and U.K it has become harder to encourage as many customers to come out to choose and return their films when they can now rely on the convenience of a postal rental service at an often lower cost.
Beating businesses down on price is the name of the game for consumers now faced with greater choices…especially during a recession. Let’s hope that Blockbusters find an alternative to bankruptcy as a way forward out of their liquidity issues.
Banking inquiries show the extent of risk taking
February 26, 2009 | Leave a Comment
Paul Moore has been in the news this week claiming he had been sacked by the HBOS boss, Sir James Crosby, for arguing that the bank was taking too many risks. Sir James resigned from his role assisting the Financial Services Authority arguing that, whilst he feels these claims are unfounded, he does not want to make the FSA’s role any harder in these challenging times.
Earlier this week several bank leaders publically apologised for their role in the financial crisis. For many of us it is a relief after watching the horror of the world banks’ decisions unfold around us to witness some degree of culpability for their decisions…however sincere or not those apologies. Whilst the silence was almost deafening in the immediate aftermath of the global finacial crisis, it was hard to have any respect for those who were still rewarded with bonuses for spectacular failure.
Unemployment levels rise close to 2 million
February 23, 2009 | 1 Comment
The U.K unemployment figures reached 1.97 million this week. This came as a bit of a surprise for many who believed it would pass the 2 million mark. They are still, however, the highest unemployment levels since labour came to power in 1997.
The scary thing is that business bosses predict that unemployment will top the 3 million figure by the time this financial crisis and recession are over. Experts have been describing the current employment and business situation as a depression this week.
Even major cash and carry stores such as Makro have closed stores this week. When places geared towards saving money for their customers are closing down you just know that there is trouble afoot is they are not making enough sales.
Meanwhile, job vacancies have fallen by 75,000 to just over 500,000 making the coming months very bleak indeed.
Hundreds of U.S Corporate Frauds ?
February 11, 2009 | Leave a Comment
The FBI today informed Congress that the possible cases of financial impropriety and fraud have risen in the U.S from 38 to around 100.
In his testimony to the Senate Judiciary Committee, FBI Deputy Director John Pistole compared the investigations to the probe into the Enron Corp collapse. A U.S. Justice Department official said the agency was considering creating a national mortgage fraud task force. This would be similar to the one held over Enron’s enquiry.
It seems that there is no end to the revelations that the aftermath of the credit crunch are going to reveal to us.
Is there a credit crunch crime wave?
January 26, 2009 | Leave a Comment
Recent govenment statistics show that, whilst overall reported crime is down in the United Kingdom, domestic burglaries increased by 4%, fraud and forgery increased by 16% and drug offences up 9%. Shadow home secretary Chris Grayling has claimed that these shifts are directly linked to the credit crunch with more people either turning to desperate means to deal with financial hardship ….or indeed numbing the worry through resorting to drink or drugs.
Is this a trend that readers of Credit Crunch Helpdesk have observed? I know that, personally, the number of scamming and phishing emails that I receive on a daily basis have quadrupled….undoubtably some people must be taken in by these for them to be so prevalent.
Please post your stories so as to warn readers what to look out for and Credit Crunch Helpdesk will then run a series of articles about how to tell if a communication is a scam and what to do about it.
Could setting up a “bad bank” thaw out the money markets?
January 17, 2009 | Leave a Comment
Gordon Brown has recently suggested to German chancellor Angela Merkel in Berlin that the setting up of a “bad bank” (to take on all of the risk and bad debts of the high street banks and so free up money markets) may be an option. It has even been suggested that Northern Rock may be used for this purpose.
This suggestion has come hot on the heels of the news in the US this week, that the government has injected $20 billion into Bank of America, and guaranteed bad assets to the tune of $118 billion, as the US Treasury took a stake in the bank. Clearly, argued Brown, the banks are not going to lend freely again until they know what to do with all of these bad debts.
Partial or complete nationalisation is becoming a growing trend in trying to resolve the global financial crisis. This has also been seen in Ireland last night when the Irish government nationalised Anglo Irish Bank to protect it after a recapitalisation plan was felt to be insufficient to resolve its problems.
It is evident that much more stringent monitoring of the financial institutions is going to be vital in protecting against any recurrence of this financial crisis. Perhaps partial or complete nationalisation is a good step towards the increased accountability of banks?
Global banking crisis deepening further
January 15, 2009 | Leave a Comment
Well, who’s enjoying the 2% bank interest rates? They seem to be at an all time low (even though the U.S and Japan are “enjoying” 0% interest rates) but there still seems to be a crisis over whether money will be loaned to medium and small businesses in order to get tham over the cash flow crisis that the recession and credit crunch have brought.
A big part of the problem of the global banking crisis deepening further is that global inter-bank lending has ground to an all time low and that was an important part of the availability to funds to lend to consumers and businesses. There also seems to be a lot of debate in the U.K as to who should shoulder the risk for future bad lending decisions…the banks or the government. If the risk is to be shared, the public are concerned that tax payers will be carrying the can for bad lending decisions by the banks.
In the U.S, JP Morgan Chase have announced a 76% drop in quarterly profits due to writing off bad debts and re-directing funds to buffering themselves against the worst of the global financial crisis. Mitsubishi UFJ Financial Group (Japan) have meanwhile reported $3.2 billion loss on its securities portfolio in the third quarter of its financial year ….mainly due to the challenges being faced in the Japanese stock market. Their situations seems typical of major financial institutions globally….so it seems hardly surprising that international inter-bank lending has ground to an all time slow.
Unemployment and hopes for a V shaped recession
December 30, 2008 | Leave a Comment
In recent months, the financial crisis has made job security for huge swathes of workers a thing of the past. In the months of June to August 2008 (inclusive) there was the biggest increase in unemployment since the middle of the last recession in 19991. It was also highly ominous that there was the biggest slide in the numbers of people in jobs since 1993.
Over this Christmas season we have seen further business closures. The cheapness of goods in the shops leading up to Christmas beg the question, will any more of the familiar retailers in the malls be going into liquidation in the New Year? Nearly 2 million people were unemployed in the U.K last week.
How far will the fingers of unemployment be reaching?
In the build up to Christmas, job losses in the financial, housing and service sectors have been the most obvious to happen. Alongside this it has become clear that economic hardship has taken its toll on the retail outlets as well as manufacturing. Even exporters, who were expected to benefit from the falling value of the pound, have not enjoyed the boost they hoped for as potential buyers abroad cut back on their own expenditure.
How do our unemployment levels compare with abroad?
U.K unemployment is still a lot lower than our competitors abroad with, for example, 5.7% compared to Germany’s 7.3% unemployment. With U.K workers being perceived as more flexible in recent years, this stands the U.K in good stead for recovery. The hope is that we will have a short sharp V shaped (rather than U shaped) recession and will come out of it quickly…. although predicting the outcome of this unique financial crisis is very tricky to do as we are all, globally, in uncharted territory.
The spectre of deflation on the horizon…what’s the problem with deflation?
December 18, 2008 | Leave a Comment
Deflation in context
Deflation. Its the lastest word being bandied about by politicians yet, only a couple of months ago, it was inflation that we were all worrying about (currently at 4.5% and still above its 2% target). So what does all this mean? If deflation means falling prices surely we should all be cheering and start shopping again?
Maybe. In the short term people may react in just that way to deflation. In the medium to long – term it should be making us nervous. I was noticing that twinge of concern the other day. I went into a store that I use regularly to but a top for my daughter. Whilst there were a lot of marked down goods, the one I chose had not been. Its price was just under $14. I go to the checkout and the assistant tells me that the price is now $4. How did I feel? Pleasantly surprised I mean everyone loves a good bargain don’t they? I double checked the price was correct and it was confirmed that everything was marked down to this extent. I then felt nervous. All shops mark down stuff….but to this extent of new stock?!!! Something felt wrong. How can stores survive with sustained mark -downs at this level?
So what is deflation and what does it mean for the economy?
In the short term, deflation (falling prices) is not a huge issue for the economy provided it does not last more than a few months. The UK economy has not seem a fall in the Retail Price Index (RPI) over a period of a year for over 40 years. No long term damage was done then…just a slowdown in the economy.
The Bank of England predicts that the Retail Price Index will fall below zero sometime in the coming year. This is a natural consequence of the drop in interest rates filtering through on the cost of mortgages and other borrowing.
However, the Consumer Prices Index (CPI) is expected to fall to around 1% some time next year (instead of the government target of 2% for inflation. The CPI falling below target levels is just as worrying for the Bank of England as being 2.5% above target. If deflation happens in the coming year, the Bank of England will become obliged to raise the interest rates so as to bring inflation back into line. If they don’t, retailers will be forced to lower their prices to such an extent that profit margins become too tight or, worse still, disappear. How can the economy start to grow again then?
Japan’s experience of deflation
In the early 1990s Japan was experiencing falling property prices and business failures. The government failed to intervene early. Failed business’ assest were being sold off in fire sales making an already weak economy even weaker. By the time Japan’s central bank started to to take action by cutting interest rates, increasing spending and reducing taxes it hardly had an impact. Japanese banks were taking all the failed loans off their balance sheets and owning up to haw much money had been lost but it was too much too late.
By the late 1990s deflation had set in for an already stagnant economy. People start holding out on buying goods for longer at times like this waiting for prices to fall. As they fall, profit margins are squeezed then eventually some businesses will be unable to sell their goods at a profitable price compared to more efiicient competitors and their business will fail. Resulting unemployment leads to less spending power in the community and this exacerbates the problem.
It took Japan a nearly 7 years to see positive inflation after that. Losing 10 years of potential economic growth is the last thing that the government wants to see. That is why tax cuts and major interest cuts have happened quickly in the UK.
