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.
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.
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.
Beating the January Blues during the credit crunch
January 7, 2009 | Leave a Comment
Happy New Year to all our readers!
It’s that time of year again. All the Christmas festivities are over and the New Year parties and good wishes for the new year a not too distant memory. That’s what we all want – isn’t it? A happy new year. And whilst our friends and well-wishers all say the words, we all know that while some of that happiness may come down to good fortune (or luck if you prefer to call it that), those new year’s resolutions are part of working towards making our own happiness come about in the next twelve months. The January Blues are starting to set in as we start to wonder where the financial resources will come from to meet these resolutions.
How do we make that Happy New Year more likely?
In the midst of a credit crunch it is harder to do those traditional new year activities like joining the gym if financial resources are challenged. However, it is essential to make sure that our health and well-being are taken care of before we can have any realistic chances of tacking limited financial resources and making the cash part of our new year happier.
Physical and emotional well-being boosts on a shoestring
Here are Credit Crunch Helpdesk’s ideas on how toward away January Blues during the credit crunch.
- Invest in home equipment for health and fitness that will meet your needs throughout the year. A trampoline, Wii Fitness programme, weights etc will continue to be there for you to return to regardless of whether your enthusiasm wanes by February and can be used by the entire household. By contrast, a new year gym membership is dead money with nothing left to show except a lower bank balance if your enthusiasm wanes.
- Home made foods tend to contain less fat, are lower calorie and more nutritious than fast foods and takeaways. Taking your lunch to work and eating breakfast before you go will save money during the year and probably do more for your overall nutrition and health.
- Hobbies are great for an overall sense of well-being. It is a great stress reliever to have 30 – 60 minutes per day totally focused on something that you enjoy doing and is life giving. Whether it be craft activities, gardening or even doing jigsaws, the rest time from a busy schedule will make you more able to cope with stress during the week.
- Spend time with friends…even if you just meet for a chat / to play silly board games. Laughter and fun boosts out emotional well-being and small intimate gatherings make us feel well supported.
- Get more active. Walking to places costs nothing more than wear and tear on shoes. Fresh air and exercise helps to promote our immune systems and metabolism…all helping us to achieve a healthier new year.
All of the above ideas keep costs very low during these financially challenging times. Look out for our next post examining how we can achieve improved finances whilst avoiding the scams that are out there.
Government to underwrite loans to businesses?
December 15, 2008 | Leave a Comment
David Cameron (Conservative leader in the U.K) has, again, commented on the problem of banks being unwilling to lend to businesses in the current economic climate. The problem is that the banks’ fingers have been so badly burned by the credit crunch and resulting financial crisis that they are scared stiff of being caught out again – especially when the full impact of all that has happened in the economy has yet to reveal itself.
Cameron argues that intervention is needed to kick-start the process of lending to businesses and that the only way to give the banks the confidence to do this is for the government to act as guarantors on appropriate business loans thereby taking away the risk from banks.
He has argued that a national loan guarantee was “a massive state intervention to help the banks lend again.” This seems like a great idea…however, with a government up to its neck in debt as a result of spending, taxation and bank bailout decisions, where is the money going to come from if called on for bad debts.
I am with Cameron when he called for “new rules and incentives to create a new culture of responsibility” which need to be enforced by the regulating body. However, it seems like a high risk plan (if recession is leading to the fall of many businesses) for a highly in debt government to act as guarantor to high risk loans.
I know that some risk taking has been necessary to intervene in the economic downturn – but surely it needs to be low risk?
Santa to blame for the credit crunch?
December 12, 2008 | Leave a Comment
Netmums.com surveyed 1,000 parents this year and found that around 40% are saying that Santa has had to tighten his belt too this year. Around 5% were planning to have a frank conversation with their kids and shattering the myth of Santa so that their kids don’t build false expectations.
However, nearly half of respondants claimed they would do whatever it took to ensure that their children still has a good Christmas and would deal with the consequences later. It is precisely this attitude that has caused hundreds of thousands of people to ratchet up inappropriate levels of debt in order to live out some form of ideal of being able to instantly buy the things they and their family want perceiving is as a need. “I need to get my child present X or Y (or even X and Y) for Christmas” is the refrain whilst putting the cost onto the plastic and facing the mounting debts later. Dare I suggest that the most valuable gift that we can give out children this Christmas is love, quality time and humble gifts teaching them the true value of the season as well as the importance of being financially responsible?
Credit crunch rise insurance claims
December 7, 2008 | Leave a Comment
Why would the credit crunch raise insurance claims?
It is feasible that, in the wake of the credit crunch and the start of a recession that insurance claims will rise. As people planned holidays then find they have either lost thier job or are nolonger able to pay for it using credit, there is potentially a rise in fraudulent travel insurance claims.
The Observer Newspaper recently quoted Direct Line Insurance and the Absolute Fraud Management (AFM) service as expecting a rash of claims from unscrupulous policy holders. Of course, this problem will not only be reflected in people trying to recoup what they have paid on failed holiday plans….a rise in household policy claims as a means for unscrupulous people to raise funds claiming loss of expensive items is also expected.
How will the rise in insurance claims affect customers?
Chris Price at Direct Line added: “It is generally said that during an economic downturn insurers see an increase of fraudulent claims on their books.” As a result, we can expect an increase in the time takes by insurers over legitimate claims as everybody’s insurance claims will be carefully scrutinised and authenticated. Customers seeming vague or nervy in during telephone claims will be expecting a face to face interview…otherwise premiums could end up going sky high to compensate for fraudulant claims.
For the rest of us this may simply mean that we have longer to wait for genuine claims to be settled. The current financial crisis also means that customers are more likely to claim for loss or damage to lower value items making the claims process slow down due to claims volume.
Automobile Industry Affected by Credit Crunch and recession
December 5, 2008 | Leave a Comment
Falling car sales leading to manufacturing cutbacks in the automobile industry
I suppose it stands to reason that as credit becomes less easily available, those big ticket items like new automobiles are going to be one of the first industries to suffer. The credit crunch and recession seem to be feeding off eachother now. In the U.S, the U.K and Australia there have been announcements about cut backs in automobile manufacturing. The result? Redundancies / shorter working hours, less income available to spend in the economy and retail outlets suffer further.
So what is the fallout of cutbacks in the automobile industry (amongst others)?
I don’t know about you but I have really noticed (when out and about) how grim peoples’ expressions are. There is a lot of pressure on most households’ income ….Thanksgiving, Christmas, school recess (an needing to entertain the kids)….all these factors are a pressure financially at the best of times….let alone when credit bills are hitting the doormat and there is uncertainty about how many more paycheks might be coming in if the recession bites hard.
So how do we move forwards from here? When can we feel safe to spend again? Public perception is that the VAT reduction in the U.K is not expected to have much impact on the spending of many households …the main benefit might be on heating bills (but any saving is quickly offset by rising household fuel costs). Banks are enjoying lower interest rates but passing only a fraction of them on to the customers. Everyone is scared.
Well, back to the Christmas preparations…this year it all seems much more balanced…a bit of giving but having the space to remember the reason for the season.
“Woollies” – that great high street institution – in receivership. I can’t believe it!
November 27, 2008 | 1 Comment
I don’t know about you, but I was shocked yesterday by the announcement that Woolworths was going into liquidation with an enormous £385 million of debts that have been prevented from getting any larger and have forced them to look at their options.
Everywhere I went this morning, people were talking about it. Generations have bought their pick and mix and bargain toys there as well as those weird and wonderful household items that you just didn’t seem to be able to find anywhere else. I salute you Woolworths for all that you have been over the years. You will be a sadly missed presence in our town centres!
As the news was announced last night, there were other casualties of the credit crunch fallout looking like they were heading the same way – MFI, Dolcis, Ethel Austin to name but a few AND THIS IS BEFORE CHRISTMAS!!!! If businesses that have weathered out many a recession are going to the wall now, where will it all end as the post Christmas slump in spending comes around.
I don’t know about you but I think the enormity of this global financial crisis is starting to sink in. Yes. I have been watching the news. I know about the extent of the financial crisis. It is the hidden depths of its impact that is starting to reveal itself….and, as I meet people in the North of England who have been laid off from different jobs more than once in the last few months, I don’t think I’m alone in wondering where it will all end.
Can the Credit crunch be reversed by central banks?
November 23, 2008 | Leave a Comment
The last few weeks have seen a whole lot of negotiation by governments with central banks in the hope that the huge cash injections that were eventually forthcoming would avert the worst effects of the credit crunch. Wold leaders have been discussing together how they can work together to save the world from the horror that the subprime crisis has revealed.
How can central banks reduce the impact of the credit crunch?
The federal government and their opposites across the world have been pumping more money into the financial markets in hope that this will allow funds to move more freely so easing the credit crunch. Basically, this allows more banks to borrow more money more cheaply. These lower borrowing rates will also be secured against lower value collateral.
Will the central banks be sucessful in reversing the credit crunch?
What these arguments for federal cash injections into the banking system are ignoring is that the money is being used to try to patch up the injuries to the system caused by bad lending decisions. It now seems unlikely that a major recession can be avoided. I also suspect that inter-bank and bank-customer trust has been so badly impaired that we will never quite go back to the “good old days” of freely available credit quickly supplied. Nor should we.
The economic backdrop in the U.S, the U.K and Europe is appalling and worsening too. Suddenly all the lenders are a bit skittish and yesterday’s good risks for lending are now not looking so good a risk…especially with possible redundancies around the corner as the recession deepens.
This means that, whilst there is already a lot of bad debt out there, there will be more bad debt looming as jobs get lost and spending is cut back. Even other banks will take a long time to look like a good credit risk as nobody seems to know what dark secrets lurk on eachother’s balance sheets. It will take at least a year before that kind of information becomes publically declared and so the decision to lend to other banks can be made based upon transparently declared facts.
Everyone is starting to hoard money ready for any surprises in their own financial affairs…consumers, banks and businesses. I wouldn’t hold your breath that these cash injections are going to be made available to customers too quickly. All the banks have had a major scare and need time to catch their breath, see the impact upon their own financial stability, work out what on earth happened and try not to do it again.
