Quick summary of what's happening with the economy

**ferret** · 17 July 2008, 09:18

I think the current cliché is "A perfect storm".

Doomed.

**Badger** · 17 July 2008, 09:20

Originally posted by sasguru View Post

... companies going bust/and or poor results, which will lead to rising UNemployment.

**sasguru** · 17 July 2008, 09:21

Originally posted by Badger View Post

Thanks.

**BrilloPad** · 17 July 2008, 09:25

Originally posted by sasguru View Post

Posted this on another thread, but think it deserves a thread of it's own:

Oil prices are just one side of the doom.
The main problem as I see it is debt caused by poor lending practices. Currently we are seeing a credit crunch caused by poor lending on mortgages in the US. This debt was sold on to the world banks who have suffered as a result and withdrawn credit. This has led to a destruction in the housing market and hence confidence. This in turn will lead to a contraction in spending, which will lead to companies going bust/and or poor results, which will lead to rising unemployment. That will lead to the fallout from people defaulting on their massive credit card debt and a second round of pain in the financial industry. (Credit card debt is sold on just like mortgage debt). All the while the housing market will be falling like a stone. The whole pack of cards is collapsing.
Oil prices and hence higher costs for everything are just accelerating the process.

And my reply from the other thread :-

**if** oil prices drop then most things will cost less so interest rates will drop. Though I agree the bigger effect at the moment is the difference between libor and base rates.

But there has not been a massive effect on economy - yet. The shopping centres still seem full(or is it my imagination?). The roads still seem choked with cars. Where are people getting the money?

Maybe at the moment people are maxing out credit cards and overdrafts? When will this really start to bite? I can see alot of sense in your 2 year reasoning - in fact there is an outside chance of another depression?

As an aside - I find it incredible that inflation is **only** at just under 4%. food up 10% - but offset by falling cost of cars (who can afford one with petrol so high?) and DVDs and eating out.

**rootsnall** · 17 July 2008, 09:31

Originally posted by sasguru View Post

Currently we are seeing a credit crunch caused by poor lending on mortgages in the US

I think poor lending all over the place ! This one has been a whopper of a boom due to the exceptionally low interest rates used to patch things up post the twin towers events and dotcom crashes. They can't do any more patching so it's time for a whopper of a bust.

**oracleslave** · 17 July 2008, 09:38

Originally posted by rootsnall View Post

so it's time for a whopper of a bust.

Artificially created or natural?

**Xenophon** · 17 July 2008, 09:39

Originally posted by rootsnall View Post

so it's time for a whopper of a bust.

Fnar...

**DimPrawn** · 17 July 2008, 09:41

Can I make a point about oil prices (like gold prices).

Oil is not going up because there is a shortage of oil, it is going up because it is priced in US $, and the US economy is bolluxed and their currency is becoming worthless.

Since oil has intrinsic value and worth(like gold), the price of a barrel rises as the currency becomes worthless.

HTH

**BrilloPad** · 17 July 2008, 10:59

Originally posted by DimPrawn View Post

Can I make a point about oil prices (like gold prices).

Oil is not going up because there is a shortage of oil, it is going up because it is priced in US $, and the US economy is bolluxed and their currency is becoming worthless.

Since oil has intrinsic value and worth(like gold), the price of a barrel rises as the currency becomes worthless.

HTH

So if it is priced in EUR it will be okay? It might help but it will not affect root cause. production has not risen as fast as consumption.

Quick summary of what's happening with the economy