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Monday, 29 September 2008

Financial chaos and the jobs market

The problems of global finance are entering a new and profoundly different stage. It is going to get a lot worse before it gets better.

It seems that as every day passes another bank is going bankrupt, being forced to merge or being bought out by a government.

This crisis is not limited to the US and the UK, it is a global problem. The government of Iceland was today forced to nationalise the countries third biggest bank and the governments of Holland, Belgium and Luxemburg have bought 49% of Fortis Bank.

More banks will collapse in the coming weeks and months and more will be brought under the wing of national governments. The $700bn bail out process is likely to be passed in the US but it could be a long time before any sort of stability returns to the market.

This chaos will translate to the wider economy and will harm businesses from every walk of life. Jobs will be lost as businesses either go bust or attempt to cut costs. Make sure you do everything possible to ensure that your company needs you. Now is the time to be preparing yourself for the worst.

If you do lose your job then make sure you stand out amoungst the many more candidates that will be applying for a smaller pool of jobs. Coming to this web site is a good start for learning about writing a convincing CV, interview technique and finding out the sort of questions that could be asked at interview.

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posted by Carl Malways at | 1 Comments Links to this post

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Saturday, 6 September 2008

Credit crunch continued but now with an end in sight

The credit crunch is now over a year old but to many it must feel like it is a lot longer. Those working in banking, housing or retail have felt the direct impact of failing financial markets, rising borrowing costs and higher food and energy bills. These problems are not going to sort themselves out soon.

Financial markets still have a long way before they will be back to normal. According to the Nationwide today, they do not expect an end to the current problems until 2010. It seems likely that the banking industry will have to go through a long period of painful adjustment.

Without a return to normal banking conditions we will not see an end to higher and retricted borrowing. Therefore it will remain difficult for consumers and businesses to get debt for a mortgage or to expand their business without it being exceedingly costly. As a result housing prices will continue to fall in the UK and businesses will find it very hard to expand.

As the problems continue more and more businesses will be forced to cut headcounts and unemployment will continue to rise. This will have a further negative impact upon the economy as those without work will be forced to stop spending and those still in work will reduce spending in preparation of potential unemployment.

But there are now a few signs of what should help to bring the current downturn to a halt and start the economic recovery. It seems that some parts of the economy are now beginning to work as expected. With the economy slowing demand for goods such as food and oil are declining, and therefore, following the simple rules of supply and demand, prices have fallen. Oil is now $40 below its peak and food prices across the board are down. Wheat is currently slightly cheaper than it was a year ago.

Falling prices will aid economic recovery in two ways. The most obvious is that consumers will have more money to spend on other things. Given that many of the commodities that have risen so sharply in price over the last year were imported, the rising cost has had a net negative impact on the economy, having a greater negative impact on consumers and businesses than the benefit given to domestic producers of these commodities.

The second and more significant impact of falling prices is the impact it has on inflation. Across the globe rising prices have pushed up inflation. This has limited many central banks, such as the ECB and the Bank of England, in their ability to cut interest rates. The fall in commodity prices will aid the ability of the ECB and the Bank of England to cut interest rates, helping to cut borrowing costs and aid economic growth.

One further upside of potentially lower interest rates is that it will cut the valuw of the pound and the euro. This should help to stimulate exports as they become relatively cheaper. Its not good for those of us about to travel abroad, but it should have a net positive impact upon the British and European economies. Given that some of the earlier oil prices were also stimulated by a weak dollar, a weakening euro may even help to push oil prices down further.

So there is a potential end in sight for the credit crunch and its associated economic problems. This end is over a year away, the US, UK and eurozone economies will probably see recessions but with an end in sight it is easier to prepare for the year ahead and put yourself in the best position to weather the storm and take advantage where possible.

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posted by Carl Malways at | 0 Comments Links to this post