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Wednesday, 31 December 2008

Personal lessons from 2008

This year has been one where the word "unprecedented" has been banded about more than I care to remember. Indeed, in recent history this year has been unprecedented, however, over the course of human history or even the last century I think things have been overblown. Commentators and press columnists have both a very short memory and a desire to exaggerate. Yes things are bad, but they have been bad before and we have got through them.

But lessons can and should be learnt from the turmoil of 2008. I'm not talking about lessons for the government or financial system. Clearly there are plenty of lessons to be learnt here and things will have to change. But there are also personal lessons in the way we conduct our lives and see the world.

Here are a few that I'll be taking away with me:

- Pay little notice of forecasts made for more than a year. The difference between the forecasts made at the end of 2007 and the out turn from 2008 has been so large that forecasting the economy has lost a lot of meaning. I find it more useful to concentrate upon the current state of economies and the general outlook over the future.

- Laugh in the face of anyone who tells you that something is obvious or a dead cert. So many people I have talked to over the last couple of years have banged on about the property market and how it was easy to make money. With the market likely to fall around 30% from peak to trough many are now struggling having fallen into negative equity and overextended themselves on their mortgage. Never trust anyone that says "You'll always make money", its either a scam or a sure sign that the market is overheated.

- Plan more for the future. In the recent boom years it has been easy to live for the moment. Saving nothing and forgetting the grand plan. It has been easy to move up the career ladder and simple to get pay increases. However, it should be remembered that the economy is fragile and can turn very quickly. You'll need a Plan B when this happens.

- Hard work and education pays off. The boom times were easy for many people to get by doing the minimum at work. It often seemed to some that a little bit of a loud mouth and a sociable nature would get you further than hard work. Looking at my friends who have lost their jobs and those that are still in work, I would suggest that when things get tough those people who haven't worked hard and don't have their qualifications will be the first to be identified for the chop.

- You can still change jobs in a recession. Although companies are making many people redundant there continues to be churn within the economy as people move company and people retire. Therefore you should not see recession as a time where you have to stay at your current job. You can still climb the ladder even in the bad times...its riskier but higher risks tend to come with higher rewards.

- As bad as it will get better.

It has been a long hard year but there has been plenty of lessons for everyone. These are lessons for life, that will make you a better person and employee throughout the next lot of boom and the bust.

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Sunday, 6 July 2008

It just keeps getting worse

Every day the news on the economy in the UK, the US and the eurozone just seems to be getting worse and worse. There seem to be few silver linings at the moment and the prospect of recession in the US, the UK and in a number of eurozone economies is becoming ever more likely.

The UK may technically just about avoid a recession but it is going to be a struggle. There are a number of adjustments in the economy that are going to happen before we start to see more normal economic activity.

Sadly we are only at the start of the economic downturn. There is likely to be at least another twelve months of pain. Housing prices will fall, unemployment will rise and the governments budget will be strained.

The main hope is that world commodity prices might fall as the world economy slows. Lowering inflation next year, giving consumers a break and providing the international central banks with the room to cut interest rates and stimulate growth. However, with the volatile nature of commodities at the moment I wouldn't like to guess where they will be in a years time - its hard enough to tell where they'll be in a weeks time.

Its all looking pretty grim at the moment. Here's hoping for a summer lull...

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Thursday, 6 December 2007

Interest rate cuts

With the Bank of England cutting interest rates today it seems like some of my predictions for 2008 seem to be coming true - not that they were that hard to see. Hopefully the Bank has acted quick enough to stem some of the worst outcomes for the year.

The housing market will slow but if rates continue to fall then those people who have been holding off buying may start to come back into the market and look for bargains. This could help to keep prices from falling too far.

The banking crisis will continue to be a problem for both the banking sector and the wider economy. However, this positive move by the bank could help to reduce the cost of commercial borrowing and start to reduce the risk premium banks have currently placed upon borrowing. As a result businesses will struggle to find capital to expand but by the middle of the year liquidity problems could start to lessen.

The consumer is set to be squeezed in 2008. The previous interest rate cuts will hit home owners, especially with many coming off their fixed rates in 2008. However, some of the major building societies have already taken the positive steps of reducing their mortgage costs as a result of today's cut.

There continue to be many downsides facing the economy in 2008, however I think we must avoid talking ourselves into a recession. There are upsides and downsides. A period of slower growth will probably be good for the economy in the long run as it will make us reconsider some of the poorer decisions made over the boom years. However a sharp slide into recession will leave scars that will take a long time to heal.

As I always mention, whatever happens, people will be losing their jobs in 2008 and as such competition at interview will become more intense. Take advantage of this site and many others to try and stay ahead of the game.

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