Is 2008 a crisis year?

[Nancy117]

Is 2008 a crisis year, i mean about the ecnomic especial the trade, the international trade.

my Uk, USA, Canada long-term business customers place little orders this year, more strange, they do the business with out any zealous, may i know why?
by the way, i am chinese, i do the busniess for about 14years, and have many many overseas friends from all over the world,

i not only do myself business, i also do business for others, i find suppliers for customers for the overseas business friends, i got helping others as my pleasure.

 

[getsetgonline]

I was just thinking the same. Driving to the office today, the readio was full of doom and gloom. I ask though, is it really that bad?
I run a travel business and we have not been affected whatsoever.

 

[borobabe]

On the news last night I half heard a story that said retail sales were up (think it was highest increase in 22 years but I may have misheard).

 

[borobabe]

Just found this article but there are others that say it is due to the nice May weather so to be taken with a pinch of salt apparently.

 

[Mr_Wizard]

I was doing some work in a clients office yesterday afternoon and have to admit to eavesdropping in in a really worrying conversation, one that may answer the puzzle as to why the recently released retail sales figures were unexpectedly high.

Of the 4 people having the conversation 3 of them are behind with their mortgage because they were using that money to prop up the rising cost of food/fuel/etc. I wonder how much more of that is going on, have we reached a kind of 'I just don't care anymore' point and people who can't borrow any more money are simply diverting funds.

For all of the wrong reasons I can remember the last house price crash and rising interest rates and I happen to think we're close to the edge of a major problem. I've been hearing this tale of 'booming economy' from our wonderous government but nobody sees to mention the one and a half trillion pounds of borrowing it's built on or the fact they've sold off the family silver.

I can't help but think there's a sting in the tail somewhere along the line.

 

[quikshop]

I'd be sceptical of any official figures, everyone is playing an angle including the report authors and it could be designed to 'justify' the Bank of England increasing interest rates to help combat inflation - or to put it in more simple terms, to take more money out of everyone's pocket to stiffle spending to control inflation

 

[WillWynne]

Until this week we've seen no probs. But this week has been pretty grim in terms of trading. I guess it doesn't help when you've got a major football championship, good weather and all the news sites and programmes filled with woe, such as the governor of the bank of England issuing bleak warnings...

 

[streetslocal]

I believe the crisis is getting worse.

I also believe the fuel crisis is going to be Gordon Browns coal crisis equivlent.

I believe under Gordon Brown we are going to fall into a major melt down one of which he has helped to create.

Fuel for example the more it goes up the more he makes in tax??

Why can he not reduce tax on fuel as an emergency measure?


This should help with that.


In regards to the housing market this is a international thing but i think again this could be reduced.

 

[dataferret]

It is not all bad news. According to the Aztec calender the world is not due to end for another 4 years (Dec 31st 2012) so you can take comfort in the thought things could always be worse

 

[An Oasis]

I also believe the fuel crisis is going to be Gordon Browns coal crisis equivlent.

I blogged about the hidden scam behind the fuel er crisis... not so much a crisis more certain ferkers making dosh from hyping the market.

http://www.realoasis.net/?p=624

 

[Cornish Steve]

It's quite amazing. The official economic numbers for unemployment, inflation, and interest rates are good - historically, much better than we've seen in the past. A majority of people are stating that business has been unaffected, although there will always be weekly lulls. Yet, so many people write that we shouldn't believe hard data and that "they believe" things are bad. It's depressing to see just how much impact the media has on our opinions.

Like Henry Ford once said, "whether you believe you can or you can't, you're right". If everyone tries hard enough to believe things are falling apart, they will. On the other hand, if we see through all the whining by the media, we can rebuild consumer confidence and see a much improving economy. As someone suggested in another thread, if we really want to know what hard times are, return to the days of Edward Heath, the three-day week, strikes across the country, rampant unemployment and inflation, and interest rates off the scale. But we survived.

 

[Matt1959]

Of the 4 people having the conversation 3 of them are behind with their mortgage because they were using that money to prop up the rising cost of food/fuel/etc. I wonder how much more of that is going on, have we reached a kind of 'I just don't care anymore' point and people who can't borrow any more money are simply diverting funds.

This is where the problem is. If it ain't affecting you, you won't know about it. Theres a swath of people who can't make ends meet as costs push up and up and up and yes, I think it's a timebomb. Its all right for us business types, we can put our prices up a bit, work a bit harder, be a bit cleverer but for ordinary 9 to 5 PAYE, I think its nightmarish times....

 

[sysops]

It's quite amazing. The official economic numbers for unemployment, inflation, and interest rates are good - historically, much better than we've seen in the past. A majority of people are stating that business has been unaffected, although there will always be weekly lulls. Yet, so many people write that we shouldn't believe hard data and that "they believe" things are bad. It's depressing to see just how much impact the media has on our opinions.

Spot on Steve, well said. A couple of points to add.

- Oil prices are high, but it's a speculative bubble, not because of lack of supply. It will soon burst.

- House prices had to come down, and it's a good thing. The main reason retail spending is up is because people are spending less on houses, so have more money to spare.

 

[hughlss]

Nancy117,
I'm not surprised that you've noticed business from the UK is slowing. I import from China, and, up until recently ordered full containers at a time. From as long ago as just before last Christmas, business started to slow and now it's very quiet with turnover about 60% down on last year.
I import machines and accessories from about 6 different manufacturers and trading companies - my latest order from Nanjing is only about half a container and would normally be about a half pre-sold - I've sold none!
This year I will break-even only.

Hugh
btw, to make matters worse, all my pro-forma invoices are coming in with a 15% or more price increase, with more on the way!
I believe America is also struggling, Europe will be next when the economic crisis spreads there.

 

[Cornish Steve]

I believe America is also struggling, Europe will be next when the economic crisis spreads there.

The downturn in the US appears to be over. The stimulus package spurred the economy. A little more time is needed to get through the housing problems in some regions, but it looks like it growth time again. The doom and gloom in the media is because they want their candidate elected. The economic numbers tell a different story, and things are looking up.

 

[hughlss]

I'm quite surprised at your reply as I believe there's much worse to come in America before the economy improves. Ditto the whole world.

Just 2 extracts from a report this week:
"The Royal Bank of Scotland has advised clients to brace for a full-fledged crash in global stock and credit markets over the next three months as inflation paralyses the major central banks," reported Ambrose Evans-Pritchard".

and,
"For now, the situation is worst in the States. That's no surprise, given that they are further into their slump than anyone else. The US default rate on high-yield debt hit 1.89% in May, up from 1.64% in April, and the highest in more than two years.
It's going to get a lot worse. The rate is expected to surge to 4.7% within a year. And there's a 20% chance that it could shoot up to 8.5%, said S&P. That would see "corporate casualties piling up faster than in many years, as economic conditions deteriorate and volatility in the financial markets stays high."

IMO, things will get a lot, lot worse, both in America and the UK - in fact - worldwide. Europe will be the next casualty - Spain has already experienced a collapse in its housing market and prices across the board are rising.
Asia is also suffering the problem of inflation - China especially so.
I know the media are not to be trusted, but when the banks start to say it's bad - then..................it's bad.

Hugh

 

[leemason]

It is not all bad news. According to the Aztec calender the world is not due to end for another 4 years (Dec 31st 2012) so you can take comfort in the thought things could always be worse

So we've just got time to pay for the Olympics befor the end...

On a serious note I feel that this could be worse than the late 80's / early 90's. The major banks are still yet to admit the overall cost of the sub-prime mortgage problems. Anything that affects the banking industry as badly as this will almost certaining have a very bad affect on all other economic activity.

We have the possible prospect of the economy slipping into a stagflation (stagnation + inflation) situation with:

Rising inflation
Rising interest rates
Rising business costs (inc. transport, raw materials, etc)
Rising wages and industrial unrest (because of rises in domestic prices inc. food, fuel [motor and household], etc)
Rising Government debt (which is already hitting Labour's own debt limits)
Rising Tax (inc. council taxes which will continue to rise above inflation)

all combined with a stagnant or shrinking economy.

 

[PeterCarruthers]

I don't know about other areas, but Ringwood has seen two estate agents close in the past 2 months and a couple are up for sale - but with few buyers in sight it seems.

It's not a UK problem - it's global. My SA client base has dropped by 20% since the beginning of the year - that's 250 small businesses who have closed their doors in 6 months.

That's my reality, not the press adding their spin.

Since closing my own business in 1992, and losing everything in the process, I have focused on ensuring that I always have at least one "Plan B" - and that keeps me aware of what's happening around me. It's not a question of being positive (I have always been), it's a question of making a realistic assessment of what's happening.

I don't believe that just working harder, or just staying positive, is the answer. I think there is a fundamental shift happening, and it makes sense to assess what that means in each of our businesses and plan accordingly.

No matter how bad it gets, it is just a season. next month/year will be better (or worse). The business environment is like the weather - constantly shifting.

 

[deniser]

My opinion is that the whole of the UK economy is based on the hypothetical value of the property market, not on solid foundations. It is like a giant house of cards and is about to come crashing down.

For as long as people have equity in their houses, they can keep borrowing or cashing it in by downsizing. Whilst property prices were rising, you can keep doing that and then spend the money - which most of the UK economy is dependent on. As soon as that equity is wiped out or banks are no longer willing to lend at low rates, all that stops automatically.

Property prices have gone up to a level that is no longer sustainable. First time buyers and buy to let landlords can no longer enter the market at the bottom level because they have reached that ceiling where the figures no longer stack up which has a knock on effect on the higher value homes.

So now we have construction companies with lots of unbuilt units which they can't sell leading to them shelving plans for any further development. This has massively devalued their share prices (having a serious effect on pension funds etc who own those shares) and has a direct effect on everyone associated with construction from tradesmen to etstae agents and mortgage brokers to furniture retailers and many more.

And anyone owning a second hand flat or starter home can't sell either meaning that there is no-one to start off the property selling chain. So those who wanted to retire and cash in the money from their house can't and are now stuck in a house without the income they were expecting, those who are in the habit of borrowing more when they need the money can't and those who lose their jobs are completely stuck. Add negative equity into the equation and things are pretty dire.

I think this is going to much worse than the later 80s/early 90s which I remember vividly. The commercial property market will follow and then the whole economy will collapse. As there is a housing slump roughly every 15 years, this one has been overdue and has been entirely expected and predicted. Anyone who has been caught out and borrowed more than they can afford only have themselves (plus the banks) to blame.

The greed of the banks has fuelled this reckless borrowing spree. No-one should ever be lent more than 3 times their income and the margins on buy to let should have been much greater. They could have kept the current situation under control had they not lent people so much money with income multiples up to to 6.

So I think 2008 is only the beginning of the crisis which could last for years.

 

[Cornish Steve]

I'm quite surprised at your reply as I believe there's much worse to come in America before the economy improves. Ditto the whole world.

Not at all. America has not experienced a recession, just a downturn. The economic numbers are pretty good: inflation, interest rates, and unemployment remain close to historic lows. The problems are very regional. For example, while house prices plummeted in Miami (where they had previously soared out of control), prices actually went up in Charlotte. Here in Atlanta, I've not heard any announcements on the radio about companies laying people off. Years ago, when we were in a recession, you'd hear that type of thing all the time. As I mentioned, the media want their candidate elected, so they'll keep portraying the economy in a mess until the end of the year.

IMO, things will get a lot, lot worse, both in America and the UK

Of course, your opinion is as valid as anyone else's, but I don't see how it fits the facts. One thing that could trigger problems in the US is if the party in control of the Senate keeps blocking oil drilling in the US. The country has enough oil reserves to be self-sufficient for several decades, but the idiots in power have blocked drilling for 25 years. Thankfully, more and more people are demanding that the government bring an end to this stupid policy. Right now, oil prices are high in part because a lot of people are speculating that the US won't start drilling. If it does, oil prices will go into a steep decline - and that would boost economies all around the world.

 

It's quite amazing. The official economic numbers for unemployment, inflation, and interest rates are good - historically, much better than we've seen in the past. A majority of people are stating that business has been unaffected, although there will always be weekly lulls. Yet, so many people write that we shouldn't believe hard data and that "they believe" things are bad. It's depressing to see just how much impact the media has on our opinions.

Like Henry Ford once said, "whether you believe you can or you can't, you're right". If everyone tries hard enough to believe things are falling apart, they will. On the other hand, if we see through all the whining by the media, we can rebuild consumer confidence and see a much improving economy. As someone suggested in another thread, if we really want to know what hard times are, return to the days of Edward Heath, the three-day week, strikes across the country, rampant unemployment and inflation, and interest rates off the scale. But we survived.

Quite right Steve ask your self what has in reality changed in the last six months ,nothing but peoples confidence,shaken by media frenzy as usuall.

But the world keeps turning and people go to work same as ever.

so is our whole economy based on confidence rather than what we do.?

Earl

 

[Faith28]

Quite right Steve ask your self what has in reality changed in the last six months ,nothing but peoples confidence,shaken by media frenzy as usuall.

But the world keeps turning and people go to work same as ever.

so is our whole economy based on confidence rather than what we do.?

Earl

That's what I thought...confidence and fear. Our economy seems to be based on these two emotional yo-yos.

 

[Cornish Steve]

so is our whole economy based on confidence rather than what we do.?

That's what I thought...confidence and fear. Our economy seems to be based on these two emotional yo-yos.

The economy thrives on consumer confidence. How many people have posted to these forums asking whether they should start a business in the current climate? Others won't spend money because they are worried about the next few months. Both decisions hurt the economy. If I remember correctly, two-thirds of the economy is based on consumer spending. If the media convince everyone not to spend, two-thirds of the economy is affected. It's reckless and irresponsible of the press and our leaders to spout nonsense about the economic sky falling down.

 

[Dogwalker]

Driving to the office today, the readio was full of doom and gloom.

That's the trouble isn't it? The more the media push these kind of stories, the more people panic and stop spending.

 

[leemason]

That's what I thought...confidence and fear. Our economy seems to be based on these two emotional yo-yos.

The main reason why this is the case is that the City and the way that it works as designed around short term considerations, mainly fear. Because of the way that City institutions are constituted they are very much prone to panic easily under these sorts of economic conditions.

It's not just sentiment though. The credit crunch in the banking sector is very real and has meant that many investment chickens are coming home to roost. Previously the banks and other investment institutions have gone on quite happily conning everyone else (think about pensions, split investment trusts, etc) but now they've gone too far and it's rebounded on them big time!

 

[MartCactus]

That's the trouble isn't it? The more the media push these kind of stories, the more people panic and stop spending.

I don't think one can blame the media. A couple of years ago they were busily churning out property programmes and glossy magazines showcasing housing "porn". They merely hype up what is happening... when its booming they jump on the bangwagon, and when its crashing they report that too.

Our recent boom and that in America was built on borrowed money, secured on houses. That borrowed money was largely used to bid up the price of houses, and so the cycle continued... house prices rose, people could then borrow more money against them, and so they rose higher.

This process has now inevitably gone into reverse. It will go on some time... its an avalanche, and it has little to do with media reporting.

Governments were in part to blame for not raising interest rates to pop the housing bubble sooner - they preferred to explain it as not a speculative bubble but a reflection on the booming economy our govts had delivered. So they ignored it and let it get out of control.

But house buyers were also to blame, along with the banks. The house buyers were prepared to borrow silly money to buy houses that used to be half the price and believed prices would never crash - and the banks happily lent them the money and brought out reports by "experts" explaining why it wasn't a bubble and wouldn't crash.

And now its crashing.

When one examines the colossal amounts of money that are being destroyed as the bubble implodes, it won't be a surprise that other parts of the economy seize up. Its like the dotcom bust x100 (after all how many people borrowed several times their income to punt on dotcom shares?).

The secret to survive as a business is not to have debt, and to keep costs down, and flexible. Weather the coming storm and then when it clears in 2-3 years you'll find an expanding market with fewer competitors. If you have debt then the bank is calling the shots... they can decide to reduce their lending to you (eg force repayment of half) and pull the rug out from under you. Or they can increase the rates you pay to service the debt.

 

[Cornish Steve]

Its like the dotcom bust x100 (after all how many people borrowed several times their income to punt on dotcom shares?).

A very small fraction of 1 percent, I'd say. In other words, most people were unaffected, despite the big news.

 

[Blush]

Any business that can ride the current economic doom and gloom out will reap the rewards when we rise out of this.
House prices had to tumble, after all their prices were verging on ridiculous in some areas.
As for retail sales my main website is increasing every month, my dance website is only two months old so sales are increasing weekly and the shop which I only opened in April is doing realy well with sales increasing there on a weekly basis too.
Sometimes you have to look on the positive side and put all the doom and gloom to one side.

 

[quikshop]

Its ironic for a someone who contributes to a business thread to dismiss the importance of money, but thanks to the financial meltdown and having rising costs, we:

drive less and walk more
watch less tv
eat better, far fewer takeaways

On a business level we:

relocated our office, cheaper rent
organise our week better to minimise costs
changed telecoms supplier

We have less going out per month now than we did 6 months ago

/bursts into Monty Python song...

 

[Rico121]

I work for an internet company and I have noticed a steady decline in sales this year, think its hit us particularly as I work for an electronics store. I can't say which one as I may get in trouble, but there is definetly a decline, to be honest though I thought maybe it was because the media is full of doom and gloom so therefore the consumer has thought they better slow down on the spending front. Personally I have kept up my frivilous ways and am spending just as much and haven't noticed any impact on my life. :|

 

[Cornish Steve]

On a business level we:

relocated our office, cheaper rent
organise our week better to minimise costs
changed telecoms supplier

We have less going out per month now than we did 6 months ago

Spot on. This is exactly what businesses should do. Likewise, I recently took advantage of some of the zero percent credit offers that started arriving; a couple even had no balance transfer fee, so I now have another interest-free loan for 18 months. Now is the time to take advantage of lower rents and so on to reduce costs for the long-term.

Great post!

 

[Kwackers]

The reality is that it's just a minor blip in an upward trend.

I don't know about other areas, but Ringwood has seen two estate agents close in the past 2 months and a couple are up for sale - but with few buyers in sight it seems.

It's not a UK problem - it's global. My SA client base has dropped by 20% since the beginning of the year - that's 250 small businesses who have closed their doors in 6 months.

That's my reality, not the press adding their spin.

Since closing my own business in 1992, and losing everything in the process, I have focused on ensuring that I always have at least one "Plan B" - and that keeps me aware of what's happening around me. It's not a question of being positive (I have always been), it's a question of making a realistic assessment of what's happening.

I don't believe that just working harder, or just staying positive, is the answer. I think there is a fundamental shift happening, and it makes sense to assess what that means in each of our businesses and plan accordingly.

No matter how bad it gets, it is just a season. next month/year will be better (or worse). The business environment is like the weather - constantly shifting.

 

[serendipitybusiness]

Retailers are being cautious as we are heading into a recession in the US and the UK on the back of the lending crisis. I would start looking for more clients aggressively now if I was you to weather the storm as you will find this will happen a lot.

 

[fairestcape]

Of all the posters on this thread so far, quikshop has the best grasp of the realities.

Most banks are functionally bankrupt - a secret being fiercely wrapped up by the BOE and European Central Bank, as well as Gordon Brown and his monkey, Mr Darling. If the general public was aware of the real scale of the losses the banks are undergoing, there would be political mayhem.

This state of bankruptcy in the financial sectors is the key driver of sky-rocketing commodity, food and oil prices - (not demand from China and India as is often claimed. This is a political smokescreen.)

Gordon Brown is largely to blame for the financial mess the UK is in. (He likes to think otherwise and is desperate to tell everyone so). He rode the back of a booming economy for 10 years - literally raping it along the way. The fact that the economy survived Brown pillaging over the last decade is testament to the then confidence in the business sector - a confidence not brought about by politics, but by business activity, entrepreneurship, leadership and innovation.

If you think 2008 is going to be gloomy, just wait for 2009 and 2010. They will be far, far more gloomy!

 

[serendipitybusiness]

Just to add business ae also havingproblems getting finance on the back of this as well so their ability to place large orders will be hindered by potential cash flow problems.

 

[Digger1]

For the past 10-15 years the global economy has experienced beneign business conditions - low inflation, low interest rates, strong growth, etc. This has been due to a number of factors including cheaper products out of China(deflation), globalisation and baby boomers in the west being in the prime earning years.

As part of the business cycle we are now starting to experience the opposite effects.

Enjoy the ride!

 

[cmoney]

Where does the figure 3% inflation come from? Fuel, food and Utilities have gone up a hell of a lot more than 3%. 2008 is a hard year and I can see a winter of discontent coming.

 

[Cornish Steve]

The doom and gloom has reached epidemic proportions, customer confidence is about as low as it gets, and everyone is talking about a recession/depression/end of the world scenario. If history is anything to go by, that means we've reached the end of the current downturn.

This weekend, I put my money where my mouth is. After last week's stock market drop, I've transferred my retirement money into the most aggressive mutual funds available. I'm prepared to ride out the storm for a few months should I have guessed the timing wrongly; for the long-term, I feel reasonably confident that things will go up from here.

 

[cjd]

This weekend, I put my money where my mouth is. After last week's stock market drop, I've transferred my retirement money into the most aggressive mutual funds available. I'm prepared to ride out the storm for a few months should I have guessed the timing wrongly; for the long-term, I feel reasonably confident that things will go up from here.

Oh dear. I'm looking at 2-5 years of economic downturn and financial uncertainty - it's a brave move to go against a market and global sentiment.

I really hope your god listens.

 

[Digger1]

Oh dear. I'm looking at 2-5 years of economic downturn and financial uncertainty - it's a brave move to go against a market and global sentiment.

I really hope your god listens.

I agree - the tide is going out and business conditions are contracting = lower profits for many businesses.