The brightest economic outlook in years

If you have picked up a newspaper, or switched on the television recently then doubtless to say you will know that we experiencing an ‘economic disaster’ (their words not mine). But are things really that bad?

If you subscribe to Darwin ideology then the so called credit crunch may actually be a blessing in disguise as it is rapidly eliminating weak businesses and in their place stronger players will surely emerge. This is particularly true in the financial services industry where aggressive lenders such as Northern Rock and Bradford & Bingley had almost bullied the ‘old school’ banks out of the mortgage market, yet no sooner had the economy taken a slight dip and they were running for the cover of nationalisation.

Now the same is happening in the retail sector with Woolworths demise being rapidly brought forward as a result of a slight drop in consumer spending. Woolies may be fondly remembered by millions, but ultimately they have paid the price for failing to change with the times and whilst their pick & mix selection may have been the best on the high street the rest of the shop was a random mixture of failed business ventures. I do feel for their employees whose jobs will be lost, but I strongly believe they will find new jobs over time and they should feel heartened by the big supermarkets already eyeing up ex-Woolworths real estate (although I acknowledge that in the short term they may require help).

At an individual level, those of us in employment face a number of years of uncertainty, and some will feel the full force of an economic slow down and experience demoralising periods of unemployment. If you have squirreled away some savings during the recent good times, then take my advice and go and enjoy yourself for a couple of years whilst the economy recovers. If you do not have the rewards of ‘prudence’ to fall back on, then I suggest you take the time to reflect on what you would have done differently and make sure you don’t make the same mistakes during the next inevitable boom.

The biggest crash is undoubtedly still to come, and that will be to people’s expectations. If you expect to have a brand new car every couple of years and your definition of financial hardship is the idea of only having two foreign holidays per year then you might be in for a bit of a shock next year. If however you have not got carried away with the spending frenzy that has been fuelled by the popular media, then life may just go on as normal. Yes your monthly cash surplus may be squeezed for a couple of years but you’ll be better off relative to your peers who will be struggling to adapt to the concept of living within their means. 

In the coming year property owners will see their house price fall, but it was socially unfair to have prices so high that they prohibited first time buyers entering the market. And it’s only the absolute price of the property that is falling, the value of having four walls and a roof over your family surely remains the same. If you don’t plan to exit the market in the short-term and can remain in the game so to speak, then this is purely a paper loss that you will only realise the day you stop needing a roof over your head (and I believe at this point the state will pay for a small wooden box for you to live underground in).

If you think Christmas is expensive then you have got it all wrong, it’s spending time with your friends and family that is important not your spending on lavish presents. The value of this festive season should be measured by those memorable moments come January, not by a large credit card bill. So forget all the doom and gloom, and the endless debates about whether it’s inflation or deflation coming next year. Whether prices go up or down, remember those items that you cherish the most should be priceless.