Darling, 20% off everything will save the economy

It’s been years since we have anticipated a pre-budget report this much but given the current economic turmoil we can expect the current Chancellor Alistair Darling to possibly announce some interesting new measures.

However, Darling should be looking to the high street at times like this as they are said to be suffering more than most as the economy heads into a downturn. Their response was simple, slash up to 20% off everything with big names such as M&S and Debenhams leading the way.

Now if my visit to the local shrine of consumerism this evening is anything to go by, this financial stimulus action worked with shops full of buyers fighting over the retailers wares as if it was January 1st.

Graduates to benefit from falling rate of inflation

The Governor of the Bank of England, Mervyn King, said that inflation, on the old Retail Price Index measure, will probably fall into negative territory next year for the first time since 1960, as mortgage rates come down.

This is great news for graduates as interest on student loans is based on the RPI measure of inflation. Whether this means loans could actually be reduced by negative inflation remains to be seen, but either way it looks like interest charges will be coming down although any benefit will not be seen until Sept-09, when next years student loan interest rate is set.

Was Pudsey affected by the Credit Crunch?

Amazingly this years Children in Need appeal raised £20,991,216 on the night which is even more than the £19m achieved last year. This puts it well on the way to beating the £37m in total that was raised last year.

This has got the Daily Mail all confused as they were clearly ready to roll out the stories about us all being “less charitable as the country heads into recession“.

I’ll leave it to the psychologists to debate whether we are more or less charitable during harder times, but for what it’s worth I reckon Pudsey benefited from the ‘Credit Crunch’ as it’s likely that more people stayed in this year and were therefore at home to donate on the night. Although the Sun newspaper would dispute this as they think the ‘Credit Crunch’ means we are all too busy creating the next baby boom!

"Deterioration in the outlook for economic activity"

These are not my words but those of the Bank of England following their aggressive 1.5% cut in interest rates taking the base rate to its lowest level in more than half a century.

Whilst it may seem like great news for house owners with mortgages that track the base rate, any feel good factor is likely to be short lived as the reality of the property slump sets in. So far house prices have dropped by 15% in the last year according to the Halifax but as I warned back in March house prices could drop by up to 37.5% (although I should reiterate this was merely an opinion and not based on any scientific calculation).

The real losers today though are the savers as interest rates are likely to be rapidly slashed and whilst inflation is forecast to come down, in the near future it will significantly erode any returns.

It’s not all doom and gloom today though. For those that love Christmas (and I don’t mean the big spending type of Christmas) the odds of a white Christmas have been reduced down to just 7/1 at some bookmakers today giving us a glimmer of hope for that extra special Christmas this year!

Its The End Of The World As We Know It (And I Feel Fine)

A quick look around all the major news outlets today and you would think this credit crisis is going to end the world. My personal favourite is this piece from the Australian Courier Mail:

Consider the events of recent days. World financial markets have continued their death spiral, culminating yesterday in a 360-point bloodbath on the Australian Stock Exchange. Falls in the past week have basically obliterated the gains of five years of economic sunshine. Trillions of dollars of investors’ savings around the globe have been vapourised.

We have had market crashes before, but none quite like this slow-motion train wreck. And the fear and loathing on world stock markets is really only a symptom of a far deeper and intractable cancer afflicting international credit markets. In short, much of the system teeters on the brink of collapse. It is the credit crisis we did not need to have.

Wow… after reading this even I am starting to think it might be the end of the world. However despite all this doom and gloom this morning, as the song goes “And I feel fine”. Yep that’s right, physically I feel just as good as I did when I woke up last week, last month or even last year before the term credit crisis had even been coined.

As far as I am aware there was no blood spilt on the floors of the Australian Stock Exchange, or any other global trading floor for that matter. Nobody will lose their life as a direct result of this stock market crash, and it’s long been cited that money does not buy. And even here in the UK, the sun is shining today!