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Credit Crunch: Your Take

Written by Nowa Indania

Thursday, 03 April 2008

Billionaire financier George Soros claims that the economic downturn in the US is the worst since the Great Depression. Now, most experts believe that this is a global phenomenon and that the economic slow down will get worse and could be with us through to late 2009.
What impact, though, will all this will have down at the personal level. April, the start of a new tax year here in the UK, finds many consumers with little disposable income. Water bills, TV licences, Council Tax and Vehicle tax all go up this month. The cost of basic grocery items has been rising steadily with ever increasing fuel costs. It should come as no surprise then that the country has gone into a borrowing frenzy.

Personal debt in The UK shot to more than 2 billion pounds in the month of February. This was the highest monthly rise since records began. Consumers are taking on more unsecured personal debt just to meet their day to day needs as mortgage lenders have raised interest rates and cut off their best deals. Even families that own homes are finding it difficult to borrow against their property. Loans, credit cards and overdrafts all have higher interest rates than mortgages and the fear is that the growth in debt could fuel a wave of payment defaults and bankruptcies.

The credit squeeze is starting to hurt. Lenders are finding it difficult to raise finance and it is home owners and first time buyers who are feeling sharpest end of the sting. They are finding it increasingly difficult to get finance and it is not just in the sub-prime market. Firstdirect, the internet and telephone bank is one of the UK's leading mortgage providers. It has announced that it is closing its mortgage products to all new customers after receiving five times the usual number of applications. Other lenders are doing the same, and in sum there are only a third as many mortgage products on the market as there were this time last year.

So how does all this affect the individual, or the family? Average and low income earners find they have to work longer hours with many forced to take on a second or third job. The expected belt tightening will see spending on holidays and luxury items fall, which in turn will threaten the security of jobs in those sectors. In previous periods of economic slump it was students, pensioners and people on low incomes and those without savings who were hardest hit by the crunch. Are you living outside Kenya? How is the global credit crunch going to affect you?

Nowa Indania
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dire straits
written by Amir Ibrahim , April 03, 2008

I am writing an article on global food supply, and how we really may have hit a brick wall here. As for the global crisis on credit, here is a programme on the BBC that could shed a light, catch it early, the links die in a few days. Super Rich the Greed Game. You may download it for future viewing also. I wonder how it is in Europe, and in Australia. I hear South Africa is turning ugly and the currency is falling like a pin.

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UK better off
written by Andy , April 03, 2008

They can take on a second or third job?

In the US the jobs are non-existent too.
The first tax rebate (Bush's economic boost) will be mailed this may, but in states like California and Nevada, 1 in every 6 home owners is loosing their property.

In places like Detroit, the city is a ghost, with half the building long abandoned.

They said Capitalism was good, hmmm, then it became super capitalism.

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written by acolyte , April 03, 2008

Well here in the States if you are a mwanainchi and willing, you take a second job like one of the posters said. I'm planning to do so too. I don't own a house , so I don't have mortgage payments to worry about. I also have very little in terms of revolving debt ie credit cards so personally I'm fine but most American families carry at least $5k in revolving debt so things are tight for them. It's going to mean less shopping, more defaulting, less house purchases and downgrading standards of living.
But with the rising standards of everyday stuff esp petrol, no more cross town jaunts for me. Plus all my clothes shopping is done during sales and no other time whatsoever! All my music and movies are jacked from the net, where I can cut costs I do it. What also sucks is how due to the exchange rate any money that I send back home has really been cut down by the strong shilling.

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written by a guest , April 03, 2008

Well here in the States if you are a mwanainchi and willing, you take a second job like one of the posters said. I'm planning to do so too. I don't own a house , so I don't have mortgage payments to worry about. I also have very little in terms of revolving debt ie credit cards so personally I'm fine but most American families carry at least $5k in revolving debt so things are tight for them. It's going to mean less shopping, more defaulting, less house purchases and downgrading standards of living.
But with the rising standards of everyday stuff esp petrol, no more cross town jaunts for me. Plus all my clothes shopping is done during sales and no other time whatsoever! All my music and movies are jacked from the net, where I can cut costs I do it. What also sucks is how due to the exchange rate any money that I send back home has really been cut down by the strong shilling.

Which jobs are we talking here? In my state kimeumana. It is either underemployed or unemployed, your take.

A rafiki is raising a young family and has been unable to find a job to cover for his family's health for 3 years running. A plethora of degrees to his name, no one wants him permanently.

They say he is overqualified, but the lower jobs are pretty much dog eat dog: squeeze employee to death, the investor needs his/her returns and the CEOs are waiting for their bonuses.

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coming home to roost
written by Jayawardene , April 04, 2008

Nowa, great topic. What you are describing is just dalili ya mvua. I believe that if things are left as they and if the big economies don't get their houses in order quickly what we are headed for is nothing short of a Global economic Tsunami(to borrow a word).

Amir, you are probably touching dynamite in your bare hands with your article; the problem of the rising food prices that we are witnessing is only the tip of the ice-berg. There is a real danger that serious global food shortages are looming and I am sure you'll have heard that countries like India, China and Egypt amongst others are placing bans on grain exports...

The Iraq war was about Oil. the potential for a food war does not bear imagining

The acolyte has a point in saying there will be a general downgrading of life standards. We see it here daily. Fewer people drive, opting for public transport and how many 08 plates have you seen in the past week? It is also true that those with most to lose are those bearing heavy debt kwa mfano mortgagees and those with maximum limit cards.....just think, not so long ago the banks and mortgage houses were falling over each other as they pushed their fantastic credit offers at fantastic rates totally disregarding ability to pay....

Today I learn that Sub-Prime is not some cheap cut of beef...

The western Governments lost their authority and gave in to pressure placing all their eggs in a basket that Andy calls Super Capitalism I guess the market is a ruthless place and the chickens will come home sooner or later

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It is going to get real Rough
written by Njamba , April 06, 2008

When the West capitalism systems gets a cold. African countries get a Flu. The economy especially in USA has been going down since year 1998. Personally I do not think USA recovered from the Dot.com burst. The housing burst is proofing to be the most dicey down turn that the American econommy have ever exprience since great depression.

The biggest lesson out of all this is that you cannot legistlate GREED. THe American Greed is what is driving this melt down. Consumers and financers were so greedy to see the reality.

Chickesn are home to roost.

I wish Kenyanitos who bought Inflated houses in the last 2 years luck they will need it in the coming future

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China the scapegoat
written by Wuod Aketch , April 06, 2008

Can anybody explain to me why the west is victimizing China? Concerning the olympics, it was at one time the pollution that was a reason for athletes to boycott the games, and now it is Tibet.
The west should give the Chinese a break.
Economically, what I saw recently in China is very impressive - cities like Shanghai have skyscrapers sprouting like mushrooms. The main shopping streets and luxury shops are full of Chinese customers on spending sprees.
Well, growth has chosen Asia where people are working hardest.

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written by acolyte , April 09, 2008

@ Anon
I'd like to know what state your pal is in but when you bring kids into the equation things become so so much harder and I think relocation also isnt an option for him with a fam. And I do agree corporate America is milking people dry!
I think this is a good time to remain single and childless.

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