kittycat1

http://www.bbc.co.uk/news/business-14454406

It has been long predicted that the recession would be a double dip and with markets going hairwire it would seem that this is the start of it. With the US loosing its AAA status and the Euro on the brink of collapse this could be a hard one to recover from. Any predictions?

Anyone any ideas how to fix it all?

There have been some interesting documentaries on recently- I watched Inside Job narated by Matt Damon and Capitalism - A Love Story ( Michael moore) both very interesting.

The world does in fact appear to have gone mad...

Ethos83

Save your money, hold you to your job and sit tight and ride it out.

This recession isn't going to be "fixed." In many ways trying to fix it only made it worse (see the Euro meltdown). Governments are broke, spending will have to be cut and it will be painful and hurt some people more than others, but that's the nature of these things. But once deficits levels and government spending are at much more manageable levels, things will get better. And this will happen because governments will simply have no choice.

For all the doom and gloom talk, the interesting side to this economic situation is that businesses - corporations - are cash rich at the monent. It was the private sector that immedately trimmed expenditures and paid off debt when the first recession hit. But even though bank balances are now healthy (let this be a lesson to governments!), companies aren't spending money, hiring new people, investing into new venues, R&D etc, because of fear of the future which is really centred around out of control public debt levels and the destabilisation of the accepted government role in the western socio-economic model.

Once the role of the government in society stabilises - which will be when public debt levels are much smaller and we've reached a new national consensus on the appropriate role and size of the government, then we will see a return to prosperity.

However, this will take time. My prediction:

2-3 years of pain.

3 further years of stagnant doldrums when very little seems to change.

6th year - beginning of a new expansionary period. The productive classes will benefit first, appropriately enough, so it may be year 8 before we start seeing much more widespread feelings of prosperity down to the lower sectors of society.

mentalist

Not sure if you can view this chart but it basically shows that the FTSE almost always rebounds after a major dip, although it may take 4-6 months to fully recover. I am waiting for the bottom to be reached and hope to find plenty of bargains, especially amongst high yield stocks. For the short term, more doom and gloom is expected for the rest of this week with 4,500 likely to be reached on the downside.
http://investing.thisismoney.co.uk/c...E%3C%2FSPAN%3E

Meow

Much of the current market falls are due to panic selling and herd mentality. The fact is that the fundamentals largely look OK, that company balance sheets are strong and the debts aren't a surprise. It is an over-reaction, but predicting doom and gloom as many seem to be doing simply scares and worries people.

Unless you need to sell investments now you haven't actually lost anything and I do think that markets will recover within a reasonable period of time. It's a time to reassess holding and review your situation, not panic sell and crystallise a potential loss. If you are investing for the long term on a regular basis, this could be very much in your favour. It is also potentially a good time to get into markets.

This is not driven by just one thing (no Americans, it isn't just about you!) but a combination of issues that have come to a head at the same time. I don't doubt that markets will be interesting again today and even for weeks to come, but I'll be interested to see if the actions of the ECB calm European markets at all.

Is it a crash? Is it a recession? (unhelpful labels IMO) It's certaining a reordering and rebalancing and time will tell.

typical

Personally, I do think the worst is to come as governments throughout the world are forced into austerity by the same market players who will then punish them for a lack of growth

Many companies are indeed cash-rich now, but that doesn't help the economy if there are no projects for them to put the cash into. And even those who are cash rich are cutting staff.

It's a weird world where the downgrade of American bonds caused market instability, which caused a flight to safety, which increased demand for American bonds

I'm unfortunately holding dollars and sterling right now; d'oh.

Maxima

Well, but saying "1 Trillion lost" does make for better headlines. I agree people are just panicking and seem to be trying their best to predict a recession; self fulfilling prediction anyone ?

typical

Pet peeve - governments who issue bonds in their own currency don't go broke...

It shouldn't just be about cuts. Tax the rich.

Meow

But the higher earners are already being taxed. 40% and 50% are pretty high rates of tax and thus these people are contributing significantly.

Perhaps we should be saving money, and maybe posters would like to suggest ways in which the British Government should do this?

I'm going for 50p tax on every burger and bag of chips and a 20% levy on hooded tops, for starters.

Norm_uk

This is driven more by fear than anything else as fundamentals are actually pretty good right now. Governments have tried to spend their way out of a situation which needs time to correct and a major dose of removing the culture of spending more than we have.

Longer term investors getting into markets now are likely to make a lot of money in the next 5-10 years if they stop reading the news and ride out the storm. As usual it's the short term thinkers who are panicking not the disciplined investors.

I think the media is being very irresponsible about the whole matter knowing full well their headlines affect the world today.

N.

Ethos83

The top tax rate is already 50% in the UK...

Realistically, how much more can you tax the people, whether rich or middle class? It's documented that raising taxes rarely generate the amount of revenues predicted as people reduce their exposure to taxes, and of course income tax increases are offset by declining consumption, which hits its own taxes.

The last thing the governments want to do is to give people an excuse to reduce expenditures even further.

typical

More than they are taxed right now. (50% is, historically, not that high and is not the total effective tax rate; the top rate was 83% in 1974...)

Income tax's top rate is at 50%, but in many cases "income" generated by those at the top is not actually disbursed or taxed as income. This can lead to executives paying ridiculously small tax bills.

On the first - yes, but I've never seen an accurate Laffer curve, and so this comes across more as an excuse. By all means reduce a tax rise if it's shown to reduce overall take, but as long as the marginal gain for working more is positive, I would bet the vast majority of people would choose to earn more.

You're assuming too that their consumption would be taxable...

It's going to be hard to make this a non-credit-fuelled, consumption-based recovery.

paca

you are joking right?

typical

No, I'm not. Inequality in the UK has got out of control.

WakeUp

Sure tax the poor even more, there is a reason why they are rioting, do you really think further taxes on the lowest earners will make that situation better?

One way to bring in more would be to get hold of the tax dodgers, by that I mean those business men like Trevor Hemmings who earns all of his money in the UK but lives in the IOM. There are many high earners who dodge the taxation on their earnings.

WakeUp

Not just the UK, but globally.