Credit Crunch-Time to Panic?

One simple answer-no. What does it actually mean?

Basically, people have overstretched their resources, have spent more money than they’ve earned and the banks want their money back.

What’s happening with the banks?

The banks have been greedy and there’s been a backlash. By offering loans and mortgages they earn their money in interest from repayments and is why personal banking has always been free. They cover the loans they give through the other banks, so all the time they are all earning money there is no problem but by one being too greedy, everything breaks down. This leads to banks doing whatever they an to get their money back and they tend to add charges where they shouldn’t.

Is there an alternative to banks?

Yes, there are credit unions. You may need to find out who these are. They look like banks and generally act like banks but are owned by the people who use them and nobody gets huge bonuses at the expense of the customers. You are recommended to use them wherever possible.

But aren’t the banks losing money?

No. Don’t be fooled by what they say. What they call losses is only what they haven’t earned, compared to last year.

Aren’t we coming into recession?

Yes. What recession means is that financial growth has stopped, as it has at the moment, so companies don’t have the same amount of money available to them. This means that cutbacks are made and most companies tend to make these in the wrong places. Sales are unavoidable and other luxuries have to disappear, such as overtime payments. Unfortunately, where companies need to increase their spending is in advertising. It is always those who stop advertising that go out of business first. If you went to a shop needing something and can’t find it at your local parade or the supermarket, where you’re most likely to go is the place you see most advertised, because you recognise the name. Even on the internet, the search engines promote those who pay the most money, best of all.

Can we avoid recession?

No, but don’t stop spending your money on things you need or it can easily become worse than it needs to be. Champagne and caviar can be avoided but bread and milk are needed, so as long as you’re sensible everything should be ok.