okay well i am doing a speech on this recession but i cant quite find a website that tells me what i want to know.
i hear that alot of people are losing their jobs, some people are losing their money, and many more horrible things like that.
I would like to know how this all started, when it started, why it started and pretty much i just want a basic understanding of this topic.
THANK YOU :)
What exactly is this recession that is apparently changing the world drastically?
Will try and make a very complicated subject simple!
Politicians are only interested in getting re-elected. Also Gordon Brown wanted to be Prime Minister after Tony Blair. He wanted a favourable economy to take over.
When he was Chancellor of the Exchequer he and Blair did not know how to modernise the UK economy for the future. They saw an opportunity to allow the Financial Sector to grow (to 30% of the economy!) to become a World Centre - which meant he could get lots of tax from them! Much sexier than making things! Regulation was lax, the only priority was continuous growth which equalled ever increasing tax revenue!!!
Along with excessive gambling by the Banks %26quot;easy%26quot; consumer credit was also encouraged, so the population no longer making things could be employed on the retail trade - i.e. lots of shopping centres!
Easy credit and disasterous immigration and housing policies in the UK meant a shortage of houses. The law of supply and demand says prices rise when supply doesn't meet demand.
So house prices rose - house owners could then remortgage their houses to get more (cheap) credit to spend on consumer items - sold in the shopping centres!
Cheap credit in the USA allowed mortgages to be sold (so the mortgage broker made a commission) to people who could not really afford a mortgage.
Banking is based on assets - the usual one is housing! So the US banks then started to sell the asset backed mortgages to make another commission! The UK started to do the same!
Interest rates went up in the USA and instantly millions of USA citizens could not afford their mortgages, so their houses were repossessed. But the credit bubble had burst and the houses were worth less than the outstanding debt in both the UK and USA!
Banks buying the sub prime mortgages were suddenly left holding semi worthless assets! Banks had however insured against bad possible debts. Historically housing was a gold standard asset so insurance premiums were cheap. When thousands of insurance policies had to be paid there was no money to pay the claim!
The Banks and Insurance Companies were holding worthless assets and were bankrupt.
Gordon Brown has tried to say it is a global problem - agreed - but as a result of lax regulation, and the Government encouraging us all to live above our means on credit. It had to come to an end sometime as in the 70's 80's and 90's recessions!
Remember Governments have no money. All this money being thrown around is borrowings the population has to repay sometime!
The Government will never admit is but the state of the economy is now:-
Government Debt (see above)
PLUS
unfunded Public sector pension debt
PLUS Private/Public Initiatives debt (where the Government allows private firms to build a new hospital - for example - and then pays (through the nose for 30 years!) for the use of it - we used to call it Hire Purchase!!!!
Total about 拢3.4trillion, that is 拢3.400,000,000,000.
Consumer Debt about 拢1.400,000,000,000
Roughly speaking that is 拢200,000 owed by every family in the country! The only way Government debt can be repaid is by taxation!
By the way that 拢200,000 attracts interest at about 拢10,000/year. In other words we cannot even pay off the interest, let alone the capital!
To summarise:.
If you are at school your parents are going to be hit by big tax rises.
When you go to work you will pay huge tax amounts.
Your children will continue paying high taxes.
The country is going to be in recession for at least 10 years, and in normal common sense terms is bankrupt!
