Tuesday, July 15, 2008

Money worries in US and UK

It’s been a turbulent week in financial markets. Asian markets have been hit particularly badly, the oil markets have been far from stable [CNN] and there was more bad news in the US banking sector as the government was forced to step in after another financial collapse. But far from appearing gloomy George W Bush was in his outlook for America’s housing market and the oil industry. Speaking on Tuesday he said his plans would help “stabilize” the economy [CNN]. "It's been a difficult time for American families," Bush said at a press conference but added, "We must ensure we can continue providing credit during this time of stress." On Sunday, the Bush administration said it would provide capital and might even buy stock in Fannie Mae and Freddie Mac, the country's two giant mortgage financing companies. Stocks in the two firms plummeted last week on fears they were holding billions of dollars in bad loans. Turmoil at Fannie and Freddie raised fears the home lending market may dry up, sending home prices into a tailspin.

Across the pond in Britain there are increasing concerns that wages aren’t covering the soaring cost of living. In the last year fuel has risen 23% and in turn has put up the price of even the most basic foods in the shops. There was even more gloomy news as it emerged inflation in the UK was at a 10 year high hitting around 3.8% [Sky News / BBC]. All this has forced many to tighten their purse strings and consumers have been seen shying away from major purchases. There will be more bad news to come for anyone wishing to escape from the hustle and bustle after British Airways talked of inevitable fare rises in the near future. And any desire to drink one’s sorrows away is also becoming more difficult. Not only has the price of beer increased dramatically over the last year, but there are fewer pubs to drink in with Channel Four News reporting that they are closing at a rate of 23 a week.

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