Hardly a day seems to pass without some more disturbing news in the financial markets. Last week was one of the most turbulent, volatile and depressing weeks in the sector. Despite various attempts by world governments, financial regulatory originations and individual financial institutions, the stock markets worldwide plummeted as the world’s banking system seemed to almost seize up.
Despite vain attempts by the American government, and a more sensible and measured approach by the British government together with worldwide cuts in interest rates last Wednesday, by Friday, the falls became if anything more rapid and extreme. By Friday the UK stock market had fallen well below the 4,000 level, Icelandic banks were complete no go areas and World Governments seemed helpless as they vainly tried to bring a halt to the bloodshed.
As I write this, I like many, are waiting with baited breath as to what’s going to happen next.
Remarkably, the SME sector has at least in the short term, remained relatively unaffected by the devastation, but a recent snap poll by the Federation of Small Businesses has found that the credit crunch, economic slow down and financial instability is beginning to take its toll.
80% of those taking part in the survey reported that their costs have increased in the last year and many experienced a decrease in trade. Whilst interest rates have fallen, for many small businesses, the costs of borrowing have inexplicably increased as banks seek ways of papering over the cracks caused by their own greed and bad management.
Once again, the SME sector, so vital to the economy, will probably bear the brunt of all this financial mess. Let’s face it, many of the people who have created this situation are simply “hired hands” and in the case of bankers, have long ago cashed in their chips. Unlike SME business owners, who haven’t had super profits in the good times, these bankers and the politicians who stood by whilst they created this mess, will undoubtedly find other jobs and probably do it all again at some stage in the future. The small business person in many cases could face ruin and real hardship.
The worst thing for me of all of this is that we have seen it all before and if we are not careful, will see it all again. Economic theorists have been predicting for years that we have been living beyond our means and now it is all coming home to roost. Of course, it’s not popular politics to “put the brakes on” when everything seemed to be so rosy. However, the time has come for regulators and others in influential positions to ensure that this can never happen again. We simply can’t allow people to take a motgage when they can’t afford it and credit card companies have got to be brought into line and stop offering credit to the very people who shouldn’t be offered credit.
We are all going to be feeling the affects of this for some years to come and it will be some time before property values, stock market prices and the overall health of the world economy has recovered to anything approaching their previous highs. For many, with endowment and pension policies, their future financial well-being could be affected forever.
These are definitely dark days for all of us and it is difficult to be optimistic.