Financial crisis: Keep your heads down it’s not over yet!

Posted on: 06 February 2010 by Gareth Hargreaves

The economy has shown signs of recovery but don't be too optimistic that you will reap the benefits any time soon.

In October 2007 I went to a reception of ‘angel investors’ and was introduced you a young Asian man who told me ‘he handled his family’s investments’! Forward as he was he asked me if I had a ‘portfolio’ – I quickly pointed out that after working for a charity for twenty years you didn’t end up with ‘portfolios’.

I told him I had savings, a house and a pension fund. ‘Take my advice, do what we are doing – sell everything and buy gold. Even sell your home! Next year will be the most cataclysmic year in financial history!’ Taken aback I gulped my wine and absorbed what he had said. He then went on ‘America has broken the system and we’re going to have financial collapse! Few people realise just how bad this is going to be’. At this point my friend Brian popped up and joined the conversation and went on to say that if this young guy believed it so should we. I went home that evening reeling with the consequence of what he had said. A few day later Northern Rock collapsed and the banking freefall started.

I was lucky! The coincidence of meeting this guy and Northern Rock going belly up convinced me he had been right. I quickly turned everything I had in to cash and sat there and waited. He had saved me a hefty amount of money in those few minutes over a glass of wine. We’ve all seen what’s happened over the past two years and know the consequences to our own saving and life style. Pretty bad huh!

Well take my advice – don’t believe the newspapers and television – it’s not over yet! Since the start I have bored friends telling them that this is going to go on and on and we most likely won’t be free of the problems for five years (2012).

Those early buds of recovery that we were told about six months ago have wilted and died. The car scrappage scheme has helped, so has quantitative easing (printing money by simple folk’s language) and Barak Obama has made a big difference. But even with all this the problems have not gone away. Global growth is still slow and very sporadic – and very much happening in the Far East.

In Europe we have debt – lots of it – so much that it is going t affect us and our families for the next twenty years (it won’t bother me too much as I’ll more that likely be dead!) . In the short term the debt issues of the UK, Greece, Spain and Portugal are going to dramatically impact on the EU recovery. And this will be ‘real’ to us as citizens. Interest rates are likely to stay low as will annuity rates. Energy costs (gas, electricity and petrol) are going to keep on rising and jobs creation is going to be very slow. All in all if you are about to retire or have retired it will have big a big impacts on your lifestyle.

So stay warm, keep the hatches battened down and don’t take any risks! Tomorrow we’ll talk about what we can do about all this.

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