Isn't Life A Bitch? (How has the Credit Crunch affected you?)

Member Name: kenjohn

Product:	How has the Credit Crunch affected you?
Date:	25/01/09 (286 review reads)
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Every time you open a newspaper or turn on the radio or television these days all you ever seem to hear is tales of doom, gloom and financial disaster, either real or impending. The banks are on the verge of bankruptcy, stocks and shares have dipped so low that they are in danger of becoming valueless, and financial impropriety is rife among the management classes. (Including Government)

Add to this a government (at least here in Ireland) that doesn't seem to have an earthly clue of what to do about the situation and with fiscal policies that seem to change on an almost daily basis and you have a real problem.

Granted the situation is not good, but to be totally honest with you I am sick to my back teeth of all the moaning and whinging and the "poor me" syndrome that appears to be infecting all and sundry.

Anyone who thought that the good times we have all been enjoying since the early 1990's were going to last forever must have a head full of scrambled eggs instead of brains, as the capitalist system we live in here in the West has always gone through spells of boom and bust. So (once again) the days of wine and roses and easy credit have disappeared (for a time at least) and people are having to start to (once again) cut their cloth according to their means and to live within their actual incomes instead of simply living for today and to hell with tomorrow.

The problem is that many ordinary people were taken in by the "let the good times roll" mentality of the past 15 years or so, and many borrowed *WAY* beyond their means, whether it was to buy a house (or even a second or third house!) or to facilitate a champagne lifestyle by liberal use of bank and finance house loans and easy to obtain credit cards with totally unrealistic limits. The banks, credit card companies and finance houses must share much of the blame in this regard as too many times they encouraged people who they *KNEW* would eventually get into financial trouble to obtain this easy credit simply to increase their short term profits.

One result of these short-sighted policies is that here in Ireland we now have an unprecedented number of house repossessions and people literally losing the roof over their heads. This in turn throws further pressure on the Government to re-house them. There has also been a huge upsurge in the rate of suicides as people came under such pressure to resolve impossible financial problems to which they see no solution that they take the only way out they see left to them.

The virtual closing down of credit facilities for small to medium size businesses is really starting to bite here in Ireland. They are falling of the tree like ripe apples, and this along with some particularly high profile closures of large companies like Waterford Crystal and Dell Computers in Limerick means that the live unemployment register is now over 300,000 (about 8.5%) and likely to reach a minimum of 400,000 by the end of 2009. (About 10% of the workforce) Of course, this rising unemployment rate then compounds the problem as the Government then has to find even more (non-existent) funds to pay them unemployment benefits. Add this to the unpalatable fact that there are now virtually no new jobs for them to go to and suddenly the problem is chronic and long term. The old "Irish solution" of simply getting on the boat (or in these modern times the plane) and heading off to the UK or the USA to find work is no longer a viable option as these two countries have similar problems to our own. (Although increasing numbers are looking to Canada and Australia as a solution)

The banks here in Ireland don't seem to be able to help much either, even if the will existed in their higher echelon management to attempt to do so. (Which I personally don't believe it does!) Our two main clearing banks, the Bank of Ireland and Allied Irish Banks have seen their share price decimated, and one of our smaller banks, the Anglo-Irish, has been nationalised after never ending tales of their "dodgy dealing" in the boom years. (The CEO borrowed Euro87 million to finance his own personal purchase of bars and restaurants in Las Vegas!) There is talk of the two main clearing banks also being nationalised, but personally I can't see this happening as it would send out a dreadful message internationally about the perilous state of the Irish economy.

I have to admit that just this past week I've actually made a real killing because of the banking crisis. Shares in Allied Irish Bank dipped to an all time low of 40 cents per share at the start of the week. By the close of business on Friday they had recovered to 57 cents. Guess who bought low and sold high? (Heh, heh)

What has all this economic doom and gloom meant to me personally, and has it affected my lifestyle?
To be honest the answer would be hardly at all. (Although driving a taxi here in Dublin has been becoming a low paid profession for a number of years now since the restriction on numbers was removed back in 2000) I have always been of the opinion that people in a service industry can ride out a recession better than those employed in the retail or manufacturing sectors, and so when I gave up sales in the mid-1990's I bought myself a taxi licence and then later stared up a small/medium sized picture framing enterprise (which I run from home) which has gone from strength to strength. (And continues to do so) I also have my journalism degree, and also earn a few sheckles from this which tops up my income. So I am somewhat insulated in as far as I can't lose my job as nobody can actually give me the sack. The vastly increased number of taxis plying for hire here in Ireland is something of a worry though, (increased five fold since 2000) although recently I joined a highly reputable despatch company with plenty of telephone and business account work which has greatly increased my taxi earnings.

I was never foolish enough to get myself over extended financially during the boom years, and followed my late mother's advice (God bless her soul) of salting a few pennies away for a rainy day. Just a thought, but perhaps if our successive governments had done the same then the country wouldn't now be in this awful financial situation.

Of course, I *AM* affected by government legislation. Last year's budget imposed a 1% income levy on all workers, along with draconian cuts in expenditure in almost every government department. So, for example, an already bad health service is now getting progressively more awful by the day and Dublin Bus has now *CUT* its service by 10%, despite the crying need for it to actually expand it! The private health insurers have also increased their premiums, so that too is a few extra Euro directly out of my pocket every year.

VAT also rose here by half a percent to 21.5%. This means that literally thousands of Irish shoppers are now making a weekly trek from here in Dublin to Newry (just over the border in Co. Down and with lower UK prices) to do their shopping, thus taking even *MORE* revenue out of the hands of the retailers and the government. Just before Christmas there were tailbacks of over 10 miles on the main M1 motorway into Newry from Dublin as Irish consumers ran like rats from a sinking ship to save a few sheckles on their Christmas shopping. I *DIDN'T* join the exodus incidentally, although I have to admit to having carried out most of my Christmas shopping online.

Many people are now finding themselves in negative equity situations in regard to their mortgages, having bought houses and apartments when the prices were at their peak. Now they are dropping like a stone and many purchasers find themselves trapped in as much as they can't move from their current accommodation without losing a fortune by doing so. I thank my lucky stars that we bought our house way back in 1987 before the house prices went ballistic, and although the couple of properties we own have decreased in value it doesn't really affect us in as much as we had no intention of actually selling them any time in the near future. I *STILL* believe that property is probably one of the safest investments a person can make, as people will always need somewhere to live, and eventually house prices will inevitably recover, so now is actually an excellent time to invest in bricks and mortar. (My opinion)

The fall in value of UK Sterling and the US Dollar in relation to the Euro has also brought problems in as much as less and less UK and American tourists feel inclined to spend their hard earned dosh in visiting Ireland, where everything is way more expensive than it is at home, and even more so now that they have a poor exchange rate. This impacts on me personally as it means there is less taxi work from overseas visitors, and I can see 2009 being the worst ever year in living memory for Irish tourism. An already expensive country has just become a *VERY* expensive country because of the poor exchange rate and the tourists are deserting us in droves. The hotels are attempting to combat this loss of trade by offering rates that a couple of years ago would have been unthinkable. For example, the 5 star Berkeley Court Hotel in the leafy suburb of Ballsbridge in Dublin (now called D4 hotels) has recently been offering rooms at a mere Euro20, which previously wouldn't have bought you a bed in a down market hostel here in Dublin! They are also putting most of their staff on 3-day weeks.

The decline in the economy has also seen an exodus of immigrant workers from Ireland (mostly Eastern European) as the building industry, on which much of our "boom years" economy was based, has ground to a virtual halt. Many have either headed for their home countries, or else over to London to work on the construction sites for the London Olympics.

On a day to day basis the current decline in the economy is actually saving me money. Prices on imported goods, and especially on goods from the UK, have begun to tumble in price. Just after New Year I visited a major department store to buy some new trousers, and noticed they were priced in both Euro and Sterling; Euro40 or £26 Sterling. I asked for the manager and asked him to justify the price differential given that at the time the Euro was virtually at par with Sterling. He hummed and hawed for a minute or so with various lame excuses, and then I said to him that it was OK, I'd simply not purchase the trousers and instead wait until I was next visiting Northern Ireland (the UK run part) and buy them at the Sterling price in their store there. His response was to immediately offer me the trousers at Euro30, a massive 25% reduction on the ticketed price!

Retailers here are gradually becoming aware that because of the economic situation they will have to offer shoppers better value and that they are no longer going to get away with charging whatever price they like for goods and services. So prices across the board are beginning to tumble.

The fall in the price of oil brought about by decreased global demand has also meant that I have a few extra Euro in my pocket at the end of each week, as diesel and petrol prices here in Ireland have fallen dramatically. Just a few short months ago I was paying a massive Euro1.45 a litre for diesel for my car; now I am paying a paltry 93 cents. (Long may it continue!)

My own personal belief is that this current slump in the world economy will be short lived, and that the inauguration of a new young and vibrant President in the USA will probably kick start a world wide recovery before the end of 2009.

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© KenJ January 2009

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Summary: 1930's style disaster? Nah, I don't think so!