h2g2 The Hitchhiker's Guide to the Galaxy: Earth Edition

Do you feel as if your standard of living has dropped over the past twelve months? If so, in what ways?
- less spending money, salary lagging behind costs of food and energy.

What do you think the main factors behind the current econonomic situation are?
- too much easy credit fueling spending through house price inflation.

Can governments have much sway over national economic conditions in a global financial community?
- Well we have our own currency and were, until recently, fairly self-sufficient in energy production, so you would have thought so.

Have you changed any major life decisions based on changing economic conditions?
- Well, I'm regretting being too lazy to sort out a solid fuel heater for the house. Changing jobs to try and correct the salary shortfall will be more difficult if I decide it is necessary.

Is boom and bust inevitable in our economic system? If so, how can its effects be lessened?
-- Yes, we should learn to enjoy it.

Do you remember previous economic crises? If so, how does this one compare? Do you think things will get back to 'normal' and when?
- Yes I remember previous, so called, crises. The only one that came close was 1974. I think comparisons with 1929 are valid. Please remember that we haven't been living in anything that a sane economist would regard as normal for the last dozen years. We will be back to stability in 5 to 10 years, but looking forward to considerably reduced pensions. The government seems to have chosen the course of printing money and dropping interest rates (anticipating the BoE here) - expect the cool breeze of inflation to pick up a bit.

Can you see any benefits arising from the current situation? For example, do you think people might become less wasteful?
- I hate to pass up an opportunity for a cheap political shot here, but no, there are no advantages, except that the bust had to arrive some time and it has been obvious for the last 5 years that the longer it took to arrive the worse it would eventually be. Yes, people will learn to be less wasteful, but then a lot a people are going to be "wasted" - in that, they won't achieve anything like their potential. While people are struggling to feed and house themselves, it may bring out their humanity, but leaves much less energy for intellectual pursuits.

I wouldn't normally be so bold as to suggest that DNA was wrong in any way about the fate of the universe and its (total lack of) intelligent life, but I suspect the the Shoe-event-horizon was a little wide of the mark and that we were in fact heading for a mobile phone event horizon (or possibly an over-sweet, fat laden coffee event horizon), but that we may just have been saved by this economic downturn. We may even start to see the under 25's use the same phone for more than 12 months at a time. There may be a period in which lemon scented napkins are in short supply, so I suggest you change your plans appropriately.

I see this as a wonderful opportunity to get ready to buy low. Not only credit, which is falling every day but real estate, formerly *blue chip* stocks and anything else that will off set the losses I've had in retirement funds. Even if my plain old savings have to be augmented by credit to buy, the interest rates are not going anywhere but up in a year or two. The Bank of Canada just recommended a half point cut with more to come, we are talking lending rates that haven't been equalled in decades. I plan to buy an apartment and buy some stock in about a year which will put me within six months or so of the end of the US housing surplus estimates. I think that's fairly conservative but watching the markets should cover me safely. I won't touch my present meagre investments because that would just be panic selling, the worst possible strategy.

Now if I can just live long enough to eventually cash in.....

I realised, almost as soon as I posted yesterday, that I had not anticipated the BoE, but was lagging it by a couple of hours.

Your strategy might be sound, but I would hesitate to try and buy in at the bottom this year, or next. If you look back to the 30's you will see that there was a whole sequence of market turns which were taken to be The Bottom, but just sucked in a few more investors and allowed the clever ones, who still had stock, to sell it before the plunge continued.

You always will get your money back of course, but the trick of living long enough for this to happen is not one we can always pull off.

The trick may be to buy the property you need and to sit on it (or in it). I am very concerned however that with the more socialist leanings of our old new old labour government will sooner or later produce a property tax to ensure that the property investments we have all made in lieu of a coherent pension industry, become the property of the state. Council tax has reached damaging levels already, particularly for those on fixed (low) incomes, such as pensioners. I already feel aggrieved that 5% of my taxed income goes on council tax, but imagine a 2% tax on the property value - this could be the next big idea to produce equality; to eliminate child poverty - or whatever the socialist excuse is.

Sorry. That was part of the political rant I was trying to avoid in the first posting

I hope you don't live in Kent where the council has £50M in Icelandic banks.......

They'll be completely Bjorked then