Tuesday, 16 September 2008

Signs of the Time We Live In

A 24 year-old arrives for his first day at work as a trader at Lehman in London only to find that everyone has been fired and he will have no job (see BBC It's Like a Massive Earthquake. His starting salary was to be £45,000. A Head Teacher (a Principal in Canadian terms) of a primary school in Scotland, responsible for 300 children and a staff of 20 after 30 years experience earns a few thousand more. Perhaps like those in the tech industry where the crash forced lots of smart, ambitious people into other industries where their talents could be applied to better uses, this young man might also redirect his future?

A UK consumer misses their payment of a very small balance on a credit card. Instead of happily letting the balance accumulate interest and perhaps even increasing the credit limit as in former times, the UK credit card company freezes the account and tells the person that this is for their own good! Person pays off balance (with punitive fee) but is unable to make purchases on the card for a week. Economy gets zero discretionary spending during that week. Said person had never previously missed a payment, this one being forgotten due to the small amount. Said person also has zero other debt and healthy bank balance that could easily support a balance ten times the amount paid late. Is the financial sector in a state of panic tightening that will unduly restrict spending and deepen the recession now underway?

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