Personal debt crisis still lingers

OK, Bernanke cut the interest rate today by a full half a point but will it be enough? Lehman Brothers revealing losses of $700million due to the fallout this led to a 3% fall on profits but lower than what the experts expected. Shares rose on the news of the rate cut but the under lining problem still exists debt!!! As these mortgage rates reset in early 2008 it will lead to more turmoil in the housing markets. People just don't have the extra money so that new car, fridge, holiday,Plasma TV will be put on hold, retailers will see a slowdown as I see a consumer led recession. Oil prices up, so gas and heating will go up also air travel. We are in a viscious circle and the Atlantic Hurricane season has not even ended yet. Wheat prices are also up hitting $9bushel so what's really going on? The era of cheap money is coming to a end as the debts mount up as pay rises have not really kept up with the cost of living.

The UK now charges £650 for naturalised residents to file for citizenship it use to be £150, a whopping £500 pound increase, gas prices in the UK are around the $7.50 a gallon added to that the tax burden. The UK economy is built on borrowed money and housing, the baby boomers who lead a life of saving are being replaced by a generation who borrow, and borrow consumer debt is at a worrying £1.3 trillion pounds we are a generation who likes to live beyond our means. The pawnbrokers and Hock shop are seeing a huge increase in money being borrowed as credit becomes harder to get, and the stigma attached to poor people is simply not true a lot of middle class folk are just as likely to hock a wedding ring for cash.

So where do we go next? The Fed and BoE will use lower interest rates as a tool to steady the financial markets and consumer spending with Christmas just 3 months away but with this huge debt hang over don't expect lavish presents this christmas. Try and find a institution that gives a good rate of interest for your hard earned money.

Northern Rocks queues may have abated but this does not alter the fact that public confidence in politicians and bankers is at a low ebb. Banks do go bust, long gone, too is that relationship with the bank and its manager,so people will hoard cash and move money around in the fear that more collapses are near. What we need now is a period of calm Bernanke cutting the rate today goes some way to helping but runs the risk of fueling inflation and recession. On closing in our real world A total of 243,947 foreclosure filings were reported in August, up 115 percent from 113,300 in the same month a year ago.