Depressed about a recession?

By Staff Writer

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Depressed about a recession?

No-one is afraid to say the R word anymore.

Recession, recession, worldwide recession.

The next scary word is the D word.

A depression can last for many years and is characterised by a sustained inability to purchases goods and services that should normally be possible given the level of technology or resources in a given economy.

Here in South Africa we may not yet be in even a recession, but most of the rest of the world is. If this translates into a global depression, we will probably follow into recession and beyond.

The UK is expecting to repossess 75 000 homes next year according to a report by the BBC. These kinds of massive changes will eventually knock through to us as the UK is one of our major trading partners.

If they have no jobs and no money to spend, we lose our market. The Bank of England is also expected to cut its interest rate to 2%. This would be the lowest level since 1951 states another article by the BBC.

Here in South Africa there are now sustained calls for an interest rate cut and an early one at that. iAfrica looks at the various options available to the MPC after it's meeting next week and the two options on the table seem to be either an early 0.5% or 50 basis points cut or to remain the same with no change and wait and see how the situation develops. We may have a weakening economy but we are still not as deep in it as the more globalised economies, so a hold might be the most prudent call, bearing in mind our penchant for stridency here in South Africa, it's either boom or bust in the popular business culture, and maybe a few hawks watching out for us is best. The Monetary Policy Committee (MPC) is meeting next week and will release the interest rate whether they change it or not on Thursday the 11th of December.

The Chinese and the US Americans are meeting right now on agreeing a plan that can save two of the worlds major economies. This meeting will be known as the Strategic Economic Dialogue (SED) according to the Mail and Guardian.

The SED will 'focus on how we can work together through international forums to strengthen the global economic system'. This quote is attributed to Henry Paulson, the US Treasury chief.

The global players are worried, very worried, and we should be too, but this is not China, we are not America, we are a small country that is on the periphery of the globalised economy and this position bodes well for us to sit tight, watch our savings accounts grow, budget more prudently and not get hysterical with all the international bad news. It may yet come and bite us, but there is no need to be rash as long as we are prepared.

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