Banks in UK Taking a "Pounding"

http://news.bbc.co.uk/nol/ukfs_news/hi/newsid_7880000/newsid_7883200/7883255.stm





This article addresses the current decline in the economy of UK and what the bank's response towards this subject is. The governor of the bank of England stated that rate cuts in interest may not help anymore and that the recession may be deeper and longer than what most people had initially anticipated. Despite attempts to stimulate the economy by cutting down interest rates by 500% the value of the pound hasn't gone up. The bank stated that new "unconventional methods" may need to be introduced in the near future. The bank also believes that the resolution lies in increased exports and investment instead of consumption. While the banks are expecting the economy to start recovering by 2010, business leader are even more pessimistic. A member of the Institute of Directors, Graham Leach, said that "we are well into the financial crisis but the economic crisis is only just beginning."





Firstly, this article relates to recessions and how they affect the general economy. A country's stated to be in a recession if it faces two subsequent periods of decreasing GDP along with a drop in economic activity. In addition, the article also talks about inflation and the bank's effort to stop it. The value of the Pound has gone spiraling down with the recession increasing the prices of goods. This decreased consumption and as a result, forced companies in order to retain profits to slash down their work force. This brings up the concept of unemployment by creating demand-deficient unemployment and decreasing the participation rate. These are all negative and many countries are currently being confronted with these problems.





In the world's current state of economic recession most countries have suffered as UK has. This decreased economic activity caused many countries to cut down the amount of goods they import, even further harming the global economy. As individuals the recession has decreased our sense of financial security and has made it harder for the general population to land a job. Interest rates have been cut in banks worldwide and although this makes it more worthwile for the public to borrow money it hasn't done much to resusciate the world's economy. The recession affects everyone and even those who don't have a job can feel its profound effects upon entering a store. Remaining optimistic while the world is currently falling in terms of economy many people are expecting it to recover next year. After all, the night is always darkest before dawn.