8 Good Things About the Credit Crunch

Author: imad sedki

It is very hard these days to watch the news or read your daily newspaper without being constantly bombarded by predictions of doom and gloom and worse days to come due to the current credit crunch. Large banks are falling like flies after a lengthy fanatical high fuelled by a long greedy lending binge. With an increasing number of large businesses collapsing and the promise of many more to come, people find themselves constantly battling with feelings of uncertainty about the future were catastrophe seems to be looming just around the corner. However, we conveniently forget about the many perks that might result out of all this misery and we seem to have a strong tendency to push aside any optimistic ideas in keeping with the general doomsday mood that the media keeps inflicting upon us. The following points might help add a pinch of salt to our general perception of life and project a flicker of light towards the end of the tunnel.

1 High Inflation


With inflation edging just below 5 points, things are getting more expensive every day. Yes, we are coughing up increasing amounts of money for the daily essentials and most of our salaries will not keep up with the increase. But for those of us who have debts and mortgages -which is probably a large majority as a result of the government's last ten years economic policy- things are not as bad as it seems. With inflation figures very close to the Bank of England interest rates, we are paying our mortgage lenders a smaller margin of profit in real money value. For a typical £100000 mortgage, inflation alone is reducing just under £5000/year of the real value of the money owed. In a few years when we eventually emerge from the other end, many people will realise that this credit crunch has reduced the required time for paying their mortgages compared to average years.

2 Lower Interest Rates


No bonus points for guessing that sooner or later, the Bank of England will have to reduce interest rates to stimulate the economy. In our modern volatile economic environment, we are in a rare situation where we can be that certain about the coming year's interest rate predictions. This is obviously good news for those of us with debts and mortgages but it is also fantastic news for business that know  -providing they can stay afloat- a significant highly predictable boost is already in the mail.

3 Lower Immigration

Remember how hard it was last year to go through a day without reading a story about the considerable influx of immigrants into an already saturated island with infrastructure struggling to cope with the numbers? There has been a long debate about the effects of immigration and about weighting its benefits against its social and economical impacts. This has prompted the government to introduce major reforms to the immigration rules which came just in time for the credit crunch to score a double whammy in the same direction. A weak pound combined with an unsecure, over-saturated job market is making the UK less attractive for new immigrants and even forcing some of those already here to think about leaving. The correction of course does not happen over night, but it seems that the system has its own way of brining back harmony and balance equalising immigration volumes with the country's capacity to welcome new comers.

4 Positive Environmental Impact

With greedy big oil inflating prices and a weak US dollar, highly oil-dependent businesses in general are becoming less competitive compared with less oil-dependent ones. There is a growing incentive for both governments and businesses to switch to greener options in addition to making research in order to find alternative energy sources more economically viable.

5 Increased Exports


It is a no brainer that the current weak pound will increase the competitiveness of our business abroad. This will play a significant role in getting us out of the crunch and will help create new jobs on the long run.

6 Collapse of Under Performing Businesses

They say in an up moving market, only fools manage to loose money, while in a crashing one only the best are able to survive. The credit crunch is tourching through financial markets like a forest fire. It is weeding away old infrastructures with weaker less cost effective businesses leaving behind only the solid foundations. Once the fire is out, we will have a market with only the best performing useful businesses and lots of space for expansion.

7 Improved Tourism Revenue

A weak sterling and high air fares have already forced many of us to consider exploring the great destinations that good old GB has on offer for our next holiday. It is also cheaper now for foreign tourists to visit the UK which promises a nice timely boost to the tourism industry that in turn will generate extra real revenue contributing to end the crunch.

8 Lower House Prices

We all have been complaining about over-inflated house prices during the last 5 years, but when house prices come crashing down like a wall of bricks, we complain even more. The reality is, as we all knew and conveniently ignored, we all had it coming, and a seemingly endless inflation in house prices is obviously unsustainable on the long run. Although this crash might be bad news for those of us who need to sell and down-grade during the crunch, the majority of home owners who borrowed sensibly will not be affected even if they wanted to sell and buy a similarly priced or more expensive property. As for first time buyers, yes they will struggle during the crunch to get a mortgage, but once this is over, they will be able to buy the same houses with smaller mortgages, and with inflation wiping even more of their mortgage costs and interest rates expectedly coming down, this might compensate them for the rent money they had to pay during the crunch years.

Article Source: http://www.articlesbase.com/investing-articles/8-good-things-about-the-credit-crunch-601334.html

About the Author
I am an NHS doctor living in the UK with an interest in economy. I tend to move in the opposite direction from where the herd is heading and in these difficult days this probably means to be full of optimism, happy and appreciate life as it is.