Plunging equity prices, spiralling downwards and falling sharply are all phrases you will read in the press today as the UK money markets react to the news that were are in a recession already and things are set to become even worse.

The FTSE 100 now stands at its lowest point for over 5 years. The pound has fallen against the dollar to below $1.60 for the first time in five years ( not so long ago you would have got over 2 dollars for each pound) and there is almost unanimous expectation that interest rates are set to be cut again by the Bank of England.

 

This really is bad news and no-one should be any doubt that their lives will not be affected by it. If you are working your pay and even your job could be at risk, if you are retired your savings will be earning less, if you are about to retire your pension fund is likely to be worth a lot less and even if you have plenty of money, the investments you held it in are also likely to be worth a lot less now. There are very few individuals or companies who will survive this meltdown scot free.

 

So how should we be behaving in order to minimise the effect. Well the advice seems to be work hard, spend less, take less risk, borrow less, save money. Easy to quote but much harder to do for most people. Anyone in employment is, to a large extent, at the mercy of the perfomance of the company they work for. If business is poor and profits are down, then costs have to be cut and that usually means jobs in most cases. Then people will face the prospect of finding a new job in a market that is already stagnating. Not a pleasant prospect.

 

On the other you may step back and consider the bigger picture. The root cause of all this turmoil is said to be over-stretched borrowers funded by haphazard loan providers. If all that has been corrected now, then perhaps there is no real problem. The world is still developing, people still need to eat, clothe themselves, travel etc so there may not be a real long term issue and this is just a short sharp adjustment. Let's hope so.