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“Everyone has become increasingly obsessed with the credit crunch, which may sound rather unthreatening, like a breakfast cereal, but, if it becomes a recession, could develop into something altogether more serious.

There is general consensus within the media that we are now facing a world financial meltdown, with the situation changing daily.

US economists and politicians are currently debating whether Washington should acquire the banks’ toxic assets for $700bn. In the first instance, Congress turned down the bill to inject $700bn into the banking system, amid popular feeling that this support of the banks was akin to being sued by a burglar who has broken into your home.

The need for bank bail-outs has not gone away. Billions of taxpayers’ dollars was used to give Wachovia to America’s biggest bank, Citigroup. Belgium’s largest bank, Fortis, was partly nationalised by the governments of Belgium, Luxembourg and Holland.

Previously the US government bailed out the quaintly-named mortgage giants, Freddie Mac and Fannie Mae, who were teetering towards collapse as a result of the housing market slump, at a cost of hundreds of billions of dollars. Conversely, Lehman Brothers, the fourth largest bank on Wall Street, was allowed to go to the wall, but the Federal Reserve has pledged $80 billion to rescue giant insurer AIG.

In the UK, Lloyd’s TSB took over HBOS, a move previously prohibited under anti-competition regulations. The mortgage side of Bradford and Bingley is to be nationalised and Spanish bank, Santander, is to buy the savings operation. Extraordinary times call for extraordinary measures. Banking is now a fully global concern and the ‘spivs and speculators’ are able to get around local legislation. In markets where confidence is all, the appearance of stability is crucial.

We are told that the debt crisis, escalating banking problems, the price of oil, major shifts towards Asia, plunging stock markets and house prices are creating an economic catastrophe, which the press appears to revel in. With headlines like ‘Meltdown Monday’, ‘Global Cash Chaos’ and ‘Fear Stalks British Banks’, is talk of a recession in danger of becoming a self-fulfilling prophesy?

When George Soros says things will get worse before they improve, people listen. The Times says the recession started either eight years ago, with the bursting of the dot-com bubble, or with the sub-prime mortgage crisis of last year. It believes it could last for a long time, since it is centred on banking and property.

A recent article said: “In an ordinary recession, one has to wait for consumers to regain their confidence, which restores the confidence of business. At present, banks are too anxious even to lend to each other, let alone expand consumer credit or business loans.”

The Guardian is also very downbeat, citing banking and housebuilding as two industries shedding thousands of jobs, with house prices falling faster than ever and the mortgage industry grinding to a halt, which has a knock-on effect on the construction industry as a whole, which joins manufacturing, the service industries and even the public sector in the doldrums.

Ronald Regan said: “Recession is when your neighbour loses his job, depression is when you lose yours and recovery is when Jimmy Carter loses his.” The accepted definition is two quarters of negative growth and the UK has not yet reached that situation, with the second quarter of 2008 flat, ending a run of almost 16 years’ growth.

There are some positives to be pulled from the gloom; retail sales were strong over the last quarter and unemployment is relatively low, but the press chooses to emphasise the negative and recession has replaced global warming as their new hot topic.

At the beginning of July, Denmark was confirmed as the first European country to enter into a recession. Its economy contracted by 0.2% in the last quarter of 2007 and by 0.6% in the first quarter of 2008.

Inflation in Denmark has reached an 18-year high and an OECD report said their economy would have the lowest growth of its members until 2014. Interestingly, Denmark frequently tops polls showing levels of overall happiness.

European data shows other countries could soon follow suit, with the UK, Italy, Spain, Portugal and Ireland, the countries most likely to fall into recession. One of the key pressures they are facing is inflation, which frequently outpaces the 2% target set by the European Central Bank.

As inflation rises, workers demand higher wages to keep pace with prices, but with European business becoming less competitive, companies are forced to freeze wages and cut jobs. In this environment, people are naturally fearful of losing their jobs and recent images of well-paid bankers thrown onto the streets, with their work possessions in cardboard boxes, adds to the unease.

The CEO of a company may look at revenue models to see where savings can be made when times are hard. Some aspects of the business might be outsourced to save money and employees need to see if they can ring-fence their position within a company.

If you are an employee, it would be wise to consider whether your role is outsourcable; employees need to be adaptable to become indispensable, so perhaps learning a new language or skill or being prepared to move abroad within the company will add value to your position.

Unemployment levels across Europe are generally low (see figure), but are likely to increase, so ensure your CV is up to date and lists your relevant skills. As a company will try to find ways to increase sales and reduce costs, you need to do the same on a personal level, finding ways to secure and supplement your income.

You do not need to be disloyal, or outwardly declare that you are on the market, but the current recruitment model means that has never been a better time to be passively looking around. The popularity of sites, such as LinkedIn, Career Builder and, indeed, ExecutiveSurf are testament to this.

Whether we are facing the potential of a full-blown recession or not, it is never a bad idea to change some bad habits, to economise and in doing so, help ourselves and the environment.

The British politician, Norman Tebbit, famously described as a ‘semi-housetrained polecat’, provoked outrage in the 80s with his call to “Get on your bike.” His point was that if you had lost your job in Britain’s industrial heartlands, it was not a good idea to look for another manufacturing job in the same area. The sector was pretty much non-existent and there was a huge surplus of skilled workers.

Tebbit meant people should move to where the service industries were booming. That concept can now be applied to the whole world. It may be easier said than done, but if you are prepared to move to another country, you can increase your chances of finding work. Learn a language and ask yourself (and your family) whether you would be prepared to move abroad for your job.

A world of rolling news and internet access can easily make people anxious, with governments falling over themselves to guarantee personal bank savings, stock prices in freefall and the job market uncertain. Now is not the time to panic, but to remain calm and focused. To paraphrase Rudyard Kipling, “If you can keep your head when all about you are losing theirs…Yours is the earth and everything within it…”

If all else fails, remember that in the 1930s, the economist, John Maynard Keynes, advised people to spend more in a recession, to get things moving, and who are we to argue with the great man?

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