2 Dollar Pound Approaching

Yesterday sterling hit $1.95 as the US economy appears to be faltering. A number of indicators show that the US economy is under pressure. These include house prices down 3.5%, industrial orders down 8.5% and a fall in the Consumer Confidence Index. US interest rates have been on a steady rise over the past two years. However, it appears that they are now pressuring the economy into a serious risk of deflation. To read a full report of the figures, click on the post title.

Farepak - From an economist's point of view

Leading economist John Kay, who writes a regular column in the Financial Times, has criticised the management of Farepak for blaming the banks for its demise.

The collapse of Farepak has deprived thousands of lower income families of their Christmas savings. Without naming names - parent company Chairman Sir Clive Thompson being the most famous - Kay has suggested that it was poor strategy rather than the banks which were to blame.


To read John Kay's article, click on the post title.

Debts - Individual Voluntary Arrangements

This is a follow-up to the earlier post on debt.

One way out of debt is to sign up to an Individual Voluntary Arrangement (IVA) which acts as a legally binding agreement between you and your creditors.

There are a number of benefits of to an IVA:

1. The interest rate spiral is brought to a halt

2. The unpaid balance of your debts is effectively written down

3. This could be as much as 75%

4. You replace this with one monthly payment

5. If you stick to the revised payments you are protected from further legal action

6. You avoid bankruptcy and therefore no need for embarrassing notices in the press

2 million people in debt

According to a report in the Daily Mail (20th November 2006) as many as 2 million people are so far in debt that they have no hope of repaying. For some people the debt mountain is now so large that interest payment absorb all their spare income. A boom in consumer spending aided by credit card and other loan facilities has seen many UK households overload with debt. The recent rise in interest rates, coupled with rising costs for energy will place many people at risk of bankruptcy.

The UK is now the debt capital of the world. And you only have to watch daytime TV to witness the growth of a burgeoning debt management industry. Providing management solutions is the latest growth area for financial advice.

To read the Daily Mail article, click on the post title.

First SIPP sales reported

French ski property Hotel des Deux Domaines has reported its first S.I.P.P. (Self Invested Personal Pension) sales. Property investments are only eligible if they are for commercial properties. Hotel des Deux Domaines is a ski hotel located in La Plagne.

UK Interest Rates rise

On Thursday 9th November the Bank of England Monetary Policy Committee raised interest rates to 5%. The increase was widely signalled. The increase has been brought about by fears regarding the level of domestic inflation, now in the region of 3%.

Inflation is very much a mixed bag. Factory gate prices are steady, energy costs are falling from their winter 2006 highs and oil is much lower following the reduced tension in the Middle East.

However, much of the UK domestic index is dominated by public sector items. Council Tax, which has almost doubled since 1997, and the introduction of higher levels of University Tuition Fees are driving up average household bills.

One area where costs are not only under control but falling is the electrical goods sector. This is impacting on everything from ipods, to flat screen TVs, to mobile phones. Technology is benefitting from the experience curve economies enunciated in Moore's Law, whereby the costs fall by 50% every 18 months. Apart from the manufacturing aspects there are also the benefits of a more competitive retail market. This is principally led by a move away from the high street to online retail. Online specialist retailers such as 121 Electricals can offer a leading model of flat screen TV at prices sometimes 10-20% below their high street equivalents. Prior to the rise of the Internet, the high street had become almost a duopoly of Dixons and Comet. Now online competition is providing both choice and lower prices.