Some environmental factors that may stress the economy could be the exhaustion of excess bank reserves, inflation, consumer resistance to rising prices, accumulation of large stocks of new durables in consumer’s hands, the puling up of business inventories, and the most recent stressors that we know for sure have had an impact is when big changes in government spending, bailouts and the housing market took major turning points.

Big government has weakened our confidence and expectations as the recession continues with no real news insight- we wonder if the system will continue to bump along the bottom, is a depression just around the corner.

Three good indicators for good or worse economy will be derived by First: The market- investments and consumption spending. Second: rising stock prices, this means more profits for stockholders, which means more money to come out of their incomes in terms of spending. Third: from the point of view of corporations, higher stock prices mean a lower cost of capital for any up coming expansions. Meaning credit can be obtained more easily and with lower interest rates.

Consumer spending on food, clothing, personal care…does not usually effect the balance of using credit, in other words most people back in the day did not put small purchases on credit and run up a large sum of debt , in fact such purchases except for food were know to last two or three years before another purchase was needed, therein credit was manageable.

The use of credit increased when the prices of products went up and people hadn’t been able to adjust their income levels with the price increases. Consumers would have put off making any purchases until prices went down or there was an increase in income. In short term fluctuations consumers appear to adjust their consumption habits to rising incomes over the long haul so as to maintain about the same average pro as in past prosperity periods.

Does anyone have any idea how to bring the economy back around- yes, Reserve authorities can almost surely expand the nation’s money supply, since the banks will buy government securities even if they won’t lend to businesses and or consumers, but if direct loans to business and consumers are needed to stimulate investment and consumption, then we have a problem.

The warning came to late, or we just did not heed- when consumers are spending more than they make and credit lines are expanding something is going to burst and that is exactly what we are seeing today- little to no investments and or savings and a stock pile of debt. Maybe one should consider going back to the “good old days”?

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Putting Together an IVA Proposal Since you have to be insolvent to enter an IVA, then that is the first thing to verify and any reputable insolvency firm will do this for you quickly and free of charge. You probably have enough information in your head about your finances for them to do this but if not, it does not require a lot of documentation to complete the exercise. A good Insolvency Practitioner (IP) will explain all the options open to you if you are insolvent. If you still want to proceed with an IVA – and you should only do this, if it is indeed your preferred option – you will be required to provide various documents to your IP or your case manager, if one is assigned to look after your case. I understand that I will have to furnish recent pay-slips, bank statements, credit card statements, loan agreements & statements, HP agreement & statements, mortgage statements, correspondence from creditors and debt collectors. I will also provide my monthly household budget showing my outgoings and earnings as well as any other documents required relating to my mortgage and my car HP. I will make myself available to meet with my IP or case manager in person or by way of telephone meetings. After this process, I would hope that my IP can construct an IVA proposal for me for my creditors to consider.

Getting Creditors to Agree – The Meeting of Creditors (MOC) Creditors will receive a copy of your IVA proposal and be notified of the date of the MOC. They will be able to see how much of your debt you propose to repay, how you propose to do this and over what period of time. If 75% of your creditors agree, then your IVA is accepted. Creditors may make some changes to your proposal – called modifications – and you will have to decide whether you can agree to accept them. The chairman of the MOC is the route by which you may discuss these modifications with your creditors. You obviously have to be available (usually by phone) on the day of your MOC but you do not necessarily have to attend the MOC. In fact few debtors do so. The chairman will relay these matters to you and communicate with your creditors on your behalf on all matters and may adjourn the meeting for up to two weeks while you consider if you agree to the modifications. Assuming that such modifications are affordable – and why would creditors take the risk of causing the IVA to fail by adding unreasonable modifications? – I see no reason why I would not proceed. However, I am aware that I can decide not to proceed and to withdraw my IVA proposal at any point up to and including the meeting of my creditors. If I decide to not proceed with my IVA, I understand that I will incur no costs and that reputable insolvency firms would refund any funds I may have pre-paid

Getting an IVA Up and Running Once creditors have accepted your proposal and you have agreed to proceed – i.e. agreed to any modifications put forward by your creditors, your IVA is approved. It is binding on you and on all of your unsecured creditors, including any creditors who chose not to vote at the MOC. The chairman of the MOC now prepares the ‘Chairman’s Report’ and circulates it to all creditors, to the court and of course to you. It summarises the outcome of the MOC and what you must do to successfully complete your IVA. It also identifies the name of the IP who is going to supervise your IVA. This is often the same IP who acted for you as nominee up until the MOC. Now I can stop making payments to all my unsecured creditors and commence making payments to my supervisor in my IVA. My supervisor assumes responsibility for all communication with my creditors and for distributing funds to them from my IVA. My unsecured creditors and debt collectors should cease forthwith from contacting me and chasing me for payments.

Supervision of an IVA It can seem like a new beginning when an IVA is approved, particularly for the debtor and his or her family. All the bad things that were happening cease to occur – particularly the grief that the debtor has had to endure from creditors and debt collectors. Granted, it may take a few weeks for certain creditors and debt collectors to stop their actions, but this is due to their tardy internal communications systems more than anything else. At least the debtor can refer them to the supervisor of the IVA when they come calling or phoning or writing. Good financial discipline and a supportive supervisor will ensure that the IVA has an outstanding chance of surviving for its planned duration – usually five years – and be concluded successfully. It’s hard to believe that a plan can be so simple and that the prospects for success are so high. For people like me who want to repay as much of their debt as possible an IVA is an excellent alternative to bankruptcy and the average duration makes it so much more attractive than a Debt Management Plan which I understand can last ten years or more. To be debt-free, worry-free and creditor-free in five years or less even is a goal worth pursuing.

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This may be a very difficult transition for local firms that have dealt with domestic customers for many years. They will have to look to overseas markets to try to meet their current sales targets. Peter Spencer, a special adviser from Ernst & Young, said that Britain had been relying on the domestic consumer for almost ten years and that it would not work anymore. The team’s report went on to say that the UK would have trouble reaching even 1% growth in 2010. These are not very exciting numbers for many market analysts.

Spencer went on to say that he felt the UK consumer was simply cashed out and couldn’t go on spending like they had. The Ernst & Young report says that they expect to see a meager 0.4% increase in spending in the country this year. Spencer said that the only way Britain could turn things around is if the world economy started seeing a rapid growth, which is not likely at this point in time. It will take a lot of hard work and enterprise by the UK exporter to overcome these hurdles but Spencer said it could be done.

The Ernst & Young report from this week says refocusing trade to the overseas markets was going to be key to the success of many UK businesses. One place they suggest to start is China. The United Kingdom has been a large player in Asian markets in the past but they seem to have skipped over China to some extent. Currently, the UK has a very low market share in the country. In order to really get the economy back the British will have to look to this growing market in the coming year.

In 2011, the Ernst and Young report expects to see an increase in exports for the UK but 2010 will be quite slow. The good thing is that 2011 may see as much as 9% growth and then up to 10% in 2012. This will calm many investors who have felt concerned about the recession and it should help the UK economy to turn around. Figures from last year show that the UK officially ended its recession in October 2009 but this was only made possible by unsustainable measures by the government.

The report said that firm restocking, the car scraping program, and a lower VAT had kept the country afloat during tough times.

Its expected that the positive side effects of these measures will wear off soon which could slow growth significantly in the short term.

Begbies Traynor also issued a report this week on insolvencies in the UK. They say that these government measures have kept insolvencies down in the final quarter of 2009.

Both reports showed that 2010 might be a tough year for the economy but that things could bounce back in 2011.

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The growth was said to be at about 0.1% with the cities’ growth rate exceeding that by 0.4% across the board. The numbers from 2009 saw 6 consecutive months of economic shrinkage in the UK with a total decrease of about 5%.

As the government prepares for an upcoming election, this news couldn’t have come at a better time for the Labour party. A spokesperson for the Chancellor’s office said that Alistair Darling and the Labour party had predicted these gains and that they expect increases to continue under the current government.

The shadow chancellor George Osborne was not as happy with these numbers and said they were less than impressive. He said the Labour party had been ill equipped for the recession as well as the recovery period.

After hearing news of the end of the recession, markets in the UK only declined. For example, the dollar and the euro both saw increases against the price of Sterling – not to mention an increase in gilt futures.

Vince Cable, a Liberal-Democrat spokesman said that he expects the economy to stagger over the next little while. He said that the UK economy was moving in the right direction but not very quickly.

There are only a small number of economists that felt the economy would recover quickly, as it is currently being weighed down by a somewhat fragile banking sector. Economists around the world also kept mentioning the high government and consumer debt levels that will slow everything further.

The British Chamber of Commerce director David Frost felt that this was obviously a good sign – that things were moving in the right direction – but that the economy was still “far from being out of the woods.”

Many analysts and economists feel that government support measures are what are holding the country up right now. The Bank of England bailouts and huge budget deficits are credited with keeping the country afloat in the later half of 2009.

Economy watchers in the UK say that things will be fragile for a while, especially if any of the government support measures decrease in the coming years. It’s expected that growth in 2010 will only be 1% and that it will take a while to get back to regular numbers (2.5%/year).

Statistics produced by the Office for National Statistics (ONF) revealed very weak growth in the final quart of 2009 but that things picked up in November.

ING official, James Knightley said that the United Kingdom had just barely exited the recession and said that retail sales numbers over the final quarter of 2009 were sluggish compared to years past. He said that consumer confidence was also very low and that debt problems were still rampant across the country.

The British Bankers’ Association reported that consumer debt repayment was moving very slowly and that personal loan and overdrafts were on the rise. These are all signs that the recession is still taking its toll on the United Kingdom and that it may for some time.

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