FSA sets out its nightmare double-dip slump scenario

mystic_trev

More gloom? Sorry it's from the Beano, I couldn't find it anywhere else!

Banks must be prepared for a double-dip recession and record unemployment, the country's financial watchdog has warned, in a sign that Britain may not yet be past the worst of the financial crisis.

The Financial Services Authority revised its worst-case parameters for the stress-testing of banks to include a GDP decline of a further 2.4 percentage points by the end of 2011 - or an 8.1 per cent peak to trough fall - with unemployment rising to an all-time high of 13.3 per cent and house prices falling 36 per cent from 2010 to the end of 2014.


Read more: http://www.dailymail.co.uk/money/article-1257037/FSA-sets-nightmare-double-dip-slump-scenario.html#ixzz0hsA4kgkO

Thrugelmir

mystic_trev wrote: »

More gloom? Sorry it's from the Beano, I couldn't find it anywhere else!

Suggests even further tightening of the credit markets which already have sizable problems to contend with.

A real issue for the Government of the day. Maintain growth in the economy but reduce borrowings. Some difficult choices ahead.

Wage inflation (or lack of) seems the main weapon in the armoury.

Really2

What were the previous parameters?

sarkin1

Really2 wrote: »

What were the previous parameters?

none which is why we are in this mess

markharding557

Wage inflation (or lack of) seems the main weapon in the armoury.

The problem here is if prices get too far ahead of incomes this will reduce what gets spent on luxury items as more of the average income will be needed to pay for every day expenses.
sounds like more pubs and restaurants could be closing down.

Petrol prices is having the same effect i am now spending about £10 a week more than 6 months ago,this £10 is not getting saved or spent elsewhere.

Thrugelmir

markharding557 wrote: »

The problem here is if prices get too far ahead of incomes this will reduce what gets spent on luxury items as more of the average income will be needed to pay for every day expenses.
sounds like more pubs and restaurants could be closing down.

Petrol prices is having the same effect i am now spending about £10 a week more than 6 months ago,this £10 is not getting saved or spent elsewhere.

A cut in the standard of living is a probable consequence.

We have had 15 years of increased standard of living primarily due to the importation of cheap goods from the Far East. Clothes, TV's, Washing Machines etc are all cheaper in relative terms than 25 years ago.

We haven't been creating real wealth, or investing our income to generate income in the future. We've been partying. The booze tap has been switched off. All we are left with is the hangover.

Really2

sarkin1 wrote: »

none which is why we are in this mess

I believe they did set previous stress test parameters after the banking collapse.

I was just wondering how different these were to the wost case then.

Thrugelmir

Really2 wrote: »

I believe they did set previous stress test parameters after the banking collapse.

I was just wondering how different these were to the wost case then.

The first changes are only just being implemented from June 2010. With more to follow in the years to come.

Some of the banks may be off life support but are still in intensive care. As will take some years for them to unwind their asset books.

Really2

Thrugelmir wrote: »

The first changes are only just being implemented from June 2010. With more to follow in the years to come.

Some of the banks may be off life support but are still in intensive care. As will take some years for them to unwind their asset books.

But what were the worse case scenarios for then?

Cannon_Fodder

http://forums.moneysavingexpert.com/showthread.html?t=1718387&highlight=fsa+stress+test

Really2

Cannon_Fodder wrote: »

http://forums.moneysavingexpert.com/showthread.html?t=1718387&highlight=fsa+stress+test

Cheers.:beer: