The credit crunch

'Credit crunch' is a term that has been floating around the news and economy, quite threateningly, for quite some time now, but what does it actually mean?

And how will it affect us, the student population?

The credit crunch starts when banks are less optimistic about lending money to consumers and therefore start charging higher rates of interest to secure themselves.

This then results in a domino effect around the rest of the economy, as it means that consumers have less disposable income and therefore expenditure decreases, making way for a decrease in investments and mortgages, which then leads to unemployment and often bankruptcy as firms cannot afford to sustain their business and have a pessimistic outlook for the future.

For students, this means cutting back on the food and energy bills as much as possible and holding out for the Christmas and new year sales, to bargain as much as possible, as each penny is really starting to count.

However, it seems that there is more gloom to come as, after months of crunching numbers, the government had no choice but to lose all pragmatics and unveil the 'credit crisis' for what it is - a recession. [-[quote]-]

A recession is when an economy has been in negative growth for at least two quarters, which is what Britain is racing towards.

The cabinet freefalled into frenzy after many news stations and reporters had to report on the downturn of the economic cycle.

Banks, so eager to lend money had their backs against the wall long ago, yet Brown still thought he could save us with his subsidising cash injections - but apparently his bedside manner and charm still left the economy at a slump, resulting in a chain reaction of high interest rates and unemployment.

So where do we go from here? What does this mean for the future months?

Given our current predicament, I would say that an upturn is not a likely option to be held anytime soon, unless we are befallen by a Christmas miracle.

Although this is a comforting hope and one that I would love to believe, I think that the boom that we had so guiltily enjoyed for the last few years has finally come to an end, meaning that the Brownites and their leader need to asses the situation fast and come up with a convincing plan to save us from the economical hardship that is yet to come.