For quite some time now we've been saying that debt fueled consumerism is unsustainable both for ourselves and the world as a whole. Not only is it ravaging our planet but its identifying us with the external drama of materialistic tendencies. At Openhand we feel Benevolent Higher Consciousness is guiding us to circumstances exposing mankind's delusion. Perhaps a 'perfect economic storm' is the best way to wake us all up? This article in the UK's Independent suggests were heading into stormy financial times not just in the UK but around the world...

Is Britain's economy heading for the perfect storm?
The Independent (UK) by Sean O'Grady, Economics Editor. Published: 05 December 2007

"The storm clouds are gathering over the jobs market; the climate on the high street is growing distinctly chilly; a typhoon of bad debt is buffeting the banks. Could a "perfect storm" be about to hit the British economy?

The signs couldn't be much bleaker. The switchback in sentiment since the credit crisis began in the summer has been violent. The Nationwide Consumer Confidence Index recorded its largest drop yesterday, and joins the GfK/NOP survey earlier this week in suggesting that a wave of pessimism not seen for years is washing over the economy.

House prices have begun to fall, albeit slightly; commercial property is seemingly on the brink of collapse on a par with that seen in the early 1990s. The buy-to-let market is vulnerable. The Bank of England has, unprecedentedly, voiced concerns about the grim prospects for real estate. And the Financial Services Authority has warned of the "very real prospect" of the global credit crunch getting much worse. It is that bad.

Shopkeepers are looking forward to a black Christmas. Sir Philip Green, the boss of Top Shop and BHS, said last night on Sky TV that "business is very, very tough". The British Retail Consortium says that sales grew only marginally in November, having slowed markedly in October. JD Sports, ScS furniture and Greene King are the latest household names warning of setbacks. About 4.4 million credit-card customers still haven't cleared debts they ran up last Christmas, according to MoneyExpert.com.

We're less ready to spend, particularly on "big ticket" items – furniture, fridges, cars and so on. We're more pessimistic about our finances. We don't want to take on more debt and we want to rebuild our savings. The credit markets are seizing up again. That means banks are becoming much, much choosier about who they lend to, and are charging ever higher rates, despite the efforts of the authorities to keep money markets functioning normally. No lending; no spending.

That unwillingness to lend – the credit crunch – has started to affect businesses too, though firms remain generally more upbeat than consumers. Manufacturing firms, and in particular those in the car industry, are happy, a veritable ray of sunshine. However, manufacturing makes up only 15 per cent of the economy. In the financial sector, responsible for more than half of the recent growth in the UK's GDP, the mood is glum.

After months defying gravity, share prices have suffered some dramatic falls. City bonuses will be cut this year – and next – along with recruitment and investment. Barclays, HSBC and other banks have reported billions in losses, while the future of Northern Rock is uncertain.

Growth in the construction sector eased to a 14-month low in November, according to the Chartered Institute for Purchasing and Supply. The gentle rise in unemployment over the past 18 months may accelerate. The accountants KPMG say that "what we are seeing is that the credit crunch is tightening its grip over the economy... an underlying weakening, with both demand for permanent staff and vacancies down on the levels earlier this year."

Everyone from the Treasury to the IMF has trimmed their forecasts for UK growth; from close to 3 per cent for 2008, down to nearer 2 per cent. The IMF says that even this is now too optimistic. Is it time to start talking about the "R-word" – recession, and the possibility that the economy might shrink?

The difficulty is that the credit crisis is a process that feeds on itself rather than an event that can be declared "over". It began with the collapse of the US sub-prime mortgage market and the housing crash there, problems which are intensifying. As more sub-prime customers default – because of the credit crunch – more banks record losses and stop lending, and more properties are dumped on to the depressed US housing market. That depresses confidence and spending, and the screw turns again.

On this side of the Atlantic we feel the chill because our banks are exposed to sub-prime and because the US economy is the world's biggest. If it slows, it drags us down with it. And the mood of economic gloom – Northern Rock, headlines on house-price crashes, higher prices for fuel at forecourts and food at checkouts – is reinforcing itself. Confidence is the magic ingredient in any economy; it is evaporating fast. There's no knowing how bad it could get.

The most pernicious aspect of this downturn is how it could turn not so much into a recession, but into "slowflation" – slow growth plus inflation. A depressed economy can co-exist with high inflation, as the world found in the 1970s. Low demand and high input costs (such as oil at $100 [£48] a barrel; wheat prices at record highs) squeeze profits and employment and cut the real value of wages. It also makes it tougher for the Bank of England to allow interest rates to drift lower.

But the really bad weather would arrive if the Chinese economy stumbled. Next year, more than half the world's growth will derive from China, India and other emerging economies. Were they to falter – say because the Shanghai stock market bubble burst – the world would almost certainly lurch into recession.

In all events, the worst of the slowdown will hit us towards the end of 2008, going into the spring and summer of 2009; the point when a general election is due. By then the public finances would be well out of control, though that may be the least of ministers' worries. Gordon Brown might not have sowed the seeds of the coming economic storm, but he may well reap the whirlwind."

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