Julian Knight: Will politicians be able to avert credit crunch part two?

The world's governments that bailed us out in part one now need bailing out themselves

Welcome to credit crunch part deux, well, maybe. Global markets are in freefall, Italy is a mess, the Germans are taking their time, and the US is divided between a president who, by the day, is turning into a sub-Jimmy Carter and complete headcases on the Republican side. Meanwhile, in the UK, our leadership is sunning itself on holiday. The world governments, the heroes of part one, thanks in part to Gordon, the dashing lead, are now the victims of part two. In part one the governments bailed out the banks, but who can bail out the governments in part two?

The answer is only that the strong must help the weak, and ridiculous political constructs such as the 17-member eurozone need to be radically overhauled. If this is the start of another Lehman-style crunch then the political plates are going to have to move incredibly swiftly, and I'm not sure the political class in Europe and the US is up to that. In effect, the current turmoil on the markets reflects their collective lack of faith in the people at the top of governments and institutions around the globe. In the same way that if a chief executive is seen as not up to the job then the share price in his or her firm will shatter.

However, in all this doom and gloom I can't help but look at the firms trading at very low levels of price to earnings, with major stocks of cash, and slimmed down after the recession – and think that here is a buying opportunity writ large. But only if the politicians and regulators show themselves up to the tasks at hand over the coming days and weeks. If they aren't, then those same company balance sheets will be laid waste by a collapse in confidence in the wider economy. Again, as in part one of the credit crunch, this is going to be a very close-run thing.



Let's have action, not words

If I see one more report telling us that we are heading for an impoverished old age I think I'm going to scream, or do something equally manic – like buy Italian government debt. Last week we had the National Association of Pension Funds report led by the former head of the Treasury Select Committee, Lord Mcfall, and the Department for Work and Pensions' latest figures on longevity, both of which told us ... yes, you guessed it. I really have had enough of every man and his dog telling me that we are in a collective mess, and I would far rather move on to the action phase.

The Government's plans for a higher, flat-rate, citizen's pension, twinned with the scrapping of means-tested benefits, is a sensible first step. The state pension is the base from which employers, pension providers and individuals have to build; get it right and the rest has a chance. But, increasingly, it seems there are concerns about the affordability of a citizen's pension in the Treasury, and, at a time of austerity, can we really be seen to be, in effect, boosting most people's basic state pension?

Of course it's the Treasury's job to question the need to spend, but I'd say this is clearly a case where we can't afford not to. If there was any worth to the reports of last week it is that really we have to act now – and decisively – over this issue.



New dawn for sunset industry

A "sunset industry" is a phrase coined by City types to describe an industry which is being expunged slowly by the march of technology and changes in wider society. In the 1950s you'd say Lancashire cotton was a sunset industry, in the 1980s coal would have matched the profile. Now, sunset industries, according to one fund manager I met last week, include terrestrial television and newspapers (we can't be that much of a sunset industry, though, as he still paid for lunch).

But another sunset industry – rather appropriately – is package travel firms. The collapse last week of Brighton-based Holidays 4 UK – at the height of the holiday season when cash should be flowing in by the bucket-and-spade load – highlights the acute decline of this industry. And meanwhile, Thomas Cook's chief resigned amid a collapse in profits.

Fortunately, Holidays 4 UK is Atol protected, which means holidaymakers will be flown home. But in previous collapses Atol protection has not been enough, because of a little-known loophole. Basically, people who have booked with a package company through a travel agent have found that because their agent has bought flight and hotel from different sources, rather than just one Atol-protected firm, they don't have the level of protection they hoped for. Last year, during the collapse of Goldtrail, for instance, many customers were shocked to find that their flight had fallen through but their hotel was paid for, or vice versa.

The Government would like to see Atol protection extended to these type of arrangements but we are still waiting for action. And the fact that the package-travel industry is a sunset industry makes this imperative.

Independent Partners; Do you need financial advice on your investments, pension or insurance? Book a free consultation with an independent Financial Adviser at VouchedFor.co.uk

Finacial products from our partners
Property search
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
SPONSORED FEATURES
Independent Dating
and  

By clicking 'Search' you
are agreeing to our
Terms of Use.

ES Rentals

    iJobs Job Widget
    iJobs Money & Business

    Recruitment Genius: Collections Agent

    £14000 - £16000 per annum: Recruitment Genius: This company was established in...

    SThree: Trainee Recruitment Consultant

    £20000 - £25000 per annum + OTE 40k: SThree: SThree are a global FTSE 250 busi...

    SThree: Trainee Recruitment Consultant

    £20000 - £25000 per annum + competitive: SThree: SThree are a global FTSE 250 ...

    Reach Volunteering: Trustees with Finance, Fundraising and IT skills

    Voluntary and unpaid, reasonable expenses reimbursable: Reach Volunteering: St...

    Day In a Page

    Isis profits from destruction of antiquities by selling relics to dealers - and then blowing up the buildings they come from to conceal the evidence of looting

    How Isis profits from destruction of antiquities

    Robert Fisk on the terrorist group's manipulation of the market to increase the price of artefacts
    Labour leadership: Andy Burnham urges Jeremy Corbyn voters to think again in last-minute plea

    'If we lose touch we’ll end up with two decades of the Tories'

    In an exclusive interview, Andy Burnham urges Jeremy Corbyn voters to think again in last-minute plea
    Tunisia fears its Arab Spring could be reversed as the new regime becomes as intolerant of dissent as its predecessor

    The Arab Spring reversed

    Tunisian protesters fear that a new law will whitewash corrupt businessmen and officials, but they are finding that the new regime is becoming as intolerant of dissent as its predecessor
    King Arthur: Legendary figure was real and lived most of his life in Strathclyde, academic claims

    Academic claims King Arthur was real - and reveals where he lived

    Dr Andrew Breeze says the legendary figure did exist – but was a general, not a king
    Earth has 'lost more than half its trees' since humans first started cutting them down

    Axe-wielding Man fells half the world’s trees – leaving us just 422 each

    However, the number of trees may be eight times higher than previously thought
    Theme parks continue to draw in thrill-seekers despite the risks - so why are we so addicted?

    Why are we addicted to theme parks?

    Now that Banksy has unveiled his own dystopian version, Christopher Beanland considers the ups and downs of our endless quest for amusement
    Tourism in Iran: The country will soon be opening up again after years of isolation

    Iran is opening up again to tourists

    After years of isolation, Iran is reopening its embassies abroad. Soon, there'll be the chance for the adventurous to holiday there
    10 best PS4 games

    10 best PS4 games

    Can’t wait for the new round of blockbusters due out this autumn? We played through last year’s offering
    Transfer window: Ten things we learnt

    Ten things we learnt from the transfer window

    Record-breaking spending shows FFP restraint no longer applies
    Migrant crisis: UN official Philippe Douste-Blazy reveals the harrowing sights he encountered among refugees arriving on Lampedusa

    ‘Can we really just turn away?’

    Dead bodies, men drowning, women miscarrying – a senior UN figure on the horrors he has witnessed among migrants arriving on Lampedusa, and urges politicians not to underestimate our caring nature
    Nine of Syria and Iraq's 10 world heritage sites are in danger as Isis ravages centuries of history

    Nine of Syria and Iraq's 10 world heritage sites are in danger...

    ... and not just because of Isis vandalism
    Girl on a Plane: An exclusive extract of the novelisation inspired by the 1970 Palestinian fighters hijack

    Girl on a Plane

    An exclusive extract of the novelisation inspired by the 1970 Palestinian fighters hijack
    Why Frederick Forsyth's spying days could spell disaster for today's journalists

    Why Frederick Forsyth's spying days could spell disaster for today's journalists

    The author of 'The Day of the Jackal' has revealed he spied for MI6 while a foreign correspondent
    Markus Persson: If being that rich is so bad, why not just give it all away?

    That's a bit rich

    The billionaire inventor of computer game Minecraft says he is bored, lonely and isolated by his vast wealth. If it’s that bad, says Simon Kelner, why not just give it all away?
    Euro 2016: Chris Coleman on course to end half a century of hurt for Wales

    Coleman on course to end half a century of hurt for Wales

    Wales last qualified for major tournament in 1958 but after several near misses the current crop can book place at Euro 2016 and end all the indifference