Most commentators agree that easy credit and a buy now pay later (or never) mentality either on a personal finance basis or on big loans such as mortgages was a significant factor in creating the economic crisis.

On the other hand, in the recessionary environment, what tends to happen is that the pendulum swings too much to a situation where the economy cannot grow because it doesn’t have the fuel of lending, a necessary part of capitalism.

So, it’s a double edge sword in these current conditions when the news suggest that consumer credit is on the rise – on the one hand, good news, on the other, could this be a sign that lessons haven’t been learned and that too many people are still seeking to live beyond their means ?

In news last week, figures suggest that consumer credit in the US increased significantly last November with the biggest rise since October 2001. This equated to a whopping figure of more than a $20 billion rise in outstanding consumer credit.

In addition, he also stated that literally no-one can confidently predict how the economy will pan out and what the effects are of the last few weeks.

Worrying times indeed.

There are few more depressing sites at the moment tan walking down many of Britain’s High Streets with many having a plethora of closed or closing down shops.

The British Retail Consortium (BRC) reports that 1 in 10 high street shops is now unoccupied and higher in many places as there is considerable variance and much depends on how close a retail shopping centre is to the High Street.

Part of the difficulty with these small retailers is that there becomes a domino effect, the more shops that close, the more people don’t use their high Street. This is exacerbated by the ongoiung growth in online shopping.

Set against this background it is clear that local councils, who also suffer with decreased business rate revenues will need to help the smallest retailers. A spokesman for the Department for Business, Innovation and Skills said the Government is currently looking at a number of proposals to support high street shops.

Fears are increasing that the combination of the unprecedented downgrading of America’s credit rating together with the european debt crisis will ultimately impact significantly on the commercial banks in both continents, many of which are exposedas creditors to the Governments in question. If the banks suffer huge losses (and more may even go under), liquidity in terms of borrowing will disappear again (many would argue it is only just starting to recover now) and this creates a second credit crunch.

To seek to avoid this it looks like the most likely tactic will be attempted bailout by methods of the stronger remaining economies being asked to continue buying bonds of the economies most at risk of needing a formal bailout. We think it is doubtful that stock markets around the world will see this as anything other than another short term “band aid” to cover up the bigger problem. However, doing nothing is also not an alternative, and the one thing that holds true in thi8s century is that the stronger economies need to help the weaker ones because there is a genuine global economy. A catastrophe in Europe or the US will affect the entire world economy far more than say 50 years ago.

In terms of specifics, as investors are very nervous and edgy about certain economies, particularly Italy and Spain, bond yields, representing interest rates have risen. For heavily indebted eurozone members, 7% is the ‘line of death’ above which the country concerned is believed to be in deep trouble.

Charities claimed yesterday that middles class people face the biggest threat of homelessness for over a century, as many are losing their jobs, which in turn is leading to losing their homes, and because they do not rapidly qualify for council housing, which in turn is being affected by cuts, many are ending up on the streets.

The claim was made by Geoff Hawkins, chief executive of the housing charity Chapter 1.

In terms of hard facts, requests for Local authority accommodation rose sharply during the 1st quarter of 2011 to over 26,000, which represents an increase of 23% from the previous year and the number of home repossessions rose 17% during the first quarter of 2011, to nearly 10,000. Many believe if interest rates rise, this will be the proverbial tip of the iceberg.

The stark warning about homelessness is reflected in a leaked letter to the Prime Minister warning that 40,000 people are at risk of homeless as a consequence of housing benefits cuts.

In addition to being competitive on price, Asda now tracks disposable spending patterns via it’s Asda Income Tracker report.

In the latest report , which makes gloomy reading, the data confirms what most consumers already know, prices are rising but salaries are not and this is impacting on disposable income. Asda’s report in fact suggest that prices are rising twice as fast as income and, in terms of figures this meansthat average weekly disposable income in the UK has reduced to £165.00 from just under £180.00 over the previous 12 months.

Does this mean that Asda will now start offering 3 for the price of 1 instead of 2 for the price of 1. Let’s hope so…..

Some staggering figures have been released this week by Insolvency specialists R3 which claims that some 6 million people are in arrears with everyday bills and a n additional 2 million are believed to be in overdraft at the bank. These estimates, if anywhere near correct, are truly worrying. R3’s research also claims that :-

• 36% of people consider that their financial situation will get worse in the forthcoming 6 months,
• 32% are saving less than before.

The financial worldwide near collapse has thus far been a little like a game of negative “pass the parcel”. Others might say it is more akin to a game of Russian roulette. There is no doubt that consumers are now feeling the impact, cushioned though it has been by the massive governmental bailouts and low interest rates. It remains clear that there is significant trouble being stored up and that, save for an unlikely economic boom in the near future (which is unlikely to be a good idea anyway based on the last boom !) , there is still some real pain to be felt.

News this week only serves to reinforce the “trouble” which is just below the surface.

Lloyds Banking Group have revealed that some 150,000 homeowners who have a mortgage with them are already in negative equity. This scary figure shows the housing disaster potential for families around Britain, many of whom took out super-size loans during the boom.  The figure of 150,000 means that 1 in 20 of Lloyds mortgages are in negative equity.

Worrying figures.

Scratch under the surface and it is clear that, should interest rates rise this year, may families will be pushed over the precipice and may face repossessions. One of the features of this latest recession and the credit crunch, is that repossession figures are much lower than in previous recessions, but this does not, mean the pain is not out there.

Recent data from the charity Consumer Credit Counselling Service shows that they were contacted last year by a huge 90,00 home owners last year. Aside from many struggling with mortgage payments, the average in terms of unsecured debt was £30,160 owing on credit cards and personal loans. If interest rates rise, real trouble is brewing.

Other independent research advised that middle income households are specially vulnerable, and that most would not be to survive for 6 months if they lost their main source of income.

All in all, worrying news, but reality.