We may be in a longer recession than the 1930s Great Depression (see: link) but it hasn’t prevented the richest people in Britain increase their net wealth. The richest 1000 men and women have a combined wealth of £414bn, up 4.7% on the previous year.

Richest People in the World 2012

The richest 20 people have a wealth of £288.5bn – more than triple the wealth of 2003, when the richest 20 people’s combined wealth was £102bn. The credit crunch temporarily reduced wealth. In 2008, it was £280bn, falling to £167bn in 2009. But now their wealth has climbed above the 2008 peak.

Richest People in Britain

Read more

Recently, the IMF have been working hard to establish a bigger fighting fund to help out insolvent Eurozone economies. (Although they say, it is not just for the Eurozone, but for the whole world economy.) Extra contributions from IMF members have raised an extra £300bn – taking the total of IMF funds to £1,000bn.

• The aim is to have a bigger ‘firewall’. If economies experience liquidity crisis – e.g. can’t meet borrowing requirements, then they can apply for a loan from the IMF.
• The fact that there is a lender of last resort like the IMF – means markets are, in theory, less worried about countries becoming illiquid and experiencing shortages. This confidence factor can help avoid capital flight in the first place.
• Given the greater uncertainty in the world economy, the IMF has been keen to build up an even bigger fund than usual.

How Do Countries Contribute to IMF?

• The UK recently gave £10bn to the IMF. This doesn’t come out of public spending. It is invested from UK foreign exchange reserves. The UK can also gain interest on this ‘investment’ into the IMF fund.

Limitations of the IMF Fund

• One Trillion pounds is a big fund, but given the amount of potential losses in the Eurozone, it would be insufficient to cope if countries like Spain or Italy defaulted.

  Read more

Preliminary figures for Q1 2012 show the UK has re-entered recession, with a second successive quarter of negative economic growth.

The negative economic growth occurred despite a small growth in the service sector and spurt in retail sales of petrol. The biggest factor contributing to the negative economic growth came from the construction sector, which saw a drop of 3.0%.

Brief Summary on Causes of Double Dip Recession

• Spending Cuts – creating lower wages, unemployment and decline in confidence
• Cost-push inflation and decline in real wages. Workers are seeing a squeeze in incomes leading to lower spending
• Uncertainty in housing market causing a drop in construction
• Uncertainty in Eurozone holding back investment and spending.
• Slower exports to the Eurozone facing its own economic downturn.
• More on causes of double dip recession

Implications of Double Dip Recession

After the serious 2008/09 recession – where GDP fell a record 6%, the economy has struggled to recover.

• Despite the spare capacity, inflation has remained above target, giving little room for manoeuvre. At least one member of the MPC have started talking about the prospect of interest rate rises sooner than later. But, this news of economic recession, will give more weight to the inflation doves who are more concerned about lack of growth and unemployment.

  Read more