I just wanted to share with you my thoughts on the current so called recession or credit crunch.

It’s virtually impossible to turn on any news from any source, without being bombarded with news on how bad the world economy is doing, how everyone is suffering, how another bank has been taken over or went bankrupt.

It’s freaking depressing!

Let me ask you a couple of questions….

1.       If you are in a JOB, are you earning any less than you did a couple of months back?

2.       Has all your expenses suddenly gone through the roof, and where you could pay all your bills from your salary before, you now cannot?

3.       Is there actually any less money in circulation than there was before?

I am pretty certain that you answered no to all the questions.

Yes, prices have generally gone up. What year, month, or week for the past decade have they NOT gone up?! This is a fact of life! Prices for basic necessities have always been going up, and they never stayed in line with salary increases!

At almost any time in the past, we have all been where we are now. Basic necessities have been going up in price, much faster than our income has.

Were we in a recession or credit crunch then?

Just a year ago, people were spending MUCH more than they are now! What changed?!

NOTHING really!

Banks have gone under, only to be rescued by either the government, or some other bank buying them out.

House prices have fallen through the carpet. I see this as a GOOD thing! House prices around the world were WAY out of whack with reality!!!

You THINK people have less money lying around, and less money to spend……

Let me tell you something from my own life, which happened just yesterday, which PERFECTLY illustrates my point on people STILL having money.

I have been thinking of switching banks for a while. The main reasons being that I was not happy with the service I was getting at my current bank, and their rates for credit was not as good as some of the other banks I was looking at.

So, I finally started to make the move. Yesterday I was required to go into the local HSBC branch to show and confirm identity.

While there, I started chatting to the service person dealing with my documents. I jokingly said that they must be inundated with new account requests over the past couple of months. ( I live in the UK where the government has taken over a few of the top banks. HSBC is one of the few NOT taken over, and one of the few which has a VERY strong balance sheet.)

The service person confirms to me that yes, they have had a record number of new accounts opened.

Then she tells me something which confirmed my suspicion that people still have money, they are just spending much less. She tells me that HSBC has this special high end account, which you can only get if you have £50,000 or more in savings. She said that in the past week, they have had 19,000 people open those accounts!!!

Let’s have a look at the sequence of events, and how it has created this vicious cycle:

1.       Banks decide they want more money, so, they start lending to people who do not really meet the lending criteria. (Sub-prime) This was also driven in a big way by the US government.

2.       WAY more people are buying houses.

3.       House prices skyrocket.

4.       A big portion of those people can’t re-pay their mortgages.

5.       Their houses get’s repossessed, and the houses are dumped back on the market by the banks to try and get their money back.

6.       Because there is suddenly a huge influx of property back on the market, at far below market value, the housing market bottoms out.

7.       The banks don’t get their money back, and because they borrowed much of that money in the 1^st place, THEY are now in trouble.

8.       Banks go under, and governments and other banks have to bail them out.

9.       Media reports on all the doom and gloom all the time.

10.   People get scared and spend and borrow less.

11.   Because people borrow less, banks get into more trouble.

12.   Because people are spending less, business are making much less sales.

13.   Companies goes bust, or, downsize workforce.

14.   People who lost their jobs, can’t pay back their mortgages, and other debt.

15.   Banks get’s deeper into trouble

This is a WAY over simplification, but, you get the idea of the vicious circle!

So, banks started this by being greedy. We, the people, made it worse by panicking, and spending less!

There IS a positive side to all of this!

Business wanting to stay in business, have started lowering their prices. Nothing drastic, BUT, enough to see a difference in overall monthly outgoing! (If the damn energy companies would just follow suit! )

So, does this affect Internet Marketing?

You bet it does!!!

ANY marketer who tells you they have not been affected in the past couple of months is straight out lying to you!

We have ALL been affected!

So, what can we as Internet Marketers do to survive this?

Continue to create worthwhile products, and sell it a reasonable costs!

DO NOT go and drop all your prices by crazy amounts just to try and win business! This not only devalues the product, but, you business as a whole!

Above all, always remember the old saying: “This too shall pass.”

I would love to hear any of your thoughts on this matter!

Tags: Business, credit crunch, Internet Marketing, recession, Sales, world economy

This entry was posted on Wednesday, November 5th, 2008 at 15:41 and is filed under Business, Internet Marketing. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.