What impact does the global economy have on our personal finances?

The global economy has been under the microscope since the economic down turn of 2008.

The banking crisis resulted in the global economy collapsing like a house of cards.

The domino effect hit Europe hard and caused numerous governments into near bankruptcy.

The Bank of England has attempted to control UK finances and conquer a potential double dip recession (as well as inflation) by keeping interest rates at a historic low and cutting the growth forecast for the UK.

The global economy is in slowdown which makes it even harder for countries to pay off their debt.

A lack of confidence in the market causes panic and if the American economy plunges into a deep recession, it is likely to suck in other major economies resulting in another full blown crisis.

The USA faced serious banking problems earlier this month, taking on more debt to sustain the countryís funds. The US debt now stands at $14.6 trillion which is the equivalent to 100% of the total annual out put of the economy.

Debt within the Eurozone is quickly mounting and, as nations rely on international bailouts, the financially crippling state of the worldís economy is having an immediate impact on consumersí personal finances.

Inflation

Higher inflation leads to higher prices, pushing up the cost of everyday expenditure and living. Last month inflation went up to 4.4%, driving up the cost of transport, food, rent and household services. The impact of rising inflation is also bad news for savers as interest rates remain at rock bottom, leaving them very few options.

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Inflation also affects your wage. Typically, a salary should match the line of inflation; however the government has not raised wages in line with inflation.  This has resulted in the population earning less but paying more. 

Fuel & Gas

With the majority of Britainís leading energy suppliers imposing price hikes of around 20% on fuel bills this month, many households will be hit hard in the wallet, potentially leading to fuel poverty. 

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The price of crude oil currently stands at $85 (£52) to the barrel, down from $100 (£61 last month) and $115 (£70) in May. The cost of transport is also increasing as fuel at the pumps gets higher, leaving many drivers short of cash.

In May, the cost of petrol reached a record high of 137p a litre and Diesel was more than 140p per litre. The average cost of petrol is currently 136.5 p per litre.

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Interest Rates

Interest rates are still at a record low and this is bad news for savers, particularly those nearing retirement. Pensions will have lost money and annuities have become more expensive.

Lower interest rates result in an erosion of savings and the stock market falls are not welcome news for pensioners either.

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