The global financial crisis. Many people have wondered how we got here. Who is responsible? Will we ever get out of it? and who will be the most affected.According to a Joseph Stiglitz, a financial guru who predicted the financial meltdown, it began in the United States, one of the powerhouses in the economic world. According to the Stiglitz, deregulation and the slashing of interest rates to such a low point led to a saturation of money in the system. Unfortunately according to Stiglitz, this provided the opportunity for banks to lend recklessly to consumers particularly in the property/home industry.
However with the deflation, the American dream began to go bust and many people, well over 12 million according to Stiglitz, began to lose their homes. So how did it reach the shore of other countries? Well according to Stiglitz, some American bankers began selling their rotten mortgages on the international markets, specifically the European market.
These bad mortgages sold to Europe had the effect of actually causing some banks in Europe to go bankrupt. Stiglitz says that ‘as market participants realized that the fire had spread from America to Europe, there was panic. Part of the concern is psychological. But part of it is because our financial and economic systems are closely intertwined. Banks all over the world lend and borrow from each other; they buy and sell complicated financial instruments — which is why bad regulatory practices in one country, leading to bad loans, can infect the global system’.
According to the South African Reserve Bank, our country’s financial institutions have thus far been protected from the crisis as there was ‘little direct exposure to sub-prime-related assets’. It does concede however that ‘Financial markets are, however, highly integrated and the prolonged global financial turmoil could impact the South African economy through contagion risk. Increasing volatility in financial markets, further repricing of risks and financial assets, increasing cost of funding and possibly reduced flows to emerging market economies are threats to the local economy and financial system’.
Developing countries, as always will most probably be the country’s to suffer the most during this difficult financial situation.
What does it mean for the man on the street? 
29 year old Hip-Hop artist Camille Epembia and music producer Stephane Nguama Obame, 24, are two young Gabonese men, studying in South Africa, who have just produced and released ‘CAMEDUCATION’ a French hip-hop album by Mr. Epembia on the streets of Johannesburg and plan to release it in Gabon in August.
As up and coming entrepreneurs and students in a foreign country, I spoke to Stephane to find out how the economic recession has affected them in the production of their album. He told me that it was quite difficult to put together a quality album as there was lack of enough funds as it was difficult to save, due to the high price of daily living but they became creatives in how they produced their album on a tight budget.
Stephane said that the financial crisis has crippled them as students and musicians as food and transport prices are high, and the production of a quality albums means splitting with lots of cash as studios and other technical people needed to create the album have increased their rates.
In order to produce the album at a low cost, without comprising on quality, they first produced singles, which they sold to their friends and did street distribution. They were able to save some money in order to print a full length a high quality album. In analysing how the financial crisis came into being, he said 'It is the fault of the international markets and now as the small people we have to suffer the consequences".
TIPS FOR SURVIVING THE RECESSION
In order to survive the recession, you need to have sound-proof plan. Here I bring you the frugal tips that will keep you out of debt, or help clean the debt, in these trying times as we try our best to stay afloat:
- -Resist temptation to spend money on wants such as restaurants, entertainment and clothes.
- -If you have old clothes or things in the house that you don’t use anymore consider having a garage sale.
-Any return payment received from the South African Revenue Service (SARS) should be in the savings kitty- resist the temptation to spend it.
- Pay off credit cards and clothing accounts as soon as possible. Your credit card should not be used as a kitty to get money to help you survive on a day to day basis.
- Don’t shop till you drop. It has been said that retail therapy is the best way to deal with stress and anxiety, but in these hard times that kind of behavior may just end up leading to you a therapist’s couch, with no money to pay for the session.
- Buy generic products- trust me its just as good as the ‘branded’ goods its just that you paying for the name of the company producing the good.
- Buy items on sale, that you would normally buy for a higher price.
- Stop buying food from the work canteen. Cook large amounts of food and freeze it. This way you can carry food to work instead of wasting money on canteen food.
- Alternate between driving you car and using public transport. You may find that using public transport for one day is less expensive than petrol in your car for one day.
- Switch off the lights and geyser during the day and switch on only at night.
- Troll the charity shops and garage sales. You might be surprised at the gens you find at a low price.
Photos of moneybag and piggybank are from www.fotosearch .com and www.istockphotos.com respectively.
