By now everyone knows that there is a global recession going on, but many people have no idea how it got started in their respective countries. In the United Kingdom, during a time of rising home prices and low unemployment, the economy was in a good shape and growing. At least until August 9, 2007, the day the financial markets of Europe and the United States saw $90 billion injected into financial markets that were a bit shaky. While the next two days appeared to be good for the economy, it turned out to be anything but.

No one, especially Alistair Darling the financial chancellor of the United Kingdom, expected the markets to seize up the way they did. House prices plummeted, consumers lost faith in the economy, and the world was facing a recession. The middle of September marked the 15th anniversary of the speculative attack on the Bank of England when the country left the exchange rate mechanism, and when that happened Northern Rock, a leading high street bank, saw queues of people at every branch wanting to withdraw their money.

Instead of the economy improving as the chancellor's advisors suggested it would during the first quarter of 2009 or in the second quarter as a worst case scenario, it hasn't. Darling has been remaining cautious about the improvement of the economy, and everyone around the world has been surprised about the length, breadth, and depth of the financial crisis with it affecting the entire world. Darling and Prime Minister Gordon Brown are expected to meet within the next month to develop a recovery plan to help bring the economy of the United Kingdom back on track, similar to what is being attempted in the United States under the Obama administration.

There have been questions as to whether or not the Labour Party has lost control of the economy. They have been dealing with problems since coming into power, and as the world approached August 9, 2007, the pundits of the financial markets were discovering just how the ‘new and sophisticated ways' of making money were also losing money. Consumers in the United States and the United Kingdom who were already living beyond their means began borrowing more money to pay the debts. Lenders relaxed their loan criteria and bundled both poor quality loans with good ones, and by the summer more than half of the homes in the United Kingdom were being funded by money raised through securitisation.

Even though the governments were warned by major financial institutions about the risks that were being taken, the economy spiralled out of control quickly. The housing market of the United States was in freefall, and consumers lost confidence and trust in the banks. Banks stopped lending money, and consumers suddenly began to feel the credit crunch after years of being able to obtain cheap and easy credit. When this happened the economy seized up and a ripple effect was felt around the world, with inflation quickly rising and with it the cost of living.
How soon the credit crunch and the recession will be resolved remains to be seen and consumers are holding on as best as they can. Until things improve, bankruptcies and IVAs will rise as consumers look for a way to keep their head above water.