Government proposal to break up the banks commercial and investment banking operations

The Government have proposed to “ring fence” the retail arms of the banks from their other banking operations in a bid to reduce the country’s exposure to bailing out the banks which have become “too big to fail”. The taxpayer bailout of the banks has been widely recognised as having led to the recession in the UK. 

The move proposes to segregate the riskier casino side of the business where the banks have been able to engage in high risk speculative trading and have drummed up significant losses. Recent studies show that lending to individuals and to small & medium sized companies has become increasingly difficult and is hampering Britain’s economic recovery.

US Credit Rating downgraded

Recession is anticipated in the US given the recent downgrading of the US economy. Government spending in the US is significantly in excess of the country’s GDP and is currently funded by debt. The country’s recent application to increase its debt ceiling has had a resounding effect on the world market.