Sunday, 30 November 2008

Waste Of Money

The downturn in World Economies has reached far into the mix. A ton of mixed paper could be sold for £50 a short while ago.  Apparently it is now down to about £1 after a collapse in prices. This means that it is uneconomic to collect, collate and dispatch.

The problem was already there with plastics. It doesn’t weigh very much, people are not careful about crushing their plastic bottles so they take up a lot of space until they can be crushed and to make matters worse there are half a dozen common types of ‘plastic’ in use . That means the plastic coming into a recycling centre has to be sorted or is baled up as a contaminated multi mix.

The same principles apply to wood.  Power plants that burn wood chips have to have a supply of constant quality as different woods burn at a different rate and heat level. If an industrial process requires a constant level of heat, it matters. Oak flooring can be recycled for heritage flooring production. Nobody wants a bundle of mixed wood. 

However you look at it money is the lowest common denominator. Every department of every business or every operation, whether public or private enterprise functions with or because of money.  When it is circulating on a domestic level there are a number of factors. When you introduce an international dimension the boat can take on water alarmingly.

A while ago you could buy nearly 2 dollars for your pound . Now you can only get one and a half. If you are an importer and you paid up front or contracted for your dollars in advance you are quids in, so to speak. You have a temporary advantage over your rivals who did not. However you have to face either a 20% hike in your prices or a loss in your profits very shortly. And you have to balance your sums with the view your market is likely to take.

On a domestic level there is a cushioned effect. Many years ago Harold Wilson famously declared ‘The pound in your pocket will remain the same’ when talking about a significant devaluation in the currency. What he didn’t mention was that it would only be a short while before the outside foreign influence started to have an effect.
The so called ‘credit crunch’ started in America. We have seen far reaching effects on economies all over the world, including our own. Jobs are at risk, if they are doing things that are uneconomic. The more that happens, the less money is spent and someone else’s job becomes at risk.

The stone dropped into the pond sends out ripples. The UK boat is taking on water and is being baled out by the government. Just how big a wave those ripples are going to get noone really knows.

For help and assessment of your own Business position talk to Bob Shepherd Associates.

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