I was talking to a friend of mine, Richard, last night… about the economy, the thrilling life I lead, eh? “They should just hike rates and be done with it. Jack them up to a crippling level,” he said, emphasising the word ‘crippling’. “Start the recession, so we can get it over with, quicksticks!”

It was a comment born of frustration. Richard was annoyed that on the very day he’d planned to phone First Direct about a mortgage, they pulled the rug from under him. Faced with a backlog of applications, the lender is refusing to take on new business.

Richard’s not the only ‘real person’ feeling the effects of the credit crunch. Britons everywhere are seeing their finances hit — and they’re resorting to drastic measures. Unsecured personal borrowing shot up in February, by £2.4 billion. To put that in perspective, it rose in January by just £900 million.

This is a symptom of the contracting mortgage market. Mortgage approvals have fallen by 40%, and there are fewer deals available. Last month there were 7,726 products on the market. Now there are just 4,794.

Consumers across the land are raiding the piggy banks, spending their future wealth to keep up with today’s rising living costs. Those without savings are borrowing to the hilt. A comfortable retirement is now seen by many as a luxury they can’t afford.

But one can’t do this forever. Soon the savings are gone, the credit cards maxed out. Those who continue to put something by — and who put it in the right investments — will come out way ahead in the long run.

Bernanke sticks his neck out… a bit

The thing about a recession is you don’t realise when it starts. It takes a few months before the figures are in and we can say “Look! Two consecutive quarters of negative growth. We’ve started a recession.”

So there’s always a bit of guesswork involved as to whether a recession has actually started. We’ve been seeing it in the US for the last few months. Are they or aren’t they?

One by one, investors, commentators and the man in the street come round to the idea that, yes, we probably are in a recession. In the case of the US, the Order of Realisation has gone something like this: nervous Wall Street investors, people who’ve already lost their jobs, sections of the media, more investors, some more of the media, politicians (in private), the mainstream media, most Americans, the rest of the world, the bloke who makes the sandwiches for our office, my sister’s cat, undiscovered life forms on other planets… and yesterday, at last, Ben Bernanke, chairman of the US Federal Reserve.

Well, almost.

In his speech to Congress, Bernanke stopped short of saying a recession had arrived, merely saying it was possible:

“It now appears likely that real gross domestic product, or GDP, will not grow much, if at all, over the first half of 2008 and could even contract slightly.”

I’m being facetious, of course, in suggesting the Fed chairman is really so far behind the curve. Privately I reckon he’s as worried as anyone. His position just won’t allow him to say so.

But now he’s done the next best thing, that surely can’t be a good sign.

“The empire is rolling over,” says my US correspondent Bill Bonner. “Now, in its advanced, decadent phase, the imperial government must provide bread — in the form of food stamps — and circuses — in the form of national party conventions, elections and foreign wars. The combination settles the public… and distracts them.”Bill tells me that food prices are up 9% in America, while house prices have slumped 11%. In Denver last year the average foreclosure rate was one in thirty-two. In some neighbourhoods today it’s one in eight.

Not a great time for investors with US exposure. But our resident market maven Frank Hemsley has been following all that money which is fleeing the States… and he’s hit on an interesting alternative to gold for those seeking some safety…

Check out the “Swissie”

Private bank Rothschild, based in Geneva, has seen its shares rise 12% this week, Frank tells me. The reason? Asian, Middle Eastern and Latin American investors seeking a safe haven from the US-led financial crisis.

But if you’re not lucky enough to have a Swiss bank account, you might want to consider their currency.

“The Swiss franc’s getting close to parity with the dollar, for the first time ever” says Frank.

Of course, there’s a risk that America’s economic problems and a weakening dollar could hit Swiss exports to the US. This could cause the Swiss to cut interest rates, which would temper any currency appreciation. But Frank reckons the risk is to the upside.

“Switzerland’s a traditional safe haven. The global financial turmoil could see the Swiss franc break through the one for one level in the not-too-distant future.”

Americans just won’t stop driving!

Some interesting, if not entirely surprising, news from our commodities desk, piloted by our Mr Commodities Garry White.

The Energy Information Administration (EIA) say US supplies of gasoline fell 4.5 million barrels last week.

“It shows demand has stayed strong even though we’re seeing record prices,” says Garry. “And let’s face it, compared with what we pay for petrol, they’re still getting a bargain!”

Despite the media bleating, Garry reckons they’ll get used to it. This demonstration of inelastic demand (i.e. unresponsive to price movements) bodes well for Garry’s oil plays.

Readers of Garry’s Smart Commodities letter could be sitting very pretty in the months ahead…

Time to “unblur” your view on Emerging Markets…

“Old structures are breaking down. New sources of economic power are rising. But our views are blurred by the whirlwind of markets.”

That’s the view of Robert Zoellick, president of the World Bank, who delivered his keynote address yesterday.

Helping us “unblur” our view and see through the whirlwind is our overseas investment expert Manraaj Singh.

“Emerging market shares have been hit badly since the crisis kicked off last August,” he told me this morning. But the long-term growth story is still hot hot hot!”

Indeed, while their markets have taken a wallop, investors remain confident. Debt issued by emerging-market countries tends to pay a higher yield than that issued by the US. That makes sense, as it’s perceived as riskier.

But here’s the thing: despite the turmoil, the spread on this debt — i.e. how much more it pays than US debt — has barely risen.

“This shows that investors don’t think that the current falls in emerging markets are going to lead to financial crisis,” says Manraaj. “You can’t really say the same about America… or the UK for that matter”.

Jérôme Kerviel sues SocGen — but still has time for Facebook

He may not be winning any Nobel Economics prizes, but rogue trader Jérôme Kerviel could be first in line for the Bare Faced Cheek award. This morning it was reported that he’s suing former-employer Société Générale for unfair dismissal. SocGen denies it, but if he goes ahead, it’ll be an interesting case…

Oh, and remember when Kerviel went missing, just after the story first broke? Ever the intrepid journalist, Garry White tracked him down on Facebook, and “poked” him. And Kerviel “poked” him back.

Sadly his profile’s not there anymore, but at least Garry has the memories…

Until tomorrow

Ben Traynor