With the U.S. now firmly in recession, Syntagma looks at the causes of this spectacular downturn and speculates that the Iraq war may have a lot to do with it.

“The American economy is now in recession. A slew of new data clearly reveals both a marked downturn in activity, combined with a rise in inflation — something not seen since the stubborn “stagflation” period of the 1970s. Some economists expect a robust return to growth later in the year off the backs of aggressive rate cuts by the Fed…”

Read the article here.

In another piece today, our sister site examines banks’ attitude to risk and how securitization let the side down, handing huge advantages to authoritarian Asian regimes.

“In the old days, banks took the risk of lending money on themselves and ensured that borrowers would be able to pay it back over time. Securitization means that they can lend to any Tom, Dick or Harriet, package up the debts into large parcels of small slices from many borrowers, and sell them onto other banks and finance houses.”

Read the article here.

Is a worldwide recession already underway?

The Chief Economist of U.S invesment bank Merrill Lynch believes so. According to his analysis America is now into the first month of a recession, defined as two successive months of negative growth.

Other commentators think it could be longer than that, while some, like Irwin Steltzer, speaking on the BBC’s Newsnight, believes sovereign wealth funds will allow the banks to re-establish their balance sheets and avoid a banking crisis.

For an analysis of the coming recession on both sides of the Atlantic see John Evans’s article in Syntagma.

He writes, “All banks are now hoarding cash like Ebeneezer Scrooge on a bad day and virtually ceasing to lend. With house price indices slithering down a slope like novice ice skaters, and inter-bank rates running at around 8 percent, this has become a total banking crisis worldwide, and that has the potential for real evil in our economies.”

Read the article here.

We will shortly publish an updated piece on how to avoid the worst effects of a recession in your personal finances.

British people were told yesterday that the personal data of nearly half the nation has “gone missing”. In the newly merged department of Inland Revenue and Customs, a “junior official” downloaded the personal details, including bank account data and National Insurance numbers, of 25 million people and placed all of it on two unencrypted CDs.

The official then put the CDs in an envelope and posted it. The package wasn’t even registered so couldn’t be tracked or traced. It’s now officially “lost in the post”.

Alternatively, it may have been stolen to order by organized crime. We have been told, the official is now under guard in a “safe house” to protect him or her against the media, and presumably criminals seeking “to make him an offer he can’t refuse”.

This morning there’s huge panic all over the UK as people wake to find their bank accounts and personal identities compromised in the most dangerous way possible.

Once again we see the perils of allowing a central administration to accumulate vast quantities of information through a system of universal benefits more in tune with the Soviet era than the distributed nature of data in the age of the internet.

What can you do to protect yourself against the kind of scam everyone in the UK is now worried about?

1. Check your bank and credit card statements for the next 5 to 10 years. Criminals can lie low and strike when banks get sloppy again.

2. Change your online banking password, especially if you use family data as a memorable word.

3. Look at your credit report. The information in the Child Benefit Agency records is enough for a criminal to apply for loans, credit cards and even mortgages in your name, as well as other forms of credit such as mobile telephone and catalogue accounts. Your credit report lists all your credit commitments and recent applications for credit, so you can instantly see if someone has been trying to use your ID.

Apart from that, you are at the mercy of Government officials and your bank’s security measures. Ultimately, they must take responsibility for protecting their customer’s data.

Unfortunately, British Government agencies routinely break its own Data Protection Act. The shambles goes on.

Researchers at MoneySupermarket.com have unearthed 110 charges and fees on basic financial transactions that customers may be liable for.

In the UK, penalties hidden in the small print can add up to more than £8 billion ($16 bn) in revenues for finance companies, credit cards and banks. And a similar situation may also exist in the USA.

The website looked at five common financial products : current accounts, mortgages, loans, credit cards and savings.

Mortgages, with arrangement, booking and valuation fees accounted for 46 of the total. These have risen to around £1000 ($2000) in the past year.

Normal bank accounts can levy 32 penalty charges, while credit cards account for 16 fees. Loans attract up to 11 charges.

Stuart Glendinning, Managing Director of the website, said : “It is unbelievable that five financial products can be the root of so much penalty pain.”

Nick Gardner, a director at Chase de Vere, the mortgage advisers, said the range of fees embedded in home loans is “cunning and completely unacceptable. The headline rates may be coming down, but the number and scale of fees have risen enormously.”

Maybe it’s time to get that old magnifying glass down from the attic.