What is the matter with the Financial Crisis? Your favourite Starbucks closed down, but your Erasmus scholarship is all of a sudden sufficient to afford a decent living? Your friends quit their dreams of becoming an investment banker, and talk in university is about Karl Marx? And this year's Christmas presents have been rather moderate? If so, you might wonder, which of these changes can be attributed to the omnipresent Credit Crunch? E&M is waiting in the wings to throw light on these developments, and to give you fashionable advice.

Change 1: Karl Marx is back, and he is an investment banker

When you went out for coffee yesterday, your friends asked you about your thoughts on historical materialism and the classless society? You, rather unprepared, just replied that materialism is unsympathetic?

If so, it might be time to brush up your knowledge of Marxism. While financial products might have been en vogue as party talk a few months ago, the bank's layoffs have certainly left their mark. The Financial Times estimates the number of Wall Street Jobs to fall by 70.000, and the total number of layoffs in the financial market to be at least 150.000. So, if all your friends now intend to study medicine, and the topic of conversation are alienation and exploitation, why not finally read the Communist Manifesto?

Rest assured however, that you are not the only one who feels a sudden need to catch up. According to the Guardian, "Karl Marx is back." Sales of volume one of ‘The Capital', Marx's opus magnum, are now at least thirty times as high as in the past years. Equally, German bookshops witness an overall increase of Marx literature sales by at least 300 %.

Screenshot: www.amazon.de
Time to catch up.

So, is it the Credit Crunch? In Amazon's virtual shelf on the financial crisis, the Communist Manifesto ranks first. Its followers include such masterpieces as "Wake Up! Survive and Prosper in the Coming Economic Turmoil" and  "Does anything eat bankers?". Worst of all, Amazon even suggests to buy the communist Manifesto in conjunction with another German work: Mein Kampf. Hence, E&M's verdict is: Yes, Marx is back, and he knew it all along.

Change 2: Mamma mia, the tortellini are so cheap!

You might also wonder why you can now afford to go for a coffee at all. Did coffee not seem so expensive a few months ago? Equally, why are tortellini all of a sudden so cheap? If you live in the UK, you might have recognized that retailers like Morrison or Tesco have more special offers than ever: fresh tortellini at Morrison fell under 1 pound a package. In Germany, the price of one litre of petrol came down from about 1,50 € in summer to 1,10 € this week.

The recent fall in demand and money supply let to a short period of general deflation and an increase in purchasing power per Euro. Whereas the European Central Bank is convinced that there is no fear of falling prices in the Euro zone, prices in the UK have already diminished by 0.5 % in the last three months.

Food prices have been falling.

In particular, there has been a tremendous fall in food and energy prices worldwide. In December 2007, the Economist still declared "The end of cheap food". Yet, since the beginning of this year, the Food and Agriculture association of the UN reported a worldwide fall of food prices by almost 20 percent. In the same way, the price for crude oil fell by more than 40 percent. The oil price is now at a four-year low below $40 per barrel.

At least the fall in oil prices is clearly related to the financial crisis: In an economic downturn, less products are bought, and the public has less money to spend on heating and travel. To stabilise the price, the OPEC has recently announced its third cut in production. Still, Adam Sieminski, the chief energy economist at Deutsche Bank, for instance, predicts that the worldwide demand for oil in 2009 will fall by the largest amount in 25 years. In any event, E&M's lifestyle verdict is: What a delicious crunch; enjoy as long as you can afford to.

Change 3: A single currency at last?

www.youthphotos.eu / Jannik Schall
The financial crisis burns currencies.

Equally, why is the Erasmus scholarship now sufficient to afford a decent living? And, if you live outside the Euro zone, why is joining the Euro in everyone's mouth again?

If you receive a scholarship in Euros and live abroad: Lucky you! Currencies like the Icelandic Króna (-39%), the British Pound (-23%), the Norwegian Krone (-20%), the Swedish Krona (-16%) or the Polish Zloty (-15%) have lost considerable value compared to the Euro during the last year. As Erasmus, for example, is paid in Euros, many students in non-Euro countries have experienced a considerable rise in their purchasing power.

So, is it the financial crisis? It certainly plays its part: Iceland's and the UK's gloomy economic outlook, for instance, raised these countries' relative demand for Euro. The Zloty's fall to the weakest level since 2006, on the other hand, is likely to be based on speculation that the central bank will lower interest rates and the concern that presidential veto to the pension law may jeopardize next year's budget.  Yet, much of short-term exchange rate adjustments is based on speculation and sentiment. In short, even experts notoriously struggle to explain exchange rate adjustments.

www.youthphotos.eu / Dennis M.
The Euro is harder than ever.

Knowing all this, what can you reply if someone asks you on your expert view on whether to join the Euro now? After all, Iceland is discussing joining both the EU and the single currency at the same time. Poland and Hungary sped up in reaching the criteria for accessing the Euro by altering their target years to 2012 respectively 2010/11. Czech parties proposed to join by May 2009. Even the Danes, who rejected the Euro in 2000 by referendum, now rethink: There are rumours from Copenhagen that a new poll might come up in the next two years. Again, the financial crisis is biting: While the Euro seemed unattractive in an area of strong economic growth and currency appreciation among the emerging economies, its shelter is what companies look for now. Volkswagen's Škoda Auto, for instance, is said to lobby the European Central Bank to consider Eastern European currencies for accession to the Euro zone more quickly. Paradoxically, however, joining the single currency right now is particularly unattractive: With the Euro at parity with the Pound, rather than at the 1.5 ratio from two years ago, a suggestion to join the Euro is a political suicide. Furthermore, joining the Euro might prove difficult right now: meeting the accession conditions, the legendary Maastricht criteria, is certainly not easier in an economic downturn.

In this case, E&M can only conclude: Yes, it's the crunch. Time to throw into gear.

Change 4: Starbucks - A last Frappuccino?

However, what if not the subject matter at coffee, but rather the coffee place itself is endangered? We all enjoy shorter queues and getting to sit in an armchair rather than a wooden chair, but what if the customers disappeared completely, and Starbucks closed down? What would modern life be like without a latte in your hands? According to media reports, Starbucks intends to reduce the number of its stores by 600, and to cut its staff by 12.000. So is it the Credit Crunch biting again?

www.youthphotos.eu / Manos Radisoglou
Only half espresso?

Parts of Starbucks' difficulties are homemade: The company seems to have opened far too many places over the past years, essentially creating competition among its own stores. Furthermore, rivals like McDonald's McCafés and similar coffeehouses expanded equally aggressively. Another problem, however, might be the fall of purchasing power: In thrifty times, a Mint Chocolate Chip Frappuccino is not high up on the shopping list. While the company initially only struggled in the States, it announced increasing worries about the European market in July. In any event, E&M's verdict is: The world is half espresso, but it is also half latte.

Change 5: Applied Economics

Let us now turn to two rather humorous developments. Attentive observers will also have noted another change, which E&M cannot conceal: The suffering of all sectors of the erotic industry. What once seemed a failsafe business, or so one would think, is now allegedly "an industry fighting for survival". The Australian The Age quotes a European brothel owner as follows: "I have offered free Viagra, free porn and cut the rates of the girls by 40 per cent, but business is down 45 per cent - it's really terrible."

Not only major financial capitals like London and Frankfurt suffer, but so do the most popular destinations of sex tourists. In Prague, for instance, the demand seems to have fallen by 20 percent, and layoffs seem inevitable. Yet, clearly as this development is attributable to the financial crisis, E&M resolves: If love is not affordable, it might be even the more precious.

Change 6: Lack of Christmas Presents

The ultimate in minimalism.

Finally, what if the number of Christmas presents this year was rather moderate? Is the Financial Crisis to be blamed? Or was it rather your sinful lifestyle over the course of last year? If it is of any comfort: Again, you are not the only one. Not only do shops worldwide suffer from their customers' lack of confidence and purchasing power, but the Government of Croatia even banned the public sector from spending any money on Christmas and New Year parties and presents.

For this reason, maybe the present of the season is not expensive jewelry or the newest gadget, but ‘nothing'. Not nothing as in really nothing, but an empty ball with a little description, a present sold all over Europe since a few months: ‘Nothing, for the person who has everything.' The ultimate in minimalism. Very philosophical indeed. According to shop owners, the gift really hit a nerve, and the high demand could only be controlled by extra production and price rises. In this case, E&M has faith in your own judgement: Is it me, or is it my own Credit Crunch?

IN -1106 DAYS