by Barry Marcus

Created on: March 13, 2009   Last Updated: August 18, 2010

It is a downward spiral that plunges the world into recession. It is driven partly by expectations and fuelled by economic realities. Expectations are enough to start the slowdown as consumers and business alike delay or cancel buying decisions in the light of recessionary forecasts. Consumer spending slows down. Production is cut. Jobs are shed. Job losses result in lower spending power. Again, spending slows down. Production is cut. More jobs are lost.

Consumer spending is the oil that keeps the wheels of economic activity turning. Consumer power is largely the result of employment. People earn and spend. Business produce. They employ people to do the work. Those people spend. Everyone is happy.

When the cycle turns, people are unable to spend. Job loss reduces the funds available for spending. Banks have taken a more conservative line on lending. This further reduces the pool of disposable income available to lubricate the economy.

Faced with a falling demand for goods and services, suppliers are forced to cut back. The result is job loss. Job loss and consumer spending slowdowns have fuelled a world recession. It is a recessionary spiral that is difficult to break. The struggling recovery seems doomed to a second dip as jobs are not created and governments cut back to reduce fiscal deficits.

This is the first truly global recession affecting almost every nation on the planet.

Although oil prices have fallen back to more reasonable levels, the high prices experienced a few short years ago were enough to impact the world's economies and the level of consumer spending. The high cost of transport was just one factor in the falling levels of consumer demand.

Agriculture was displaced by the more lucrative production of bio-fuel resulting in an international food crisis. The food crisis resulted in higher food prices. Consumers were forced to cut consumption on other products to simply feed their families.

In this scenario, Donald Smith is employed by a major motor manufacturer. The news around the world is becoming rather gloomy. A recession is on the cards. Donald's family have been feeling the pinch as a result of higher food prices. They have begun to cut back. The weekly splash-out meal at La Cortina - their favourite restaurant - has been replaced by a monthly take-away. The family's clothing expenditure has been cut back from monthly to quarterly.

La Cortina is a well-established Italian restaurant nestled in a leafy suburb. It has a good reputation serving

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