Here are some common words and phrases to talk about problems in the economy.

Credit crunch = when borrowing money (from banks) becomes harder to get and more expensive.
(In the present credit crisis, banks stopped lending to other banks, then stopped lending to their customers, which means that there is now a shortage of credit and no more cheap credit).

Economic terms

The Central Banks and Finance ministers are trying to decide whether to inject more money into the financial markets (places where stocks or commodities for example are bought and sold). (Read an in-depth definition of financial markets.)

Many people now believe that we are now heading towards a downturn / recession / depression / financial crisis. Apart from the credit crunch, there are other signs that our economy might slide into recession, such as rising inflation and an increased cost of living. The government may respond by cutting interest rates (to bring down the rate of inflation).

To compound the misery (=make things worse), falling house prices mean some home owners face negative equity.

Overall, the forecast is pessimistic or gloomy.

Personal finances

High street banks (see our page on banking vocabulary) lend money to customers in the form of loans (such as car loans or personal loans) or in the form of mortgages to buy houses.
Sub prime mortgages, now often referred to as toxic mortgages, were sold to people with poor credit ratings. It is a combination of this type of risky lending, falling house prices and high interest rates which led to defaults on mortgage payments and foreclosures (=repossession). This in turn triggered the global financial crisis.

A number of banks have already gone bust or have been nationalised (= bought by the government) who try to reassure customers that their savings accounts are safe. In the UK, the government has announced that all savings accounts are guaranteed up to a threshold of £50,000. However, consumer confidence is low.

Unemployment

People worry about losing their jobs, or being made redundant. Some industries are cutting their workforce, and laying off staff. These job losses / job cuts / redundancies mean that there will be more claimants (for unemployment benefit) – or more people on the dole. (dole = unemployment benefit).

Phrases

weather the storm = survive bad times
be in good shape (the economy is in good shape) = to be strong
live beyond your means = not have enough money for your spending (so you need to borrow it)
pay the price = pay for your mistakes
foot the bill = pay for someone else
at rock bottom = to be so low you cannot go any further down
in free fall = keep falling without anything stopping the fall