Despite all the Brown bating from the anti Labour press, (see story today) our prize for the most miserable economic prediction this weekend goes to the Observer. Jim Mellon, author of “Wake up! Survive and prosper - the economic turmoil” said that: “In a few short years at most - the rich West and Japan will have a terrible shock.”
Mr Mellon said that certain trends threaten to come together and drag down the global economy. They are firstly an anti Americanism, at a time when the US is slowly being replaced by China as the world’s superpower. - A similar vacuum, he said, occurred at the beginning of the 20th Century, with Germany taking over from the UK, with World War 1 the result, and warned that Taiwan could be the hot spot.
Secondly, the massive trade and fiscal deficits threaten to spill over. The US trade deficit is funded by foreigners, especially from China, buying up US Treasury bonds. If this stops, the dollar will go crashing.
Thirdly, he warns over consumer debt at a time of high asset prices. He predicts a 50% fall in house prices across the Anglo Saxon world, and says that UK and US consumers have “been using house prices as a kind of ATM.”
Finally, he predicted a crisis as environmental issues conflict with the growing demand for raw materials.
So what should you do if the author, who describes himself as a natural optimist, is right? The answer: go liquid; make sure you have lots of cash and little debt. And above all, he says, when the crash occurs don’t jump back on again too soon. Apparently, in 1929, the biggest losers were those who bought when shares had halved, “not realising that cheaper was to get a lot cheaper.”
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