The UK and world economy

I am renowned at home, work and amongst friends as having being an economic pessimist for the last five years and as having been predicting a crash in house prices and economic ruin for that long. Of course my views were widely derided as friends and colleagues bought portfolios of buy to let properties and boasted of the power of "leverage".

Last year as property prices stalled there was some acceptance that maybe the property market would suffer a small correction but nowhere the 40% that I had been predicting. Now the consensus seems to be that maybe, just maybe, I might have been right.

I started very quietly predicting the coming of a 1929 like depression around a year to 18 months ago, quietly because I just knew the reaction I would get. I started pushing the idea last summer but oddly it has been only in the last few weeks that any credence has been placed on my views.

My problem is that a few months back I started to fear that what was around the corner might actually be worse than I had originally feared and that a 1929 depression might be a walk in the park compared to what we were heading towards. Quantative easing being seriously discussed, 200 shops a day predicted to be closing soon, blackouts on the way, war in the Middle East soon to spread beyond Gaza, war between India and Pakistan on the way..........

It doesn't look good does it?


On November 30th last year I blogged this, that I repeat in full: "The Telegraph report:

"Gold is poised for a dramatic surge and could blast through $2,000 an ounce by the end of next year as central banks flood the world's monetary system with liquidity, according to an internal client note from the US bank Citigroup.

The bank said the damage caused by the financial excesses of the last quarter century was forcing the world's authorities to take steps that had never been tried before.

This gamble was likely to end in one of two extreme ways: with either a resurgence of inflation; or a downward spiral into depression, civil disorder, and possibly wars. Both outcomes will cause a rush for gold.

"They are throwing the kitchen sink at this," said Tom Fitzpatrick, the bank's chief technical strategist.

"The world is not going back to normal after the magnitude of what they have done. When the dust settles this will either work, and the money they have pushed into the system will feed though into an inflation shock.

"Or it will not work because too much damage has already been done, and we will see continued financial deterioration, causing further economic deterioration, with the risk of a feedback loop. We don't think this is the more likely outcome, but as each week and month passes, there is a growing danger of vicious circle as confidence erodes," he said.

"This will lead to political instability. We are already seeing countries on the periphery of Europe under severe stress. Some leaders are now at record levels of unpopularity. There is a risk of domestic unrest, starting with strikes because people are feeling disenfranchised."

"What happens if there is a meltdown in a country like Pakistan, which is a nuclear power. People react when they have their backs to the wall. We're already seeing doubts emerge about the sovereign debts of developed AAA-rated countries, which is not something you can ignore," he said.

Gold traders are playing close attention to reports from Beijing that the China is thinking of boosting its gold reserves from 600 tonnes to nearer 4,000 tonnes to diversify away from paper currencies. "If true, this is a very material change," he said.

Mr Fitzpatrick said Britain had made a mistake selling off half its gold at the bottom of the market between 1999 to 2002. "People have started to question the value of government debt," he said.

Citigroup said the blast-off was likely to occur within two years, and possibly as soon as 2009. Gold was trading yesterday at $812 an ounce. It is well off its all-time peak of $1,030 in February but has held up much better than other commodities over the last few months – reverting to is historical role as a safe-haven store of value and a de facto currency.

Gold has tripled in value over the last seven years, vastly outperforming Wall Street and European bourses. "


I have been saying for three years that gold is where our money should be, maybe Mrs NotaSheep will listen this time... "

Once again I wonder if Mrs NotaSheep will listen to me...