All this gloom can mean only one thing….

Thursday, 20th September 2018

All this gloom can mean only one thing….

I wouldn’t imagine Gordon Brown is much fun on a night out. The ex-Prime Minister is a relentlessly gloomy animal. A bit like Eeyore in Winnie The Pooh….

I don’t think he ever recovered from presiding over the worst trade in living memory….

As Chancellor of the Exchequer, Brown sold 60% of Britain’s gold reserves in a series of auctions conducted between July 1999 and March 2002….

He got his timing hideously wrong – selling just inches ahead of a huge bull market in gold and ignoring Bank of England reservations before pushing ahead with the misguided sale….

He sold Britain’s reserves of the precious metal for $3.5 billion. In 2011, the same amount of gold was worth almost $20 billion….

Brown was widely pilloried, and the trade came to be known as ‘Brown’s bottom’….

Brown seems to me to have been sucking on a lemon ever since….

  • Sleep-walking into crisis….

Whenever Brown steps out in public these days, you know the stern-faced son-of-the-manse bears no good tidings….

And he was true to form last week when interviewed by the Guardian newspaper on the tenth anniversary of the global financial crash….

After a ‘decade of stagnation’, Brown believes the global economy is now headed toward a ‘decade of vulnerability’….

‘We are in danger of sleepwalking into a future crisis,’ he told Larry Elliott, the Guardian’s Economic Editor….

Brown isn’t sure exactly why, how or when this crisis will unfold. He is simply certain that the crisis is coming….

‘It is very difficult to say what will trigger it, but we are at the latter end of the economic cycle where people take greater risks.’

  • Worse than 2008….

Mark Carney, governor of the Bank of England, is another perpetually serious man you wouldn’t expect to find disco-dancing in the fleshpots of London….

Last week, he too was doing his bit to deflate the national mood….

He reportedly told Theresa May’s cabinet that a ‘no deal’ Brexit could be ‘worse’ for the economy than the 2008 financial crisis….

The BoE conducts ‘stress tests’ to establish what might happen to the economy in the event of different future scenarios….

In a ‘no deal’ Brexit situation, the BoE’s stress tests suggest that a 25% to 35% drop in house prices is possible – wiping billions off the value of property and bank balance sheets….

A ‘no deal’ Brexit would also likely trigger rising inflation, rising interest rates, unemployment exceeding 10% and depressed economic growth….

Many commentators assumed this was Carney’s way of trying to resurrect Project Fear – the programme of disinformation and lies propagated by the pro-European lobby ahead of the 2016 referendum….

Maybe they are right….

So abjectly bleak was the BoE assessment, that comments Carney made to the Bank of Ireland just a few days later about retirement becoming a thing of the past and people working until they die, went almost unreported….

  • Moody’s and the BCC weigh-in….

Moody’s, the credit-rating agency, were also out on maneuvers and in a grim mood….

The probability of a no-deal Brexit has ‘risen materially’, they warn. And they see that scenario creating a perfect storm of misery….

They see an ‘immediate’ and ‘sharp’ fall in the value of the pound, followed by ‘higher inflation’,  a ‘squeeze on real wages over the following two to three years’, ‘depress[ed] growth’ and ‘lower tax revenue’….

In short, the  UK would ‘fall into recession very quickly’….

The British Chambers of Commerce were also attuned to the general mood….

Like the BoE and Moody’s, the BCC is also concerned that uncertainty surrounding Brexit is sapping the UK economy’s strength….

The BCC’s economists have revised their growth figures….

This year they say growth will fall to 1.1% –  having previously forecast 1.3%. Next year, they predict growth to be 1.3% –  down from the previously forecast 1.4%.

Summing up, the BCC says that by 2020 the UK economy will have suffered its second weakest decade of average economic growth on….

  • The gloom goes international….

And last week’s gloomy music wasn’t just being piped to the UK. The storm crows were out and about doing their work on a global scale….

Economists were telling journalists that the beginnings of another global financial crisis are already in motion….

Ann Pettifor told Sky News that global debt was now more than three times the level of global GDP. ‘It is not going to be repaid, and naturally there is going to come a point when that debt triggers the next crisis.’

Tom Russo, former MD of Lehman Brothers said: ‘The seeds of the next crisis are probably already being watered right now…. I think it’s probably going to be the same fundamental issue of leverage that we had 10 years ago. We have a national GDP of $20 trillion, but debt of $21 trillion.’ 

Meanwhile. strategists at JP Morgan have created a model which predicts the timing of the next financial crisis. That model tells them it will happen in 2020….

Nouriel Roubini, also known as ‘Dr Doom’, is another analyst predicting a 2020 meltdown. Writing for the Guardian newspaper he says: ‘By 2020, the conditions will be ripe for a financial crisis, followed by a global recession….’

It didn’t matter which way you turned last week, you couldn’t get out of the rain. The black clouds overhead opened-up and the gloom came pouring down….

  • It can mean only one thing….

But don’t worry. This prevailing mood of gloom and all these warnings of impending disaster can only mean one thing….

Things are set to continue as they are for some time yet….

One thing history has taught us is that the experts always get their timings wrong – just as Gordon Brown did with his gold trade back in the day….

When the crash comes, it almost always comes as a surprise. And it almost never arrives from the direction the experts anticipate.  The bomb almost always detonates where the experts aren’t looking….

Right now, the prognosticators are gloomy. The time to start getting properly worried is when they start sounding more upbeat….

That’s when you can be sure the real trouble is coming….

That’s how it looks from here….

All the best,

Money Truths