PREDICTIONS FOR THE ECONONMY, INVESTMENTS & SAVINGS IN 2009 & BEYOND
INTRODUCTION
I began preparing for the ‘economic meltdown’ in December 2003, when following 9/11, stock markets and interest rates had reached a low point. The primary roots of this crisis, however, go back much further, to the time of the Napoleon, when the famous banker A. M. Rothschild established the ‘fractional reserve’ banking system. He perverted ‘sound money’ by creating a money making machine based on debt. And it is this banking system, used by most countries in the world today, which is the cause of all our economic problems. Two centuries later this debt based ‘pyramid selling scheme’ has reached its mathematical limits as we have become ‘all borrowed up’. Credit is scarce because banks fear to lend, knowing that too much of our income is already taken up with debt repayments.
The long term solution is to pay off debt so that we have more money to spend and redesign the money system so that the amount of spending power in the economy is never more than the value of goods and services produced. This would purge the system of inflation (and deflation) and facilitate sustainable economic growth.
The government’s preferred option, however, is to bail out the very system that created the problem. This will prolong and deepen the recession and – in some respects - make it even more severe than the Great Depression. If the fractional reserve banking system is not replaced with sound money and the banks taken into public ownership so that the money supply can be controlled then the economic destruction we are seeing now will only get worse.
However, I am optimistic that common sense will eventually prevail and that out of all the economic destruction a Golden Age economy will arise that is in alignment with the natural laws and that will enable all people to share in the fruits of prosperity.
MANAGING THE ECONOMY
Once government acknowledges that you cannot eliminate inflation and deflation without first establishing a pure money system then we will have arrived at the point where we can have sustainable economic growth. But I do not think this will happen until about 2014/15 when a Golden Age of enlightened politics will replace the present perverted and corrupt system which was designed to benefit the few at the expense of the many.
GOVERNMENT BORROWING
I believe that the government has grossly underestimated the scale of the economic problems we face and will borrow about two and a half times more than they budgeted for in the pre budget statement. This will lead to even higher taxes and/or big spending cuts.
THE COST OF LIVING
We are entering a period of protracted deflation where the average price of goods and services will keep falling. I foresee prices going down by about 5% in 2009, 2010 and 2011 and by a lesser amount in 2012 and 2013. From 2014 I forecast stable prices. This means that on average what cost £100 to buy today will cost only £80 in 5 years time.
UNEMPLOYMENT
In 2003 I said: “Unemployment could hit 25% or more” – that’s about 6 -7 million. I am sticking to that figure which I think could be reached by 2011 if the government continues with its current policies.
Unemployment is the last indicator of economic decline, as firms will only shed labour when all other cost cutting measures have been exhausted. What we do know is that unemployment is rising fast and that the building, retailing, financial services and manufacturing sectors have been hit very hard. Unemployment is currently 6.3%. In 2009 the professional services sector, which includes people like me, is likely to fall on hard times. I estimate that about three quarters of Independent Financial Advisers and half of mortgage brokers will go bust or leave the industry.
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