Sam Orgill of ProACT Partnership looks at economic futures
Globally there is a recession in 2008 unless you are a politician. We can all feel it around us. Prices are higher, income falls, times feel tougher.
Everyone you know talks of inflation being 'high' yet officially inflation we are told is close to its target rates of 2-3%. The trick is international governments redefined their measure of inflation over the last 15 years - they wanted to create a balanced shopping basket so took out fuel and food.
off course we all know these are the items growing in price most strongly at the moment. So when a government claims GDP - gross domestic production - from an economy is rising so well they include fuel and food. This makes the figures look higher and helps them statistically claim the economy is growing strongly and everything is OK because inflation is low.
Can the central banks around the world keep propping up the status quo? or is the May admission from the Bank of England Governor, that they had lost their attempt to stop economic forces correcting the excesses leading to a 2008 recession, the tip of the iceberg and a glimpse into the future in 2009?
If you assess inflation and GDP on the same basis we definitely have a recession right now. It is also arguable that the American strategy of weakening the currency to export their debt is destabilising the world economy, that the last 20 years growth is built on sand, and that it will all come crashing down.
Funnily enough that's what happened in Japan in 1990. The politicians talked up a short slow down. In fact over 2 years the equity and property markets lost 80% of value. Today the Japanese stock markets are still only 60% of the 1990 level. UK & US stock markets are lower than in 2000. Are they being propped up and at some stage going to inevitably correct?
In the 30's they called it a depression, in the 40's a world war. All is not lost but it worth being prudent going forward in the financial and property assets you hold. look for value, review regularly.
ProACT offer independent free reviews of wealth holdings.
Sam Orgill
ProACT Partnership
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