We recognise that the national money supply increased by about 30% last year. This has driven a substantial increase in the value of the stock market. But this does not reflect the current business closures, the business slowdown and the increasing unemployment.
We now know that there will be a further increase in the money supply of about 30% this year,
The combination of increasing money supply combined with the almost 0% interest rates have encouraged companies and individuals to further invest in the stock markets.
To make matters worse, share buybacks are currently taking place. This happens when companies (and individuals) borrow money to buy back their own shares which inflates their share prices. It should also be noted that the buybacks do not increase product development, productivity or employment.
The above situations are not sustainable.
We believe that the stock market could fall by 50 – 75% within the next 3 to 6 months because the truth is that the business activity is in decline. The GDP, business turnovers and profits are all declining and unemployment and business closures are increasing.
When the stock market does fall the interest rates are likely to increase.
Over the next 20 – 30 years, the population in the UK have been increasing the amount of the personal debt they carry. They takeout mortgages, use credit cards, buy cars on the never and go on holidays etc. The majority do not save for a rainy day.
Because of the uncertainty and restrictions caused by the Coronavirus the majority of the population have already cut their expenditure, their holidays, their entertainment and their daily living expenditure.
All of the above are pointing to the coming recession. When it does come, there will be rapid inflation, falling incomes and therefore a falling standard of living.
This will not be limited to the UK. But it will be a world recession which will be with us for a long time. It is also likely that the world population will fall.
Some industries will be hit far harder than others but new opportunities will arise. In the long run, some new countries will join the faster-developing countries and some of the leading countries will fall back into recession for many years to come. All of the above will create opportunities for companies to export to the new faster-growing companies in the world
Our advice is that companies and people, wherever possible, should buy gold and crypto-currencies which are likely to retain or increase in value while most currencies in the world will lose their value.
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