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  1. Wealth
March 28, 2011

Houston, We Have a Problem

By Spear's

Our world is facing a conjunction of three cycles affecting Credit, Climate and Conflict, Bill Houston writes in his new book

Proof-reading the shortly-to-be-published and aptly-named Tsunami 3 by that acknowledged expert on business and other cycles, Mr William “call me Bill” Houston, I was struck by the elegance of his arguments and scientific proofs of the state we are in: our world is facing a conjunction of three cycles affecting Credit, Climate and Conflict.

This is not a quick post-events justificatory scribble, as he told me some five years ago that this was exactly what was going to happen in 2009/12. I was familiar with the short and long term business cycles of Clement Juglar and Nicholai Kondratieff – basic territory for all economists, but it’s amazing how many that profess to be one forget the basics – but I was completely unaware of the concept of climate and conflict cycles and how all three cycles interact.

It was Bill’s input on these two cycles that are recorded in my work Countdown to Catastrophe (available from Spear’s at £20), which went to the printers on 31 December 2009: it described the origins of the credit crunch to that date and accurately forecast the earthquakes, tsunamis and volcanoes of 2010/11 based on scientific evidence, and also the climatic changes which caused floods and droughts and migrations in 2010, but debunked the Inconvenient Truth of those proclaiming Global Warming.

The exact opposite is happening, namely a new cold period or new Minima has already started, which I dubbed the Acker Minima; it did not foresee the MENA revolutions of 2011, but forecast civil disobedience in the bust economies of the PIGS, and foresaw the potential origins of WW3 based on the regions on either side of the Sinkiang Pass. I wouldn’t withdraw that prognosis for some time yet.

So why didn’t Bill publish earlier? It was because he wanted to show the future course of Global Crunch and to offer practical advice to governments on what to do, and not do, about it all. As a result of the Credit Crunch and the perverse behaviour of governments and bankers putting the taxpayer in hock – a mistake which in economics is referred to as the Minsky Moment that will come to haunt us all – and the absurd theories of Ben Bernanke and his stupid printing presses and helicopters, the world according to Houston is heading for Hyper-Stagflation, a world in which middle class assets will be devalued and where the wise will avoid debt and where retirement will become a step-change to a different and necessary second career.

Prudence, retraining and avoidance of debt will be the norm, and bloated social security budgets will be out, as will be the politicians who don’t get it. The fact that we are in the trough of Kondratieff’s long cycle does not surprise.

For Houston, Japan was already sitting on its own economic fault-line before the earthquake, with a debt-to-GDP ratio of 247% and rising. Now the BoJ has pumped another $174 billion into the banking system in just two days, while the negative economic consequences of the worst tsunami in memory are far from clear.

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But Japan is not the real problem according to Houston: it’s America, whose budget deficit is out of control along with the endless QE and the pilot is still dumping dollars wherever he can, rather like relief aid to refugees out of the back of a Hercules, only he’s dropping the future seeds of hyper-stagflation, as the US total debt-to-GDP ratio soars through an unsustainable 350%.

So, to take just three simple answers proposed by Houston: governments should replace welfare with workfare; HMS Ark Royal and the Harriers should be mothballed and not sold off to some Turkish scrap metal dealer, as was the case with HMS Illustrious; and hang on to gold and inflation-busting assets and your own income to the last. And learn to live within your means, a lesson not lost on Cameron’s Coalition and Angela Merkel and the French: President Obama, it’s time you followed suite. And as for Japan, it was already engaged in the last dance Kibuki saloon.

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