I was on BBC Radio London yesterday talking about the Sales. The idea was that we’re all being duped into buying stuff we don’t need. Well Duh!!! Isn’t that the basis of our economy for the last 25 years?

However, I think this year is a watershed.

I have little doubt that the sales are busy. There has been an increase – year on year – in unsecured debt (overdrafts, personal loans, kitchen loans etc) and of course the iniquitous payday loans are lending more and more (though increasingly it’s people borrowing more to repay an older loan (!!!). So people are doing the silly thing and borrowing for little reason.

Also, mortgage lending is much higher than last year due to the Govt created mini house price boom (which cannot possibly end well). Some will have borrowed more than they need for the purchase. So they have cash burning a hole.

So, there is liquidity in households. On top of course one of the objectives of a near ZIRP (Zero Int Rate Policy) is to make people take money out of savings and spend it.

So, these are the reasons why people are out shopping.

On top – and this is one of the issues – the retailers have adapted to the net. They know they have to be competitive on price or we’ll look instore and buy online. So, high street prices are lower.

But why a watershed?

Because I think we are close to the end point.

Households are near ‘peak debt’. What will be the trigger? Falling house prices. “Yeah, that’s going to happen Jonathan” – you may be thinking. As I said on the radio it is not likely an economic shock will be home grown – not with ZIRP and the Govt borrowing a simply massive £110Bns. However, I am increasingly of the view that an external shock is coming. 2014? Possibly but not likely. Though a stock market crash is more and more possible. 2015 or 2016 is likely. Be it the US losing control over rates or China imploding on all that funny money they’ve been creating… these are the most likely candidates.

Either (or both) will bring a crash bigger than 2008. This will likely crash house prices. banks will stop lending, even on houses. Thus shopping will die as a pastime Watch this space.

What’s the one thing the Marxists cannot do post a crash? They cannot slash interest rates. They’re already tiny.

You couldn’t make it up.

By Jonathan Davis

http://jonathandaviswm.wordpress.com/

25+ year veteran of the world of financial services, the last 10 doing the same thing under his own name. We work with families all over the UK and in Switzerland and, indeed, on 2 other continents. If interested in our Wealth Management work, cast a glance at the firm’s website.

From time to time media folk call me and ask me to rant live or in the press. JD in the media.

I don’t buy hype. I don’t believe it’s the end of the world but I do believe, within a generation, the West will have no welfare state. The maths don’t lie. We’re toast. It’s obvious if you think about it.

© 2013 Copyright Jonathan Davis - All Rights Reserved

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