Robin Griffiths: The Kondratiev economic winter is necessary

Robin Griffiths, of Cazenove Capital, was predicting a double-dip recession a few weeks ago. Eric King had him on again at the weekend to get an update, and what an update it was.  It provided at least one great quote (below) along with some excellent predictive insights into the upcoming movements of the stock market:

Mr Griffiths thinks we’re about to enter the weakest four weeks of the year and predicts a market fall of between 10-15% in this period, with the Chinese Shanghai Composite Index perhaps performing as a lead indicator on the fall.

Anticipating a drubbing for the Democrats in the US November elections, which will make Obama a lame duck president, Mr Griffiths then expects a market rally to fire-up until around March, instead of the usual April. The US will then fall into a double-dip recession, and another leg down in the depression, because of re-setting mortgage teaser rate deals.

With his interpretation that the bond markets are screaming depression, and with unstoppably rising unemployment, he then predicts asset price falls, particularly in property.

After working through the rest of the markets, Mr Griffiths then discusses the gold market and advises everyone to hold some gold to preserve some wealth through this volatile period. Mentioning Gordon Brown’s disastrous gold sale, Mr Griffiths thinks gold could go quite easily to $2,500 an ounce, and if Bernanke keeps going with his inflationary policies, then $5,000 dollars an ounce isn’t out of the question.

He then spontaneously generated this excellent verbatim quote, proving that he is a gentleman and a scholar:

As an economist, I have never believed that Keynesian economic stimuluses work; I don’t think they worked for Keynes; they certainly didn’t work for Roosevelt; and they didn’t work for the Japanese when they tried it, fatefully. And they’re not working now. I mean, having spent the amount of money that has been spent, we really should have had some sort of multiplier and we quite clearly haven’t got it. So I’m more of the Austrian School of Economics. Basically, the problem is that if you’re in debt then you can’t borrow your way out of it. You’ve got to do the prudent and frugal thing which is to save. And of course, while you do that, your consumption is modest, which means the economy cools down.

Robin Griffiths, 2nd October 2010

Likening the pre-2008 boom period to a hot summer season, Robin Griffiths then stated that this must of necessity be followed by a Kondratiev winter before we can get into the spring of an economic recovery; the more politicians try to put off this necessary Kondratiev winter, the longer it will take before we can reach any spring.

Finishing with some thoughts on silver, Mr Griffiths thinks that this industrial precious metal could possibly become a ten-bagger and reach as high as $200 dollars an ounce, though with extreme volatility along the way, with China, Brazil, and India helping the rest of us reach that eventual spring, if the politicians finally throw in the Keynesian towel and allow us to reach it.