If you haven’t read Jim Jubak’s column from yesterday, it’s worth reading. He makes the case that the UK is close to a second financial crisis and if that happens, the US may not be far behind. The potential crisis in Britain (and the US) is close at hand due to two factors:
- The government has issued massive amount of debt to buy its way out of the financial crisis and we don’t really know what impact that will have
- People have not changed their “buy today on borrowed money” ways.
Jubak makes the point that the elections that will happen in England before May will give us a good idea of what will happen in the future. If the Conservative Party goes in with a large majority and a plan to right the Englsh economy, it won’t be an easy future, but there won’t be a serious crisis. If the Labor Party remains in power without a sound plan to rectify the long-term economic troubles in the economy, then he foresees serious trouble for our cousins with a financial crisis likely.
I suggest we pay attention to the English elections more then we might otherwise to have some insight into what may happen to the US economy over the next several years. I hope the English get it right.
What this means from an investment standpoint for you is to remain conservative and protect your potential downside. Stay conservative even when the “experts” on Wall Street and the media proclaim great things. A second major financial crisis for England, the US and the world would be very hard to take now in the delicate stage of our recovery. And it could happen sooner rather than later.
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