This article is adapted from a piece which appeared in Syntagma in March.

It’s happening now in America and is due here in the UK and Europe by summer, if the usual time lags apply.

The recession / depression / crash is on its way like an unstoppable tsunami.

A tsunami is not a “tidal wave”. Waves break and retreat when they hit shallow waters or the shore. A tsunami trundles on for miles inshore powered by tremendous forces out in the deep ocean. No power on earth can stop it until its energy is spent.

Those who think we can stop a deep recession from happening by fiddling with interest rates or printing liquidity are looking at wave science not tsunamis. Now we can only watch and hope.

The signs of families cutting back their spending are everywhere here in Britain. Apart from the super-rich, ordinary folk are drawing in their horns as if they never existed. This mass retreat from the markets is beginning to have a cumulative effect which can only build to an inevitable crescendo.

The banks are barely functioning, except as deposit-takers. When they get our money they hoard it like the early Ebenezer Scrooge — the kind of man who creates depressions or shows us how to avoid them, depending on your point of view.

America is in deep trouble now, deserted even by the Sovereign Wealth Funds of the Orient, who just a few weeks ago seemed like saviours. Now they are pulling their cash out and retreating to the new economies of the East.

The “carry trade” to smaller Western economies, like Turkey, Iceland, Latvia, Estonia and others is falling apart, as will these countries in the coming months. Iceland may well be the first to crack, like some monstrous symptom of global warming tearing apart the ice sheets.

Those that are in the eurozone are being held together only by the common currency, the euro. But the fault-lines are beginning to show and it seems only a matter of time before the whole system snaps in a great twanging of over-stretched elastic. Beethoven would not recognize the new European Symphony about to be played. An Ode to Joy it isn’t.

If we look at all this from a Scroogian perspective though, it’s a kind of deep-cleanse that the world’s febrile financial sectors need — and this is certainly a problem of their making. This tsunami began in the boardrooms of banks and retail lenders, not in the real economy where most of us work — although our greed doubtless helped.

As America contracts, like a crab sensing danger, we can only await the storms to come. And they are the least of it. The unstoppable tsunami is the real enemy.

This article is adapted from a piece which appeared in Syntagma in March.

The European Central Bank (ECB) remains obdurate about cutting its 4pc interest rate despite the Fed going to the brink of its powers in Washington.

U.S. rates are expected to be cut by a whopping 1pc to 2pc today giving America an effective zero interest rate when inflation is taken into account.

The flight from the dollar will only get worse, especially with the ECB giving a two-fingered salute to the American authorities. It’s said that the eurozone (which does not include Britain) is in no mood to help the Americans — a situation similar to 1987, when the Bundesbank let the dollar slip into freefall, spooking the markets into a catastrophic drop.

Let’s not beat about the bush, Europe is engaging in a financial war with the U.S. As long as the ECB refuses to join in the rescue package, the dollar will fall spreading even more gloom around the markets. Some very senior commentators in the UK are now discussing the potential for a collapse of the entire banking system in the West and elsewhere.

Jean-Michel Six, Chief Europe Economist at Standard and Poor’s says, “There is a monetary war going on. The ECB view is that the Fed is a victim of its own mistakes and should pay for its past crimes. Frankly, they don’t see why they should be cutting rates when inflation is accelerating.”

British inflation measured on the CPI index, which doesn’t include mortgage costs, has risen to 2.5pc this morning. However, core inflation is down to 1.2pc, indicating that, apart from headline price rises in food and energy, deflationary pressures may be the real enemy in the months ahead.

Bernard Connolly of AIG thinks the ECB is making the same mistakes that led to the Great Depression in the 1930s. “The ECB represents the 1930s element in world central banking right now. It is adding to the atmosphere of panic in the foreign exchange markets and ensuring the collapse of the credit bubble in southern Europe and Ireland will be even worse.”

How long before cries of “Cheese-eating surrender monkeys,” are heard once again?

This article is adapted from a piece which appeared in Syntagma on March 12.

The rest of the world may not know who, or what, Fannie Mae and Freddie Mac are, but Americans do. They are the financial institutions that guarantee 60 percent of the U.S. home loan market. Both are on the edge of meltdown.

The U.S. Federal Reserve Bank

They are also the leading players in a top-tier of lenders that control $11 trillion of mortgage lending. A collapse would trigger a catastrophe of unprecedented proportions across the world’s largest economy with swift knock-on effects around the globe.

What is emerging now is the greatest financial crisis since the Great Depression in the 1930s. If America’s huge mortage banks are no longer rock solid, nothing is safe anymore.

The Fed is pulling every string available to it to neutralize the toxic effects of the subprime disaster. It’s predicted to lower rates by another 75 basis points within days, and is now offering Treasury bonds in exchange for mortgage debt. By soaking up some of the poison, the central bank is temporarily providing a shoulder to lean on for jumpy bankers whose world is disintegrating around them.

Like the British mortgage bank, Northern Rock, Freddie and Fannie may have to be nationalized — or their dubious collateral underwritten by government agencies — to shore up the economy against plunging over the edge. And Bear Stearns is in serious trouble too.

All this makes the UK Chancellor of the Exchequer’s budget today rather small beer. And that’s just what we expect — taxes on beer and faux “green” measures to raise a little cash here and there.

The real action is in Washingtom, where the Fed is leading the charge against a U.S.-generated global meltdown of potentially epic proportions.

Bernard Connolly, Global Strategist at Banque AIG, believes Fed action won’t solve the problem of eroded of bank capital. “There is the risk of a very damaging credit contraction. We face the most serious global crisis since the Great Depression. But this time at least the North American central banks are doing their best to stop it spreading to the real economy. We should be thankful that we have people in charge who appreciate the gravity of the situation.”

True enough, but the “perfect storm” is gathering perfection by the hour.

This article is adapted from a piece which appeared in Syntagma on February 27.

We’re talking about the American economy, of course — now in recession, as we’ve been predicting for months — and the British and European financial positions, which are trailing some way behind the U.S., but about to implode too.

We’ve been on the case since last June when the ominous tag “credit crunch” started to be bandied about in response to falling American house prices.

As online publishers we are partially protected from the ravages faced by bricks and mortar operations. Even so, Google responded to the same data last year by dumping lots of small publishers using its AdWords/AdSense programs and its range of offshoot partnerships.

The knock-on effects lowered the earning power of a whole raft of mid-sized publishers who operate below the glass ceiling of scalability needed to challenge the giant press barons of the print media.

Given the power of this pincer movement, how should internet marketers and publishers ride out the troubles ahead, which may even include another dotcom crash?

Here at Syntagma we are developing two new business models which don’t depend exclusively on Google rankings and big investment in assets. We have also moved to conserve cash, now the most sought after commodity in global financial markets. Forget equities, bonds and angel lending. Asset-backing is truly out of fashion. Only cash and gold will do during the next two to five years, or maybe even longer than that. Japan took more than a decade to haul itself out of its banking crisis and the profound deflation of the 1990s.

I really don’t see how mid-sized businesses, with heavy debt, and/or lots of equity in the hands of VCs, can get through this otherwise.

The Fed’s dramatic easing of monetary policy, which still has some way to go, is barely making an impact, although the usual lags apply. In the 1990s, Japan found that zero, even negative, interest rates could not persuade its reluctant public to splash out in the shops. Longer term rates in the U.S. are already close to zero.

Ben Bernanke is apparently studying the Japanese experience of zero rates right now. Surely a sign of what’s to come.

The game now appears to be out of the hands of the authorities whatever they decide to do. Bernanke deserves credit for at least trying. His next move will surely be to throw the kitchen sink at the problem and let the Devil take the hindmost. This is no time for musings on “moral hazard”, the hazard is not inflation but deflation and slump. Massive U.S. Government loans to individual defaulters can’t be ruled out and may be just around the corner.

Compare that to the lethargic approach of the Bank of England and the European Central Bank. Still holding rates at 5.25 percent and 4 percent respectively, although the BoE has little room to manoeuvre thanks to Gordon Brown’s obsession with public-sector spending.

The first casualties could be some major institutions in America and monetary union in Europe, where the euro currency is looking very vulnerable. At least Brown got that right.

Syntagma predicts we are going to be amazed by developments in the not too distant future. The world may look a very different place when we come out of this, and it won’t necessarily be all bad news. Bubbles have to burst. Nature demands it. And the end of the eurozone would be a big plus for European freedom.

Nearly a year ago I wrote a post called These are the good times. They were and still are, uncomfortable though the ride may be.