Scenario planner and economist Clem Sunter said during a BDO seminar on Tuesday evening that the recession in the United States was starting to spread like a virus, with consequences for stock markets around the world.
“One of the consequences is that you will not make as much money on stock markets as over the previous four or five periods of ten years. So it will be tougher,” he said.
However, he felt South Africa would probably have a softer landing than other countries due to resources, tourism and infrastructure.
He noted that while the world average economic growth rate since 1980 was 3,5% and “we have never had it so good”, the world was in a much tougher state than it had been for 30 years.
He said the US was in a classic recession scenario, with the trigger having been a decline in the US housing market.
“Young people simply haven’t experienced this hard-times scenario,” he added.
Sunter said that house prices in the US were down between 15% and 20% on what they were nine months ago and in some states were down 50%.
He said the fact that Freddie Mac and Fannie Mae — with combined mortgages of an estimated $5,5-trillion — went belly up and needed to be saved by government, should make people realise something dramatic was going on.
“The question is can America have a private recession or will it spread like a virus? Well, it seems like it is spreading,” he said, noting that the United Kingdom’s Chancellor of the Exchequer Alistair Darling said recently the UK situation was the worst in 60 years — with house prices down on top of the Northern Rock debacle.
“We haven’t seen this since late 1970s,” he said.
Sunter said one of his friends was planning on retiring in the UK and was trying to sell his home for four million pounds, but the best offer he had received was just £1,6-million — 40% of the asking price.
“It has even spread to South Africa — you can’t sell a house here,” said Sunter.
“Things are getting very tough,” he said.
“We had minor recessions in 1998 and 2001 — but nothing like we are seeing now.” – I-Net Bridge