Economic guru Dr Mac Faber has his clients seeking the safety of cash in the expectation that most asset prices will be much lower in six months time.

Gary "Irrational Exuberance" Shilling's Insight newsletter is forecasting a global recession along with a meltdown in stocks and real estate. Shilling believes China will suffer a hard landing which in turn will cause commodity prices to nosedive, and that deflationary forces will return with a vengeance. And, not withstanding that the National Association of Realtors is to spend $40 million on a campaign to convince would be buyers that the market has bottomed and "now is the time to buy", he believes prices will drop a lot further. In fact, they would need to drop 40% merely to revert to the historic mean.

New laws will slash the maximum rate lenders can charge for consumer loans from a hefty 29 per cent down to 20 per cent by end 2009. Even more harsh (and almost surreal in the current environment of governments running printing presses red-hot and endless easy credit ) is to be told the total amount consumers will now be allowed to borrow will be capped at a measly one third of annual income! Talk about turning off the tap!

This has prompted Citigroup to announce that it will drastically cut back its consumer finance operations in Japan, whilst at the same time posting a U.S.$370 million loss by its Japanese office in the fourth quarter. This must really cause Citigroup some angst following the forced closure of its Japanese private banking arm two years ago when financial regulators discovered violations of banking laws.