The Perfect Storm

The UK is on the brink...

THE PERFECTSTORM (see page 59) : The economy is a surplus energy equation, not a monetary one, and growth in output (and in the global population) since the Industrial Revolution has resulted from the harnessing of ever-greater quantities of energy. But the critical relationship between energy production and the energy cost of extraction is now deteriorating so rapidly that the economy as we have known it for more than two centuries is beginning to unravel  https://ftalphaville-cdn.ft.com/wp-content/uploads/2013/01/Perfect-Storm-LR.pdf

The fiascos of denied decline

Posted on May 28, 2024

THE BRITISH ECONOMIC TRAP – A SEEDS ANALYSIS

Between 2003 and 2023, UK debt expanded by £2.9tn whilst real GDP grew by only £625bn. This means that each pound of “growth” reported over the past twenty years has been accompanied – rather, made possible – by net borrowing of £4.65.

As others have noted, there’s been something almost surreal about the opening phases of the British general election campaign.

Premier Rishi Sunak, firing the starting-gun for the 4^th July contest outside 10 Downing Street, had no umbrella to ward off a torrential downpour of rain. If the public suspects that your government is a sinking ship, the birthplace of Titanic might be a venue to avoid. If you’re going to ask brewery workers if they’re looking forward to this summer’s European football championship, it’s best if you figure out first that the brewery is in Wales, and Wales hasn’t qualified for the tournament.

These have just been early blunders on the road to what might well be a re-run, or worse, of the Conservatives’ nightmare defeat of 1997. The election announcement caught the party unprepared, with no manifesto written, and no candidates selected in a reported 150 constituencies.

The factors informing Mr Sunak’s decision appear to be economic, the theory being that ‘this is as good as it’s likely to get’. Headline inflation has fallen, but core inflation remains sticky. Expectations for rate reductions by the Bank of England are being dialled back and, as Britain moves into autumn, still more homeowners will have to re-mortgage at painfully higher costs as their fixed-term deals expire.

It’s becoming ever more apparent that pre-election tax giveaways are unaffordable, which would undermine the reputation for fiscal rectitude of any government tempted to offer them as sweeteners to the voters.

If things had gone well, rates might have been coming down by the autumn, and chancellor (finance minister) Jeremy Hunt might have been able to offer tax bribes to the public (whilst continuing to increase the incidence of taxation by keeping tax bands and allowances frozen).

In reality, though, Mr Sunak might just as well call an election now, because things tend not to go well for governments in any economy inflecting from growth into contraction. Read More

Recall the last time collapse threatened, the CovidCON was foisted upon us.

“The global economy was facing the worst collapse since the second world war as coronavirus began to strike in March, well before the height of the crisis, according to the latest Brookings-FT tracking index. “The index comes as the IMF prepares to hold virtual spring meetings this week, when it will release forecasts showing the deepest contraction for the global economy since the 1930s great depression.  Read More

Stay tuned for the next phase of UEP!