#131: Not about “Brexit”


What follows is an analysis of the British economy, from the perspectives of performance and risk.

It is not a discussion of “Brexit”.

Readers are, of course, welcome to discuss any pertinent issue, “Brexit” included. But a non-“Brexit” focus has to be stated clearly, because one of the most regrettable effects of the whole “Brexit” process has been to divert attention away from the economic fundamentals. Distractions don’t come much bigger than “Brexit”.

Perhaps the most striking characteristic of the British economic situation is the stark divergence between two different views. One of these is an official and consensus interpretation, founded on conventional economics, which portrays performance as no worse than lacklustre. There is, however, a raft of other indicators which paints a much less satisfactory picture.

Analysis undertaken using SEEDS – the Surplus Energy Economics Data System – indicates that prosperity peaked as long ago as 2003, and that the consequent strains are now becoming ever more apparent. Declining prosperity, of course, characterises most advanced Western economies. The United Kingdom stands out, though, for the rate at which prosperity is deteriorating, and for the elevated level of risk associated with this trend.

The great dichotomy

According to conventional metrics, the economy of the United Kingdom continues to grow, albeit at a less than sparkling pace. GDP is expected to increase by about 1.4% this year which, though hardly impressive, at least outpaces the 0.6% trend rate at which population numbers are expanding. People are, then, getting gradually better off, whilst unemployment remains low.

The problem with this interpretation is that it is hard – arguably, impossible – to square with a host of other indicators. First, wage growth is very subdued, barely keeping up with CPI inflation, and falling steadily further adrift of the cost of household essentials.

Second, productivity growth has fallen to virtually zero, having averaged just 0.2% since the 2008 global financial crisis (“GFC I”).

The labour market is characterised by increasing casualization and insecurity of employment, factors which contribute to depressed wage levels despite officially-low unemployment.

There is every reason to suppose that consumers’ ability to spend is in rapid retreat. Customer-facing businesses (including shops, restaurants and pubs) are going through a fire-storm of closures, failures and job losses. Consumer credit has climbed to potentially dangerous levels, with anecdotal evidence that this credit is being used, not for discretionary purchases, but simply to meet living expenses. There is also reason to suppose that big-ticket purchases are in decline. Surveys indicate that large and increasing numbers of households are struggling to make ends meet.

Government, too, seems strapped for cash, not really knowing how to provide necessary increases in funding for areas such as health, defence and care for the elderly. Local as well as central government looks resource-constrained.

Broader indicators of economic stress include homelessness, with young people, in particular, finding accommodation to be costly, often of poor quality, and hard to obtain. Seemingly-rapid rises in violent crime – including a dramatic surge in moped offences, of which there were 23,000 in London alone last year, compared with just 827 five years earlier – do not seem consistent with a prospering society.

In short, there is an abundance of evidence that, far from getting better off, the average British person is getting poorer. At first glance, this is impossible to square with any level of reported “growth” in economic output.

The SEEDS interpretation

An answer to this conundrum is supplied by SEEDS, which indicates that prosperity per person in the United Kingdom has been declining relentlessly since as long ago as 2003.

Over the period since then, reported GDP has risen by £386bn (23%), to £2.04 trillion last year from £1.65tn (at 2017 values) in 2003. Against this, however, aggregate debt increased by £2tn (62%).

This means that each £1 of reported growth has been accompanied by £5.20 in new borrowing. It also means that, against current growth expectations of about 1.4%, the UK typically borrows 5.7% of GDP each year.

The stark implication is that, like many other Western countries, Britain has been pouring cheap credit into the economy to shore up consumption. In short, most of the supposed “growth” of recent times has been nothing more substantial than the simple spending of borrowed money.

Stripped of this borrowing effect, SEEDS calculates that, within recorded growth of £386bn since 2003, only £77bn can be considered organic and sustainable. This puts ‘clean’ (borrowing-adjusted) GDP for 2017 at £1.59tn, barely ahead of the 2003 number of £1.53tn. On this basis, underlying growth has not kept up with increases in the population, so that ‘clean’ GDP per capita has decreased by 5.1% since 2003.

The compounding headwind has been a sharp rise in the energy cost of energy (ECoE). This, of course, is a worldwide problem, but has been particularly acute in the United Kingdom. Back in 2003, Britain’s ECoE (3.4%) was lower than the global average (4.5%). Today, though, ECoE is markedly higher in the UK (9.2%) than in the world as a whole (8.0%).

On a post-ECoE basis, prosperity per capita in Britain has fallen by 10.3% (£2,540), to £22,020 last year from a peak of £24,550 in 2003. Prosperity has declined in other Western countries over the same period, but Italy is the only major economy where the fall has been as rapid as in the UK.

SEEDS shows no sign of this downwards trend slackening, and projects that British prosperity will be a further 4.2% lower in 2022, at £21,090, than it was in 2017. In short, the average person is getting poorer at rates of between 0.5% and 1.0% each year.

Meanwhile, of course, his or her share of aggregate debt continues to increase.

Elevated risk

Deteriorating prosperity necessarily increases risk, because the ability to carry any given level of financial burden is a function of prosperity. Falling prosperity also impairs the ability to fund public services.

Trends in debt ratios reflect deteriorating prosperity. Aggregate debt at the end of 2017 (£5.25tn) equates to 258% of GDP but 361% of prosperity, the latter number having risen markedly since 2007 (283%).

More worryingly, the rise in debt exposure has been matched by sharp increases in proportionate financial assets, a measure of the size of the banking system. The most recent figure, for the end of 2016, puts Britain’s financial assets at 1124% of GDP, but this rises to 1547% when prosperity, rather than GDP, is used as the denominator. The SEEDS estimate of financial assets in relation to prosperity at the end of last year is 1577%, again sharply higher than the level on the eve of the financial crisis in 2007 (1285%).

Measuring debt and financial assets in relation to prosperity are two of the four risk yardsticks used by SEEDS. The UK looks high-risk on the debt measure, and extreme-risk in terms of the scale of its banking exposure.

On the third risk criterion, which is dependency on the continuing availability of credit, the British score is no worse than that of most comparable economies. The United Kingdom does, though, also depend on a continuing ability to borrow from abroad, to sell assets to overseas investors, and to attract inward flows of capital. This dependency looks risky, because the severe travails of customer-facing businesses, and the implied hardship of consumers, necessarily impair the attractiveness of Britain as a place in which to invest.

Finally, Britain has a high score on what SEEDS calls “acquiescence risk”. Put simply, the less prosperous people become, the less likely they are to back painful recovery plans should these be required in a future financial crisis. Worsening prosperity has already had a marked effect on political outcomes in America, France, Italy and elsewhere, and the same factor is likely to have tilted the balance decisively in the referendum on “Brexit”. Should it become necessary for Britain to repeat the 2008 rescue of the banks, popular acquiescence in such a measure should be no means be taken for granted.


SEEDS 2.15 United Kingdom 21072018


495 thoughts on “#131: Not about “Brexit”

  1. Max and Stacey discuss US political realignment; Denninger takes apart GDP ‘growth’


    If Britain is moving toward Labor, the white blue collar United States seems to be moving solidly toward the Republicans. Stacey analyzes data recently published by the New York Times to explore the radical realignment since the days of Bill Clinton.

    In the second half, they interview Karl Denninger who uses a ‘prosperity’ like analysis to show that real production in the US has been falling for quite some time. Dennninger expects a fall in margins for US companies as a result of the Trump realignment of trade relations. He also expects to see a radical revaluation of the FANG stocks.

    About 25 minutes for the total viewing time. If you aren’t interested in the political realignment, skip the first 11 minutes.

    Don Stewart

  2. ewaf88
    Max and Stacey are neighbors. They have their idiosyncrasies, but being ‘Russian agents’ is not one of them. Like Ron Paul, they use RT to get out the message as they see it. They moved to this neighborhood when Max’s mother was dying. I had a brief conversation with Stacey at the coffee shop, asking whether they might be going back to London as their base of operations. Stacey was adamant that ‘not the UK, they tried to censor us’. The glee with which Stacey recounts the retraction of the BBC attack on their analysis of Russia’s financial situation is partly due to the fact that the BBC hired Stacey to make a documentary, and then suppressed the documentary (at least that is what I have heard). I am only pointing out the strong correlation between what Max and Stacey and some of their guests are saying and the things that Dr. Morgan and SEEDS are saying. I talked with Stacey in a brief conversation about the retractions by the BBC and the IMF, and she said ‘we interviewed these guys and they gave us the facts’, and now the BBC and the IMF have both admitted that they were wrong.

    If you think the data in Stacey’s graphs is ‘fake’, or the New York Times data she quotes is ‘fake’, or that the excess of debt over GDP that Denninger quotes is ‘fake’, then give us your version.

    My ‘go to’ source for this kind of data is Dr. Morgan. But when entirely independent analysts come up with some of the same conclusions, albeit based on a less comprehensive model, I think it is worthwhile paying attention.
    Don Stewart

    • We covered the US economy here not long ago.

      One of the more striking ratios – taken simply from official numbers – is this: over a ten-year period, when GDP growth was $2tn, the combined net contribution to this growth from manufacturing + agriculture + extractive industries + construction was zero.

      Increased exports of services provided 7%.

      So 93% of all growth over a decade came from (a) services which Americans can sell only to each other, most obviously in moving money around; and (b) government activity.

      This is entirely consistent with an economy whose ‘growth’ comes almost entirely from pouring cheap credit into the economy.

    • Apologies if I’ve missed this in previous posts – do we in UK have similar stats on contribution to GDP of manufacturing, agriculture, extractive, construction etc, and therefore proportion reasonably attributed to credit based finance? (Over similar timescale).

    • Yes. They’re not as user-frendly as the US numbers, but they do exist. The EU, also, has these numbers for all member countries, including Britain.

  3. Facts; Trend Breaks; Are Celestial Forces Realigning? What does it all mean?
    See Kunstler’s current post:

    So Kunstler, Max and Stacey, and, as I read him, Dr. Morgan, all think that there are certain facts that the Establishment finds inconvenient, that centuries long trend lines have been broken, and that some of the major forces in the society and economy are realigning. The facts are the least arguable…but somebody will always find a way to recast them or cast doubt on them or hide them. The trend breaks are also hard to argue with…but, again, people will do so. Some will blame the trend breaks on hard forces such as the physics of oil production, while others will point to more nebulous factors such as social disintegration. And finally, we come to what it all means? Recent research has confirmed that humans have the capacity for memory in order to more effectively manage our current affairs. If we remember something, the very memory is not so much about accuracy as it is about relating some events in the past to our attempt to understand today. This activity is, of necessity, done on the fly. Only time will sort the wheat from the chaff.

    Trump’s story is that ‘we can make America great again’…explicitly denying the ‘physics’ explanations and denying that the social disintegration is inevitable. The realignment that some identify is another evolution in power in the US:
    *From agrarian to main street
    *From main street to heavy industry
    *From industry to financial
    *From domestic to the mobility of global capital
    And now, perhaps, back to domestic and heavy industry and main street. (Or, just maybe, global depression due to physics.)

    That last turning seems to be Dr. Morgan’s assessment. It is what Keiser and Denninger talk about. It is obviously speculative. What Kunstler talks about is the struggle by those in power now, the Deep State and Mobile Global Capital, to keep control through propaganda. And so Kunstler sees the mainstream media as already coming up with those damned Russians as the explanation for why the good guys don’t win in November. I don’t know how the election will go, but I do agree that a realignment has happened, and I do agree that the Democratic Party hasn’t a clue, and I agree that the Deep State does not bear questioning graciously, and I agree that the mainstream media has lost its mind.

    Don Stewart

    • I don’t really do conspiracies and Deep State, simply because I have nothing to add.

      However, I do think that GFC I and GFC II will be seen by future historians as book-ending the demise of the incumbent ‘globalist-monopolist-liberal’ elite.

      The elite’s last chance to prevent this was in 2008. To do this, they would have had to accept a “reset” of the financial system – nationalise banks where rescue was required; let asset values stay at or near crashed levels; and accept the wipe-out of those who had borrowed too much against the prior inflated values of assets. (The last bit was probably the one that they couldn’t swallow).

      Ironically, all of this would have been wholly in accordance with the working of the market forces that the elite claims to adhere.

  4. Risking Too Much Wordiness or Beating a Dead (or Irrelevant) Horse

    Nassim Nicholas Taleb is the author of many books, including Skin in the Game. On page 86 and 87 he explains why minorities rule, rather than majorities. Let’s consider the general principle, then try to discern the political climate in the U.S.

    ‘We can say that markets aren’t the sum of market participants, but price changes reflect the activities of the MOST MOTIVATED buyer and seller.’ In 2008, a motivated seller, Societe Generale, caused a 3 trillion dollar loss in market value by persistently selling 50 billion dollars of a security they were determined to unload. ‘The market is like a large movie theater with a small door…The best way to detect a sucker is to see if his focus is on the size of the theater rather than that of the door.’ (And that is why all central banks now have ‘plunge protection teams’.)

    Taleb presents varied evidence that a determined minority can control an unfocused majority, just as the motivated seller caused the market panic.

    Now consider the condition that white, blue collar workers in the United States may have become convinced that ‘global financial capitalism’ is a major source of all their woes. Then this determined minority will vote for politicians who promise to do something about it. They will tend to ignore side issues such as having an affair with a porn star, or whether the politicians daughter had an abortion while the politician was professing allegiance to fundamentalist Christian and Jewish values. This segment of the voting population may become ‘single issue’ voters. Motivated single issue voters have an outsized influence, just as Taleb describes.

    Stacey presents the evidence that every single one of the largest manufacturing congressional districts in the U.S. is now represented by a Republican, where as recently as the Bill Clinton administration they were solidly Democrat.

    This presents a problem not only for Democrats, but also for those Republicans who gladly took all that money from mobile global capital (the Koch brothers, for example).

    I’m not going to try to predict the outcome. I see all sorts of possibilities from Martial Law to Chaos. But it is pretty clear that the New England Town Meeting is no longer the dominant paradigm.

    The damning evidence presented by Dr. Morgan, and seconded by some of those I have referenced, may make a determined minority look for the size of the exit door. Will plunge protection teams be able to plug the leaks in the dike? Denninger doesn’t think so.

    Don Stewart

    • Thanks. This is classic ‘rock and a hard place’ – and, as far as I’ve got, anyway, doesn’t even touch on the issues I raise here around an economy in trouble even before we think about “Brexit”.

      The real problem is the breakdown in trust between governing and governed. The response to 2008 was lethal politically. It looked to the public – rightly or wrongly – as ‘rescue for the rich, austerity for everyone else’. This meant that each argument for ‘remain’ was dismissed by millions of voters as ‘just another lie from a self-serving establishment’.

      A better outcome might have been to have spent two years putting together a decent post-Brexit deal. The official line is that this hasn’t been possible because EU negotiators are intransigent. But the likelier reality is that they regard their UK negotiating partners/opponents as a pushover, being clueless idiots.

  5. Whenever David Davies appeared alongside Barnier, the unfavourable contrast was, well, only too obvious….. What a mediocre ‘elite’ the Brits have.

    I would say, though, that it was both: Brussels are being intransigent, feel that all the cards are in their hands, and are encouraged by the very narrow referendum result to push for the collapse of the Conservatives and a general election, hopefully over-turning Brexit.

    On the other hand, the Tory Brexiters are simply shambolic, when not utterly embarrassing like Boris. I doubt anyone swallows their ‘Britain will be a great trading nation again’ line, we all know that that boat has sailed.: MBGA just doesn’t wash. The workers voted to stick one to the complacent metropolitan elite, at last, after all the years of slick Tony and unconvincing Cameron, and kick out immigrants, plain and simple.

    I suspect, anyway, the whole issue will be submerged by the accelerating disintegration of the British bubble economy – every day the headlines confirm this.

    As for the bail-outs: I’m not at all sure that those who were doing well, or even just well-enough in 2008 and who didn’t lose their jobs, suffer benefit cuts in the consequent ‘austerity’ etc, are not particularly outraged by what happened with the banks.

    If you still see enough little zeros in your bank account, can pay the mortgage, take the wife to somewhere warm several times a year and give her money for a new kitchen/bathroom, house make-over, to avert divorce, all is well.

    If train season tickets came down in price, they’d be happy with anything…..hasn’t Corbyn promised that,and extra Bank Holidays?

    • I agree that “Brexit” may be subsumed into a broader event, whether UK-specific or broader. I’ve been in no doubt for quite some time now that the British economy is crumbling.

      History is likely to see the response to GFC I as a disaster of systemic proportions, buying time through “extend and pretend” rather than achieve ‘reset’ by paying up for past recklessness.

      In terms of politics, I don’t know who’s going to come out on top – populists? socialists? something else? – but I’m sure the ‘globalist-liberal’ Western establishment is finished.

      Somebody (French) once said that “the entente cordiale was buried between Mers-el-Kebir and Suez”. (Mers-el-Kebir was where the Royal Navy sank the French fleet in 1940). To paraphrase, ‘the liberal elite was buried between GFC I and GFC II’.

  6. A small extract from an article (Car sharing and autonomous vehicles) on the MIT technology review site:

    ‘Storer of Jacksons Car Wash (Phoenix) says what really worries him is generational change. Younger people are, in growing numbers, rejecting not just car ownership but even the once-mandatory rite of passage that is getting a driver’s license’

    I read the same is happening in the UK amongst younger people. Perhaps if car ownership does decline rapidly then part of our energy problems would be reduced.

    • Donald, that’s a very interesting observation. I wonder to what extent the widespread adoption of ‘renting’ a mobile ‘phone is spilling-over into other items of consumption? The rise of leasing a car through a PCP would seem to be another signal of movement towards ‘renting’? In other words are we in the midst of a quite profound generational shift in thinking? Or is the widespread adoption of PCP an indication that folk are no longer able to afford to buy a car outright?

    • Hi regarding PCP I would guess it’s for people who can’t afford the outright purchase price but I’ve never really understood why you wouldn’t take out a loan for a nearly new car (1st year depreciation is huge) so at least you have an asset without having to fork out the so called balloon payment at the end of a PCP.

      I am encourage if younger people are turning away from cars although the huge cost of them maybe one factor as well as generational change.

      Perhaps in the future the idea of having a prestige car for status – or any car at all – will have gone with most people relying on car shares or semi autonomous vehicles which have no owner and you do actually rent.

      On average my car sits on my drive 3 days out of 7 – sometimes 4 now. It’s nice having the flexibility but I can seen at time coming when I will no longer need one of my own.

  7. Tim, I too sense that the UK economy is far from sound. I wonder to what extent ‘normality’ is being assisted by PPI compensation, equity withdrawal and pension liberation? Surely injections of cash of these magnitudes must have assisted in keeping many a household ship afloat?

    • It may be affordability for some, but additionally Millenials have a clear preference for convenience, which means high on their criteria for where to live is an area that has everything easily accessible, with good public transport links.
      Additionally they exhibit moralistic attitudes and do not want to contribute to what they believe causes climate change.
      Clearly private motor vehicles do not fit with these.

    • I would think this is the best summary of the reasons. Since they built new specific bus only roads in my area I use them far more.

      The main issue has always been travel from East to West (Kent to Surrey) and back by public transport. Currently the only option is to go up to London and then back down again forming two sides of a triangle.

      As anyone who has suffered it will know that the M25 can quickly get blocked. Building a new train line would be prohibitively expensive but perhaps a designated bus road might be feasible although highly unlikely. Failing that put road pricing on.

    • When I learned to drive and bought my first car, nearly 50 years ago, it was for the freedom of ‘the open road’. And it really was that. I could jump into my car and drive from north Kent to Brighton and park on the sea front. Very little traffic on the roads and I could stop at the side of the road in any town I passed through. Over the years it has steadily got worse and worse. Now there are ten times more cars on the road as when I learned to drive and it feels like twenty times as many trucks. Driving now means the freedom to crawl along in an endless traffic jam and finally end up in a place where it costs a fortune to park – if you can find a space. Why would anyone aspire to driving today unless they have no alternative?

    • There’s only one place where the old ‘freedom of the road’ can still be found (together with an absence of speed limits and police) – and that’s in car ads.

    • Yes all other cars mysteriously disappear. Trouble is nowadays CGI is so convincing that you could well be watching a road – car and surround generated within a computer.

      In the future perhaps perfectly rendered virtual reality is where you’ll do your driving – in any era you like.

    • Hi thank you but it’s for subscribers only – you could cheat with a copy and paste. I already subscribe to three publications which I feel is enough for now.

  8. 3 blokes in a pub and Trump vs. China
    I would like to hear Dr. Morgan talk about the issue of trade, and the breakdown of such in the case of sanctions, Brexit, and the US vs. China ‘war’. It seems to me that the underlying problem is that the industrialized world can no longer generate organic growth, but must instead resort to the increase of debt. The debt is international, as the discussion by the 3 blokes talking about how ‘British’ metal really comes in as metal bars and exits as stamped metal to Europe. And explains why the Koch brothers are exercised about the value of their holdings in countries other than the US. It seems like a replay of the tariffs which the US imposed during the Depression, which most economists think only made the Depression worse. Nevertheless, the currency system can definitely be gamed. Perhaps Trump can game the system in favor of the US and reduce the standard of living in the EU and China sufficiently that the standard of living in the US can increase. Just as, I have been hearing for a decade, the Germans have gamed the EU to benefit at the expensive of, particular, the South.

    I’d like to know if Dr. Morgan has opinions on the subject.

    Don Stewart

    • A lot of different issues fall under the heading of trade wars. Too many for a quick reply…

      Germany benefits from the euro because, without it, they’d be saddled with a super-strong DM. Before Germans count their blessings, however, they need to look at Target2 balances, where Germany is owed almost 1 trillion euros, almost all of it by Italy and Spain. And the chances of collecting that are……..?

      Donald Trump seems less concerned with China itself than with tackling the ‘globalists’, the ‘Davos-leaning’ multinationals, whose preferences he regards as inimical to American interests. (This deserves a discussion in itself?)

      China is in a weak position, partly because its own model is faulty. As we discussed in a recent article, China pursues volume, not profitability, and is happy for companies to make losses so long as the national objective (volume, equals employment) is furthered. This has resulted in (a) huge excess capacity, and (b) a dangerous escalation in debt. Trump sees dumping as a by-product of this agenda.

      Finally – for now – the Depression-era comparison is apt. Protectionism gains in popularity in hard times. This is wholly consistent with the my interpretation, viz. that prosperity is static globally, and declining in the West. If you believe the conventional view – that the economy is doing pretty well, ‘synchronised growth’ and so on – then trade wars are both illogical and damaging.

    • I do not know who inside Germany is benefiting from Euro. I was in Lubeck and Berlin last week and the main high streets look as battered as their British counterparts. Lots of vacant sites with those that are still operating doing so on an “everything is a euro basis” or offering deep discounts to get the punters in. There is a lot of begging in evidence and respectably dressed pensioners rummaging through rubbish bins looking for plastic drinks bottles so as to be able to reclaim the deposit. Mrs Merkel seems to be trying emulate Ceaucescu in using her budget surplus to try and eliminate the national debt. However the infra structure is visibly crumbling away. Anybody visiting the Western parts of Germany, especially around Berlin and Hannover, can forget about driving their car as fast as they can. The autobahns are filled with Polish lorries and roadworks are everywhere as they are clearly being used beyond their capacity. In some parts you would get to your destination quicker by abandoning your motor mid journey and walking there instead.

    • I cannot say that I agree with you Bhagwan.
      The former East Germany, and that does include parts of Berlin too, does still show remnants of its socialist past, but it is getting better.
      However, move to Frankfurt, Stuttgart, Munich and you will see where the money is. Stuttgart railway Stn. was recently rebuilt, now they are working on redeveloping Munich railway Stn. Munich Airport is world class.
      Crumbling infrastructure ? – No, not here.
      Are you sure you were in Germany ?

    • try driving around the berlin ring. i would put lubeck as firmly in the West. The famous Niederegger marzipan emporium has an empty shop as its neighbour with beggars occupying the shopfront

    • Bhagwhan,
      I have not been in Luebeck for several years now, but I am sure it is not quite as bad as the third world that the UK has become.
      The increase in beggars is a Europe wide thing, you see them in all major cities from Lisbon to Vilnius and from Glasgow to Athens.
      This is the result of migration, and not the decline of their host nations.
      Most beggars select places with good infrastructure to do their begging, after all why beg on a dirty street corner in Timbuctu when you can beg sitting outside a clean shopping mall, offering clean toilet facilities, heating in the winter, and air-Con in the summer. besides, If you are in the presence of more affluent people, you stand a better chance of getting a coin tossed in your general direction.

  9. Well, there are ‘beggars’, and then there are the genuinely destitute and homeless.

    Cambridge is currently full of beggars and people sleeping in the doorways of empty shops, but I am quite sure many of them are fake and merely summer-opportunists, quite apart from the gangs run by Eastern Europeans. And if people are drunks and take drugs, the street is where they are going to end up and we can do nothing about it.

    Interesting that the Police Federation are complaining that their members are also having to resort to food banks! See The Guardian.

    Behind it all lies the property bubble, the single greatest eroder of prosperity since the early 2000’s. How much has that sucked out of consumer spending?

    Some are doing very well though: my bold Catalan cousin, 17, recently visited London with a friend and found space with Air B’nB (? I can’t spell these things) in a London suburb, where an Asian gentleman had them packed in his house, divided by nationality.

    I am sure all highly illegal and without planning permission for multiple occupancy, proper fire safety, etc…. but maybe I’m prejudiced. 🙂

    • Hi yes I read about the police too and they’re not paid badly compared to some.

      I saw a program where a rougue Tennant had converted a nice multi bedroom house into a hotel and was making £10000 a month.

      However he denied wrong doing in terms of sub letting and it took the owner quite some time to get rid of him. I think some honest landlords are poorly protected by the law even when there is blatant breaches of contract by the tenant.

  10. Clarity of Thinking
    This will be a little bit of a tangent, but I hope is consistent enough with the themes being laid out by Dr. Morgan to be relevant.

    I have just finished Skin in the Game, by Nassim Nicholas Taleb. I believe it clarifies certain systemic issues which are highlighted by Dr. Morgan and SEEDS. If you don’t want to read the whole book, turn to the last two chapters. There you will find some critical distinctions which are commonly missing in the analyses of academics:
    *Risk and ruin are different things. We should seek out risk which does not threaten survival. For example, assuming that taking a million dollars for playing russian roulette on the assumption that the expected payout is over 800,000 dollars is simply stupid…because if one repeats the experiment one’s expectation of ruin approaches 100 percent.
    *Assuming one is not a perfect narcissist or psychopath, then we are involved in risk at multiple levels: self; family, friends, and pets; tribe; self-defined extended tribe; humanity; ecosystem. ‘I am renewable, but the ecosystem is not.’ E.g., another human can be easily created, but a destroyed ecosystem may never be recreated.

    Now I would add one technical note. One’s willingness to take into account the non-self layers is probably related to age. Old people may place more emphasis on the survival of the higher layers, and less on their personal survival. This may be more related to recognition of reduced capabilities among the elderly than any increase in virtue, or it may be the wisdom to know that Alfred Adler discovered something important, or it may just be evolution of the body…we know that the microbes in the guts of old people are not the same as the microbes in the guts of young people.

    So a pivotal question is whether SEEDS presents us with a systemic threat (a ‘fat tail’) or a ‘change without a difference’. E.g., can one realistically buy insurance that, in this instance, the UK will not fall into total lawlessness? As Dr. Morgan has noted, some very rich people seem to be preparing for ‘fat tails’. So it seems to me that looking carefully at the ‘fat tail’ prospects and realistically at one’s age and circumstances are appropriate.

    Don Stewart

    • This touches on issues I’m examining at the moment.

      Put simply, what SEEDS describes is the end of economic growth, with prosperity declining in the West but continuing to expand in the EMEs. Of course, it’s up for debate whether EMEs really can continue to progress, with their Western customers and trading partners in decline. So it’s not too much of a stretch to say that SEEDS may really be pointing to declining prosperity globally.

      In itself, this isn’t existential – if we can adjust to being poorer.

      The financial system is predicated entirely on perpetual growth. As we saw in 2008, even a slowdown in underlying growth can hit the financial system very badly. GFC II is going to be a lot worse than GFC I, not least because we evaded value destruction in 2008 through “extend and pretend”. Attempting to counter value destruction by flooding the system with QE could destroy fiat currencies.

      With fiats destroyed, would we have the ingenuity and organisation to come up with something better? And can we preserve the economy itself if the financial system cracks?

    • In many ways the UK is partly lawless already: the urban scooter gangs who made the headlines make the correct analysis that their chance of being apprehended is nearly zero, and of making a good immediate profit more or less 100%.

      My elderly mother in London was recently raided by a gang of four – no violence or threats thankfully – and all her jewellery and cash (£5k+) stolen: took 10 minutes, they made thousands, and realistically no chance at all of ever arresting them

      Rural areas have effectively zero police protection, and the level of theft both of equipment -exported immediately abroad for sale -and livestock, is very high indeed. Not to mention vandalism, illegal fly-tipping, etc. There is a level of insecurity not seen for many years, and when gypsies took over the neighbouring village here two years ago, strutting about and threatening people in their homes, it demonstrated what could happen on a larger scale if the authorities grow any weaker in a financial crisis.

      The situation is so bad that the major private landowners have their own monitoring and warning system, designed to track gypsies and ‘travellers’ as they cross the country in their annual summer rampage. Now, the police should be stopping them at the ports as they enter from Ireland, shouldn’t they?!!!

      With potentially very violent fault lines of religion and race having been allowed to develop as successive governments have cynically sought to stuff Britain with cheap labour and young consumers, a sensible conclusion is that if a more stable – and less deluded – society can be found, then it is too risky to stay in Britain, however comfortable one might be now. A wise man will look around….

    • In the newspapers you will have read that many farmers have been resorting to medieval defenses to stop theft and trespass.

      I saw a program where travellers took over a small town – simply helping themselves to goods in full view of CCTV cameras and staff – refusing to pay for their meals in restaurants and claimed there were a persecuted minority when Police tried to intervene.

      I’m not sure what the Government’s going to do as real prosperity declines even further regarding crime in general. There is no money for extra police so I would guess those who can afford it will start employing more and more private security.

      As we have an aging population there are going to be far more vunerable people around – easy targets for thugs. Thank goodness your elderly mother wasn’t harmed – although perhaps we’ll see a few ‘Harry Browns’ appearing.

    • What I find worst of all is attitudes, of which three are most striking.

      The first is selfishness and greed, and the hollow belief that people’s worth is determined materially.

      The second is anger, which flows – as anger usually does – from fear.

      The third is a total disregard for others.

  11. This is a small extract from an investment article by James Bartholomew in the Daily Telegraph.

    ‘A few technical things are helping, too. The money supply is growing at a steady, sustainable pace. The high drama of the 2008 crisis is fading away along with the damaging effect of the suddenly higher capital requirements that were made on banks. ‘

    Looks like everything is ok after all.

    • HI here’s the whole article –

      Over the past three months, British politics has been in turmoil. The Foreign Secretary and the Secretary of State for Exiting the EU have both resigned. The Chequers plan has outraged a large part of the Conservative Party. There could be a leadership contest before Christmas.

      No one now knows what kind of Brexit will emerge. It could be anything from near-continued membership of the EU to trading on World Trade Organisation terms.

      In the face of all this fury and uncertainty, the reaction of the British stock market has been extraordinary. It has barely moved. The FTSE 100 index has swayed gently between about 7,500 and 7,800 since the end of April.

      It is almost as if investors don’t really think that the terms of Brexit are going to make that big a difference. More precisely, they don’t really believe that it will make that big a difference to the economy or, at least, to the companies in which they have invested.

      One of the shares in my portfolio is EI, which owns pubs. Will people stop going to the pub depending on the nature of Brexit? Probably not.

      Or take Imperial Brands, which sells cigarettes. It has subsidiaries all over the world that operate already according to the laws of the countries concerned. Some of the pattern of manufacturing and distribution might change but it will adapt.

      Group of people celebrating social gathering at the pub
      Will Brexit stop our trips to the pub? Probably not CREDIT: E+
      What politicians and political journalists tend to forget is the remarkable way in which individuals and companies adapt to and manage change. They are not chess pieces that depend on an almighty government to move them around. They wriggle. They actively seek ways to survive and prosper.

      Investors, meanwhile, tell the truth when they buy and sell. Organisations such as the CBI or the Bank of England or Amazon can huff and puff and make dire warnings.

      The stock market, though, is like a truth drug. Investors buy and sell according to how they really think, not according to what they say they think.

      It helps that the economy is chugging along quietly. It has certainly done a lot better than the dire warnings we had before the referendum. And that, too, is probably a factor.

      The reputations of the Bank of England, the Treasury, the CBI and so on are shot. People aren’t inclined to believe them any more. They have reason.

      A few technical things are helping, too. The money supply is growing at a steady, sustainable pace. The high drama of the 2008 crisis is fading away along with the damaging effect of the suddenly higher capital requirements that were made on banks.

      Meanwhile, the modest growth is not giving rise to any over-the-top investment splurge that would tend to draw cash away from the stock market. Rather the contrary. At least five companies in my portfolio are using their cash to buy back their own shares.

      And one of the biggest factors, in my view, is that shares are very clearly good value on the basis of fundamentals. Their average dividend yield is 3.8pc and rising as banks and oil companies, among others, increase their payouts. And this is not counting the share buy-backs, which may not feel as pleasant as cash dividends but which, according to logic, give us just as much benefit.

      For those looking for cash in hand, there are companies like Imperial Brands. It offers a prospective yield of 6.8pc at the price earlier this week of £28.85. Meanwhile, the redemption yield on 15-year government bonds is a paltry 1.6pc.

      I suspect that portfolio investors also draw comfort from the fact that they have been proved right. They have faced dramatic crises and been right to hold on.

      On Jan 2 2009 the FTSE closed at 3,830. I remember that there were plenty of voices, including those printed on pink paper – the colour of gloom when it comes to newspapers – who argued that things would get worse still.

      The investors who hung on have been proved right. The index is now double what it was then and there have been plenty of dividends too. The long bull market since then has also increased confidence for others who have joined in, through funds or their own portfolios.

      Of course there are genuine risks. Personally, I believe an extreme left-wing government is a far more worrying danger to investors than Brexit. But for the time being I think the thing to do is keep calm and carry on investing.

    • Reflecting on “Brexit”, I am staggered by the incompetence displayed over the whole process.

      At the start of 2016, there was an EU summit at which all member countries, bar one, wanted to discuss (a) the economy, and (b) migration. But David Cameron diverted the summit from these matters of shared priority to an issue of interest to nobody but the UK. This was the demnd for “reforms” to pacify either UK eurosceptics, or (more probably) eurosceptics within his own party.

      Not surprisingly, the others gave him nothing. He then called a referendum, apparently thinking he would win it. If he had, the UK would have remained in the EU, but with a much weakened negotiating position.

      The result left a government – soon stripped of its majority, and comprised overwhelmingly of “Remainers” – to negotiate “Brexit”. It’s reasonable to say “their heart was never in it”.

      The UK does not have separate trading arrangements with anyone. Like other members, it has, only, a share in each of the EUs trade agreements. “Hard Brexit” really means leaving without these – or, therefore, any – trade agreements at all.

      But why? Using the “divorce” analogy, these agreements are surely “communal property”, belonging to both parties, not just one. It would have made sense for the EU to assist in creating parallel agreements between the UK and third-party partners to these agreements. Two years, used properly, should have been sufficient time for this purpose. This isn’t simply a matter of generosity or magnaminity on the part of the EU, because EU countries, too, will suffer if “hard Brexit” (perhaps we should say “adversarial Brexit”) happens.

      Finally, the UK has acted on the apparent assumption that its economy is in good shape – but it isn’t.

    • Excellent news. It seems that all we need to do is create lots of money and everything is fine!

  12. Apparently this was broadcast on LBC yesterday –

    ‘Ian McCafferty told Iain Dale that the households of U.K. were on average wealthier than ever before’

    Has anyone ever read 1984?

  13. Not just a problem using average asset wealth due to housing stock, the whole business of quoting averages is deliberate and poisonous spin. If I earn £20k and you earn £180k our average income is £100k. Great news for me – apparently! Also good news for you as it plays down the inequality of our relative income. It’s very irritating the way cosy interviews these days don’t challenge the spin or examine the data from which such assertions are drawn. Way too clubby and sloppy.

    • Good point and if those on £180k get say a 4% rise (higher earners tend to get bigger rises) then the average goes up despite the fact that those on a lower salary may only have got say 1.5%.

  14. The Numbers Look Great!!!

    As I indicated, I have just finished reading Skin in the Game. Rather than debate those who argue that all the numbers are looking good, I propose a simple sanity check. Look at this quote from page 15, and the preceding discussion which provides the context:

    ‘Systems learn by removing parts, via negativa.’

    And the footnote explains: ‘Via negativa: the principle that we know what is wrong with more clarity than what is right, and that knowledge grows by subtraction.’

    Taleb argues that advances come not by convincing people of the error of their ways, but through the elimination of those who make the errors.

    If your experience, or your studies of evolution or dietary health or physical fitness (e.g., eliminate many of the ‘labor saving’ devices) convince you of the reasonableness of the via negativa principle, then ask yourself:

    Would the people who have created the current ‘looking good’ financial statistics still be around, with power, unless the governments of the world had rescued them (meaning transferring risk to the taxpayers)? If the answer is ‘No’, then you have probably learned something. Which leaves you to ponder whether the governments can perform the same trick with several multiples more exposure (from SEEDS data). If you think they can, you will behave a certain way. If not, you will behave differently, but in an idiosyncratic way of your own choosing. In either case, unless you are Too Big to Fail, you have skin in the game. Except that, maybe, this time everyone will have skin in the game.

    Don Stewart

    • Well Trump is largely to blame but perhaps he wanted to make his fracking industry profitable although I’m not quite sure what the break even point is.

  15. It’s correct to point out that a sensible Brexit plan could have been arranged over the last two years, avoiding damage to both British businesses and those in the EU.

    But it is equally clear that Brussels, bearing in mind the very close vote, and knowing full well the divisions in the Conservatives, let alone the country at large, are intent on provoking a crisis, by stone-walling, which will bury Brexit, just as they have always sought to over-turn unwelcome referendum results.

    It’s lamentable; but am confident that believe that Hard or even Soft Brexit will not happen, that it will collapse.

    Macron admitted that a referendum on the same issue in France ‘would probably have the same result’, so it is vital for Brussels to make it clear that there is indeed No Exit.

    The Hard Brexiters are entirely delusional about the strength of the British economy, that is very clear: are they blind, not to see even the now daily headlines that confirm the weakness of consumption among the mass of people, and the terrible damage that the grotesque property bubble has caused?!!

    • In or out the problems in the Uk and in the Eu remain un-addressed I think Karl Bildt got it about right in this article in Project Syndicate. “More Europe, Less Brussels” he is very damning of the Charlemagne Mafia too.

      The European project can be renewed only if those who support it move away from the limited Charlemagne-inspired vision, stop talking about “old” and “new” members, and demonstrate in words as well as deeds that they are open to ideas from every part of Europe. The EU will not work unless all member states are regarded as equals in determining a common future……..
      The era of Aachen is over; the age of Bratislava has arrived. We need more Europe – and less Brussels. If we embrace this new model – and stick to it – the EU will not only survive; it will thrive.

      I have many political differences with Carl Bildt but on this he is correct, A green PArt Wag opined back at the time of the shock result of Brexit. “Brexit imaginary Solution to real problems” Same goes for BRINO but of course the EU Commision and its 5 presidents report in response to Brexit was a huge Head in Sand cop out.
      Frankly, discourse on the subject remains abject and most writing is risible.

    • Although I agree that Brexit has so far been handled with galactical incompetence I don’t agree that it will be fudged into BRINO. People are already up in arms about the Chequers plan but, even if we parted company on the basis of that plan (unlikely) I don’t think that would be the end of it. When the extent of vassalage became clear there would be huge pressure to reopen negotiations.

      Now you may say that if you reach an agreement with the EU then we will be obliged to keep it but the EU already has a record on this; see this:


      I actually think it makes little difference as I think there will be a crisis with the Euro which will tip the EU over and that it ten years time it will change utterly; the UK economy is certainly weak but it has some very good company.

    • Now that we’ve addressed critical issues masked by the “Brexit” distraction, I might take a look at “Brexit” itself here.

    • Be careful Tim as it may drive you mad. There doesn’t seem to be any perfect solution as any option taken will either upset trade – upset one group of voters and politicians or everyone.

      It seems if we go for a hard Brexit then the EU will punish us in some form or other. The whole thing makes me feel that the majority of politicians are deeply immature and unconcerned of the consequences on ordinary people.

    • You are certainly right about that!

      What I aimed to do in this article – well, nobody else is doing it – is to look behind the “Brexit” distraction at what’s really happening to the economy. “Brexit” is important, obviously, but there are other issues, not just in economics and finance, but in politics and society as well.

      What I see is truly astonishing. You don’t need SEEDS to understand that the economy is crumbling – there’s comprehensive ‘conventional’ data pointing to the same thing. There are, clearly, other issues as well. So, what are politicians doing? Having a bash at Boris Johnson. The media? Johnson, and Ben Stokes.

      Meanwhile, the UK has a pro-Remain government trying to negotiate a “Brexit” that they don’t believe in. I’m not sure if they are (a) trying to make it a disaster out of pique, (b) trying to stop it happening, or (c) just monumentally incompetent. The whole issue only arose in the first place because the EU wouldn’t give Cameron enough ‘reforms’ to quell internal dissent within his own party!

      I now see no way out of this mess. I’m neither pro- nor anti- about “Brexit”, but it is not hyperbole to say that this process could wreck the British economy (and, incidentally, the Irish economy as well). Some time quite soon, GBP could fracture.

    • Tim I’m surprised that they’re not some Brexit entrepreneurs offering shelters to protect British citizens from the fallout – I certainly remember stuff for SkyLab being sold.

      Even the Telegraph is aware of the danger now and appears to have swung slightly away from Brexit although I doubt the Daily Mail and the Sun will stop spouting that Brexit will lead to paradise – perhaps lucky Sun readers will find Rebekah Brooks waiting for them there.

      The EU is determined to stick to their ‘fantastic’ model so I doubt we’ll get any concessions at all. It seems both sides want to hurt the European economy through their intransigence.

      I find the whole debacle deeply upsetting – if I were in charge I’d cut my losses and call the whole thing off. There are simply too many uncertainties in World trade at the moment to take risks with the battered UK economy.

    • ‘Brexit’ is just a consequence of prosperity in decline. Whether it will happen or not is not the question. The question is; what does the exponential function of ‘Brexit’ look like?

      We’re out of growth, ‘Brexit’ is a sneeze on our way to Ice Age.

  16. Don, you noted:

    “Taleb argues that advances come not by convincing people of the error of their ways, but through the elimination of those who make the errors.”

    This jibes with Max Plank’s famous observation that “A new scientific truth does not triumph by convincing its opponents and making them see the light, but rather because its opponents eventually die, and a new generation grows up that is familiar with it.”

    Taleb’s formulation is more disturbing because, by phrasing it in terms of eliminating those who make the errors, he also captures the prudential logic of applying the guillotine to those too strongly wedded to a sense of entitlement to their perquisites, to the material detriment of society at large, or of “revolution” in general. Although, with regard to government rather than science, see contra, the Who’s also justly famous and well-supported observation, “Meet the new boss, same as the old boss.”

    As further heightened appreciation of Taleb’s particular phrasing, contrast “elimination” with an alternative means of dealing with error – the Amish concept of “shunning.”

    Although Planckian die-off seems to be the normal way societies adapt, the Overton Window being pretty much a straight jacket that takes decades if not generations to change, I seriously doubt that the dual crises of climate change and GFC II will permit humans the luxury of one, two or three generations for new ideas to take root and be applied in society at large, while we wait for the Boomers to relinquish, via natural die-off, their vice grip on politics, government, universities and business, and their idees fixes to slowly dissipate and release their grip on the minds and hearts of their children now living.

    In short, I suspect that the mythology of human adaptability is about to be sorely tested and its meager limits – rooted more in opportunism than actual adaption – exposed.

    • More traditional, pre-industrial, societies almost universally valued the ability to endure – including the facing of certain death unyieldingly if still a warrior culture (and as was still exemplified by the British units who in the true Anglo-Saxon way fought to the death where they stood during the German Spring Offensive exactly a century ago) – and certainly didn’t subscribe to our comforting adaptability (and innovation, innovation!) myth , as you say.

      And so, with endurance, in time adaptations could occur.

      I also think that we tend, urbanised and stagnant as we are, to neglect the role of mobility in human group survival.

      Who escaped the Mongols most effectively? The Mamluks beat them in battle once, only to be thoroughly hammered later, but the Turkmen simply rode away and later displaced them as rulers of Persia.

      In a long journey away from danger and collapse, endurance came into its own, as much as in battle or famine.

      The English, as they were to become , came to their island at a time when they were ‘being bought and sold like sheep’ on the Continent, and the archaeological record indicates, from bone analysis, great hardship.

  17. https://www.quiz-maker.com/QYMG3AR #quiz I digitised this quizz some time back based on the Farrady positive money PDF I would be interested to hear how commenters here and indeed our Host Score on the quiz, a shorter one I did originally has been taken nearly 30,000 times.

    Positive Money had MPS take the short quiz the ignorance revealed is quite indicative of the Kakistocracy bineath which we endure.

    • Roger I only scored 18. I found some of the questions needed a University Challenge type knowledge although I was ‘sucker punched’ on about 4 of them where the answer seemed too obvious.

    • Hi I didn’t see the other results but my result had a caption calling me ‘Awake’. I still felt deflated though mainly because of the sucker punch questions I fell for.

      It was an interesting quiz but my real strength is in pop music of the 60’s 70’s and 80’s. A former girlfriend dragged me to a Pontins holiday camp (featured on a consumer program later because it was dirty and falling apart).

      We won the music quiz ahead of some formidable silver haired opposition. The prize money was great – but better still was the bottle of special Pontins’ wine – quite frankly it was probably more toxic than Novichok.

    • I got 21. Hardly top of the class stuff,
      but I felt that some questions were unanswerable, almost like asking an opinion as opposed to a factual question.

    • I got 25, but I still don’t feel I really understand the subject well enough to convince a sceptical ‘man on the street’…and I have tried a time or two 🤔

  18. Pingback: #131: Not about “Brexit” – MUSO MUSINGS ON FATHERHOOD THEORY AND STUFF

  19. For those contemplating Skin in the Game
    Page 41: ‘Whenever there is a mismatch between a bonus period (yearly) and the statistical occurrence of a blowup (every, say, ten years) the agent has an incentive to play the Bob Rubin risk-transfer game.’

    Don Stewart

    • Risk transfer is every 24h between the knows and the ‘working class’. A real shame. Backlash after 2x 10 years in declining prosperity.

      War when both become desparite.

      When chewing gum becomes tasteless, it becomes other peoples burden.

  20. Dr Morgan – last July you posted that anyone looking for a single lead- indicator for the next crash could do a lot worse than watch the value of sterling. The comments are now inaccessible, but I recall someone asking you for more detail and you replying that sterling v euro would be a good one to watch. Is that still your thinking, or have you revised your view in light of other deteriorating circumstances since then?

    • Yes, GBP/EUR is still a good one to watch.

      The biggest national economic risks now are the UK and China.

      The rate at which the British economy is deteriorating has accelerated.

      The risks implicit in China’s debt binge, though somewhat belatedly recognised by Beijing, cannot now be countered, because of changed international circumstances.

    • Look at the Turkish lira.

      Emerging markets collapse. Attention away from GBP. For now. We are being played. The fun starts this autumn indeed.

    • I’m going to book a holiday in Turkey for next month. What a bargain !
      Hopefully I can get to Ephesus, Pergamum and Capadoccia, and to crown it all they actually have good beer there too, ( Efes pils ) !
      But on a more serious note, this crash of the Lira is being engineered politically and is not the result of economic weakness. ( The Rouble is also down, but I still have faith in its resurgence. )
      With the current fragility of the world economy, I’m not sure that it has been very wise of Mr. Trump to launch his trade wars at this time; but then again maybe he is just setting fire to all the brush wood lying around so that eventually a new economy can grow out of the ashes.
      As they say,”people who live in glass houses, should not throw stones”, so maybe the USA / UK should not be too glee-full at the fall in the TRY and the RUB, because this may be the start of something much bigger, that will eventually come back to bite the USA ( and the UK ) in the bum !

    • Agree about the RUB, but the lira crash seems to be market aversion to a regime in Turkey which doesn’t exactly fill me with confidence, either. I’ve expected something like this ever since the election, and recent pronouncements by Erogan only confirm this.

    • Dr. Tim,
      I have been doing some remedial homework on Turkey, ( lot of interesting articles over on ZH on this subject ). Of course, after the event everybody is wiser.
      I must confess it was a country not really on my radar, so I never bothered to get into detail about it. You obviously have your finger more on the pulse here and your summation would again appear to be quite accurate.
      Thank you once again for the ongoing education.
      What does bother me now is, what kind of blow-back will there be from this ?
      Especially with regard to Europe. Mrs. Merkel & Co. have been paying Erdogan to stem the flow of refugees. How will Erdogan use this crisis ?
      Forgive me for being out of context with the theme of this article, but this issue has all of a sudden become Newsworthy.

    • I added Turkey to SEEDS some little time ago, partly from concern about the direction of things.

      What’s happening there is tragic. The secular state built by Attaturk from the wreckage of the Ottoman Empire had been both a success and something to take pride in. More recently, according to SEEDS, the Turkish economy had been doing pretty well, with prosperity improving. Additionally, Turkey looked able to leverage the importance of its geographical position, and its membership of Nato.

      So, before the consolidation of power by Erdogan, things looked pretty positive. Now, though, loss of faith in the lira makes disaster almost unavoidable. For Turkish businesses, banks or individuals, with debts in, say, USD or EUR, debt service has become impossible, let alone repayment. This suggests default may now be inevitable.

      This has wider implications for banks – especially in Europe – and could be a new twist to the issue of migration, both through and from Turkey.

    • Hi I take it the US wants Erdogan out? Or at least its Pastor back (the destruction of a country and fallout over all of the EU seems a pretty high price to pay)

    • Even those who ritually blame the US (and/or Mr Trump) for everything cannot credibly claim American responsibility for this. The Turkish crisis is home-grown – and so tragically unnecessary.

    • Well remember they have Allah on their side – when economic policies fail it’s always nice to know you have a safety net.

  21. I’m very pleased to say that Turkey is in NO economic trouble at all so all of you can throw away your economic theories and analysis. Here is a statement :

    Mr Erdogan urged supporters not to worry, saying that while overseas investors had dollars, Turks had Allah.

    There – if you have Allah on your side your economy is fine. Mrs May take note.

    • Well, there is that, Donald, so what can possibly go wrong ?
      Maybe we can get Allah to take a look at the UK economy while he is at it ?

    • Johan although Allah has the power over all things and has Universal greatness – the UK economy foxed him.

      Things are looking bad….

    • I think we’ll all need a sense of humour for the Autumn –

      Over the decades there have been certain years that have left me feeling worried

      1973 Oil shock – strikes – 3 day week
      1992 Leaving the ERM and sterling’s crash
      2008 Pure horror
      2018 TBA

    • I’d emphasise that autumn has, for me, been a hunch, as it cannot be a calculation.

      SEEDS says that GFC II must happen, but it cannot say when.

      This said, potential catalysts are building up:

      – China
      – Brazil
      – Turkey
      – Other emerging economies
      – Britain (and Ireland)

    • Tim,
      I do not recall reading your analysis of Brazil.
      I am bidding on a 3 year petrochemical plant maintenance contract there so would appreciate your insight.

    • Brazil is in very deep trouble, mainly through corruption, lawlessness and social breakdown.

      The country is in the fifth year of seemingly relentless economic deterioration.

      A recent poll suggested that, despite the failure of military rule in the past, a majority of Brazilians would now favour it.

    • Thanks Tim.
      If you were to fix prices in a currency, which would you choose?
      Clearly BRL is undesurable, and GBP isn’t much good either. I guess it leaves USD or EUR, but can’t choose between them.

  22. Everything is relative; sensations of pleasure and pain, heat and cold, and even economic disasters.

    For instance, my market collapsed rapidly in 2006, having been declining since 2004 due to the accelerating US downturn (the biggest market for antiquarian books). So, in 2008-10, I barely noticed anything at all, being already very deep in the nasty stuff.

    Similarly, things started to go discernibly wrong once more in early 2014: therefore, seeing what was possibly coming at the general level – and probably worse than 2008 – I started to prepare and modified my behaviour accordingly.

    So with greatly diminished expectations and highly solvent, I won’t notice the next hit very much, I am sure, unless it’s a real water and electricity cut-off, mass civil unrest kind of disaster. But even that I am prepared for – mentally as much as anything else. And if it very bad, you will simply die a bit sooner.

    I must stress mental preparation as much as financial and material: without that one sinks very quickly indeed even if there is just enough money.

    I am immensely grateful for the horrid experiences of 2006-10, as now my attitude is pretty much: ‘So, you think that can scare me?!’

    Some things are very simple: for instance, the first time round I had only the normal range of urban clothes, designed for a fully centrally-heated life – hopeless! Now, I have a large wardrobe of thermal outer clothing, shooting socks, hats, etc, nearly all acquired in online sales – top-range stuff but bought at 50-75% discounts.

    Believe me, if you are worried about not being able to pay bills in the English climate, or there are extended power cuts, in the graveyard-damp winter, then such clothing will greatly improve comfort, health and also mental resilience, and the money saved can go towards lots of good warming food and drink.

    I am just now spending a lot on even more self-installed wall and floor insulation – house insulation is lamentable in Britain: I can do this as I saved like hell since 2010.

    As decline sets in, there will be lots of useful stuff to buy online as discounts kick in to clear stock: use them! Online sales are very much better than high street ones, as the stock is genuine, not ‘bought in’, and they can cut really deep to shift stock, above all when seasons change.

    My other tip: get to love porridge. The most filling 100% British dish! 🙂

    • All good advice, Xabier.
      It all points towards a much simpler way of life for all of us, if of course the government allow us to lead it.
      Look out for government re-settling of “more needy” people into your well insulated house. Look forward to your accumulated and hoarded resources being redistributed to the “more needy”.
      When the UK does eventually break down, it will resort to the oppression of its citizens to try to continue. It will become a Police State, serving the English Elite.
      Thousands upon thousands will be imprisoned on a whim.
      Wealth confiscation ( except from the 1% who will be protected ) will be the order of the day. banks will close, your account balance will be “bailed-in” and you will receive a ration book for food and clothes. Gas and electricity will be on an ad-hoc basis, some days you get it, most days you don’t.
      Forget your civil rights and freedom of speech, you never really had them anyway.
      My advice ?
      As well as aquiring a liking for porridge, learn to speak some Russian and try to escape to there while you still can. It might not quite be the “Land of the Free” over there, but as you said, – everything is relative !

    • Interesting remarks, and I’m very pleased to hear you’re ready.

      I would also add the importance of having at least 3 months bills in cash, perhaps some USD and/or EUR bills, and gold sovereigns as well for good measure.

      There will likelybe plenty of things being sold cheap, by both businesses and consumers, so being liquid will put you in good position to take advantage of this. I bought a beautiful diamond at Bonham’s during summer of 2008 for a fraction of what it would sell for a year later.

  23. The current civilisation lifes on the yit-surface of a big bubble. Inside the bubble there is nothing but hot air.
    When it pops humans will fall very deep. Threre is no layer of subsistence for our rescue. So very few will make into 2030. We get our food from the shelves of supermarkets not from an independent farm next door.
    What happens, when the shelves are empty?

    • El Mar: most of us die, rather rapidly.

      And of course, we are tagged and numbered at birth, and governments can, with emergency legislation, take the roof from over our heads, the clothes from our backs, and so on, at any moment – see WW2.

      ‘You only possess what you cannot lose in a shipwreck’, as the old Persian proverb has it.

      And what is it that you possess, then?

      Your Soul.

      Voltaire advocated cultivating ones garden: very good, indeed excellent , advice, but that too can be lost in a moment.

      Old legends tell us that the Soul can only be lost to the Devil by consent, not theft. Something to ponder perhaps?

  24. Beyond the Crash
    Here is an essay from The Guardian which I don’t think I have seen referenced here:

    The thesis is that the most powerful people in the world in 2006 thought that politics had become irrelevant…the real moving force was markets. That the crash of 2007-8 destroyed that illusion….markets are far too fragile to steer the world anyplace useful. That national governments, and particularly the United States, took desperate action to restore things to the way they had been. The City of London, seeing its reason for being eroding, gambled on China.

    Now for just a few brief comments reflecting my views. I see Donald Trump as a traditional empire builder. Having built a financial and TV personality empire, he now wants to bring back the American Empire which existed from the end of WWII until globalization really got going around 1990. The American Empire USES markets to manage the global empire, but there is no denying that it is the interests of the American Government that is foremost. Besides military dominance (hence, a new ‘space weapons’ initiative to offset the Russian attainment of MAD capability with a new generation of weapons), the next most important objective is market dominance. And for market dominance, one needs to maintain the sacred dollar reserve currency. With political control of the reserve currency, and global supply chains, one can force other countries to toe any arbitrary line that Trump, for example, wants them to toe. Other Presidents have used crude military force to crush people like Gaddafi who tried to de-dollarize. Trump may use the same crude force on Iran. His approach to China and Russia will be different. With China I think he has identified the crucial weaknesses in China (the big dollar reserves, the need to keep expanding employment) and will exploit those.

    Consider Russia. After the amicable meeting in Helsinki, it becomes apparent that Russia is continuing to de-dollarize…they sold all their Treasury holdings. So Trump has to strike back. Nobody actually believes the Russians would so inexpertly poison a former spy, and the sheer stupidity of that explanation for new sanctions is a message to Putin that de-dollarization will not be tolerated….remember how Gaddafi ended up!

    I have no idea whether the author’s speculations about the City of London are correct.

    Don Stewart

    • This is interesting. My own view is that markets were already being subverted by 2008, and that free market economics/’capitalism’ were abandoned during GFC I. Even before 2008, there was a noticeable lack of willingness to underpin competition by tackling over-large players. Since then, this has been compounded by the nonsense of trying to claim as ‘capitalism’ a system without real returns on capital. Left to their own devices, market forces would have wiped out many influential erstwhile advocates of “the market”.

      I’m not sure that Cameron really had a ‘China strategy’ – to me it just looked like grovelling to anyone with lots of money, many of whom happened to be Chinese. Signing up to IIDB – China’s rival to the World Bank – certainly angered Washington intensely.

      I see Mr Trump as an American nationalist with isolationist tendencies. He regards globalizers with hostility, believing their loyalties lie with Davos rather than America. Much is said about how tariffs will damage China – but I suspect Mr T has others in his sights, those corporates which, in pursuit of profit ‘without patriotism’, manufacture in China rather than at home.

    • Re. the City, my general belief is that any financial system which grows too big in relation to its home economy becomes a risk.

      In 2008, this described Iceland, Ireland, Cyprus, Dubai and – in stand-alone terms – Scotland. Now it describes Ireland (again), Britain and the Netherlands, amongst others.

      Close financial involvement with China was already making less and less sense, as Chinese indebtedness soared. Tariffs could crystalise that risk.

    • The article states that U.K. banks are considerably more heavily invested in China than EU or US banks, and concludes this means the UK will be the first western domino to fall if a China meltdown occurs.

      So by combining the U.K’s exposure to China with Tim’s dire prognosis for the U.K. economy, it seems likely it will be at the centre of GFC2.

    • What is difficult to understand with the banks is that they are never bought to book for their egregious criminality. There are constant reports about money laundering, misselling, manipulation of markets and this conduct goes relatively unpunished and, in the meantime they continue to leverage themselves up to the point where a puff of wind will cause a crisis.

      This has to be apolitical failure; it is not an economic one.

  25. Dr. Morgan
    Let me just suggest one thing to you for you to think about. Somebody put together an article about Dover, and its role as the gateway between Europe and the World and Britain. Somebody there calculated (and don’t quote me on the exact figures) that if each incoming truck is delayed 5 minutes by new red tape, then trade will grind to a halt.

    Now…suppose your real goal, whether you can articulate it or not, is to be a Roman Emperor ruling from your estates (Trump Tower, Mar-a-Lago, Bedminster, even Scotland, etc.). That strength, but also choke point, called global supply chains is one of your strongest weapons, provided you can force everyone into the same system and keep iron fisted control of the choke points. I admit that this is Mafia thinking, and far be it from any Christian American to harbor such thoughts. Of course, it has always been accepted in the best religious circles that the rich can buy indulgences.

    Don Stewart

  26. One more thought about Trump
    The world is entirely too complex to be ruled by arbitrary fiat. An emperor needs lieutenants he can trust to do the right thing, given the right incentives. There is a current article by a woman who has worked directly with Putin from the standpoint of an American non-profit since he was an obscure bureaucrat in St. Petersburg. She portrays him as just about the exact opposite of his portrayal by the American Media: honest, hard-working, intelligent. Now Putin is just the sort of guy an Emperor would like to have in charge of Russia…provided he doesn’t get any ideas about de-dollarization, Mutual Assured Destruction, robust payment systems which do not need American banking, etc. The current leadership of China looks OK provided they understand the necessity for reducing the trade surplus and also forget that nonsense about next generation technologies. It was those next generation technologies, coming from Asia rather than the US, that really got the attention of the Deep State.

    It’s hard to imagine any true religious leader in Iran being a trusted subordinate. And Trump seems to have turned the religious fundamentalists in Saudi into ordinary kleptocrats.

    When Trump barks, Europe complains but doesn’t actually do anything. Ron Paul can exhort them to ‘show some backbone’, but it’s hard to envision that actually happening.

    IF the game is being played roughly as I outline, then what appears in the media is mostly sideshow.

    Don Stewart

  27. As for the lecture circuit and interesting and lucrative opportunities for politicians after leaving office, a friend met a former Blair minister at a rather exclusive art event, looking ‘very sleek and well-to-do, the way people, do when they are making a lot’.

    Having said that he was enjoying being out of politics immensely, he volunteered:

    ‘You know, I was never a Socialist’.

    How surprising……

  28. Asia-Pacific; China; US

    Plenty of data here to ponder the debt situation, peak oil, and political conflict. Note the US flying the bombers toward China and China conducting drills for shooting down bombers (near the end of the article).

    The bottom line is that production has been declining while consumption is marching steadily higher. With global production relatively static, that means they have to take from somebody else.

    Don Stewart

    • I know there’s a lot of oil in Venezuela but unsure of the amount of new investment needed to get production back to normal again even if you could find a way past the political and social mess there at the moment.

    • Another thing Don – the UK and he US has been seling huge gas guzzling luxury cars to China so that the new class of well to do people can sit in massive traffic jams.

      If China had kept to mainly bicycles I wonder how many barrels of oil a day would be have been saved. (Of course no one has any right to suggest that they should of done although scarcity of oil might dictate that they’ll have to revert to them).

      I feel that unpleasant things (even more so than now) are going to happen in 2020.

      I will restate a previous post and say that the UK must maintain close links with the EU trading area not the least because goods don’t have to travel so far and the energy costs of importing from overseas locations might become prohibitively high.

      I think these transportation energy issues transcend ant political concerns.

    • Keegan posts articles like this every week. In my view Brexit was always going to be difficult and what Keegan says in the article about those difficulties is correct but is not a reason for condemning the enterprise. Brexit is for at least 40 years and what we do for those 40 years is up to us in no small measure.

      What I find difficult is that Remainers implicitly assume that the EU will not itself change. I believe it will disintegrate and the next crash will potentially provide the coup de grace to the Euro and that will accelerate the breakup of the whole EU. As Tim says we’re really all on the slide but I think it will be helpful if we are clear of a dysfunctional, protectionist bloc that is the EU. At the end of the day we are part of Europe and we will be involved in its future come what may; inside the EU or outside.

    • Ultimately, “Brexit” is what I call a “situation”, not a “predicament”.

      Let’s distinguish here. A “predicament” (like rising ECoE) has an inbuilt outcome. But a “situation”, like “Brexit”, is something that’s not, necessarily, predetermined to be either good or bad (for any participant). Rather, a “situation” is what the participants make of it.

      The question then becomes: will the participants make the best or the worst of the “situation” that is “Brexit”?

      So far, the signs are depressing. The British side are floundering. They don’t look committed to the object (as most never wanted “Brexit” anyway), and their lack of ability, or even of simple judgement, is striking.

      The EU side are almost as bad. They see the whole thing confrontationally, whereas the best outcome for them is a smooth and amicable process. Yes, they don’t want to set a precedent – but is the avoidance of precedent worth the price that the EU will pay for a disastrous outcome?

      To amplify, a disastrous “Brexit” might indeed deter, say, “Italexit” or “Frexit”. But what then happens if the EU countries’ prosperity worsens as a result of this? All that happens is that the EU gets the blame. And does anyone in Europe, or even in Dublin, understand what this could mean for Ireland?

      Moreover, with trade wars likely to cause damage across the world, is there any sense in starting another, local one, across the English Channel?

    • Like many I’ve grown weary of all the bickering – bluffs – counter bluffs and just want a mature outcome to Brexit. It’s pointless writing to my MP as all I’ll get is a generic reply or no reply at all (so much for democracy perhaps it should be renamed as a copy and paste democracy)

      Apologies of I’ve mentioned this before but there was an action drama made in 1974 called ‘Juggernaut’ starring the great David Hemmings – Richard Harris and Anthony Hopkins.

      At a simple level it was about an ocean liner with a bomb on board – lurching from one crisis to another with political argy bargy going on in the background – but it was actually a metaphor for the UK economy of the time

    • With the Tories squabbling about the burkha and Labour squabbling about antisemitism politics gets more surreal with every day that passes. I really do wonder if these clowns ever do stop to think for a moment how these antics look to the vast majority outside the bubble?

  29. Xabier: Sure, something to ponder and to avoid to lose the soul to the devil in consent:
    el mars`s dozen against the devil:
    1. be friendly and in good spirits, study everything in depth
    2. Self-criticize, be peaceful but fortified
    3. think small, live small, slowdown, meditate
    4. buy local, save resources,
    6. grow own food
    7. learn some skilled manual work
    8. cooperate with like-minded people, barter and help each other
    9. reject ideology – hang on to your intuition, avoid pied pipers
    10. avoid mass consumption and stimulus satiation
    11. fight the powers that be – but in an indirect aikido way
    12. help others to awaken from the cultural trance
    el mar

    • I can only concur, El Mar.

      It is curious that old tales and legends -which I take more seriously than MSM – are unanimous in saying that goblins, trolls, witches, demons, ghosts,giant, ghouls, divs, etc, can grab you at any time and cause trouble, but that the Devil can only take your Soul as a result of an agreement freely entered into.

      I’m paying particular attention to cheering people up, and to shopping locally at good local shops owned by nice people not corporations T- not many left though!

      And, thinking of myself, I just bought two exquisite paintings from a struggling Iranian artist of talent, (awarded a prize in Teheran by the mullahs, but there is no work for her in Iran) which will cheer ME up if things get worse.

  30. For those who missed the ’60’s, but can still enjoy the current Bubble of Delusion:

    Spend your fiat while you may:

    Bad debt is still a-growing;

    And that Pound which shines today

    Tomorrow will be plunging…….

    (Apologies to the shade of, I think, Robert Herrick – best version sung by the divine and incomparable Emma Kirkby).

  31. I’m not convinced by the ‘The EU will collapse, quite soon, therefore Britain had best be outside rather than in when it happens.’

    Even outside, given trading patterns and food dependency, etc, that crash must have profound effects on Britain.

    All academic, I suspect, as Brexit is clearly on the way out.

    Brussels plays with fire, true, but their great bluff will probably work.

    • @Xabier

      Organisations like the EU don’t “collapse” meaning a sudden incident.They crumble at the edges and gradually lose legitimacy.You can already see this with the formation of the Visigrad grouping in EE and the Italian elections.

      I have never thought Brexit an easy option: it isn’t but I also believe that the EU is way beyond its high point and will change almost beyond recognition in the next twenty years. I cannot say that some sort of overarching political/economic arrangement among the European powers would not be advantageous (after all we have had NATO for 60 years) but it will look nothing like the EU and it’s quite possible that we will be part.

    • If one has the point of view that prosperity in Europe is deteriorating whilst risk increases, certain political processes logically follow, and are already in evidence. As discontent increases, incumbents retreat into the denial of a latter-day Versailles.

      Italy already has a “populist” government. Much of the eastern EU is heading the same way. Recent polling puts support for both Macron and Merkel at record lows. The British political class looks determined not to deliver what the public (rightly or wrongly) voted for as “Brexit”.

      Actually, the better historical precedent might not be 1789, but King Canute (Knut) trying to turn back the tide.

  32. turning back the tide
    My question will reveal the depth of my ignorance about the EU. But if any Europeans want to give me a clue, I would appreciate it. It seems to me that the EU is mostly about regulations…about migration, tariffs, food safety, auto safety, air quality, etc. But it also seems that breaking up the EU is catastrophic in the short term, simply because of the way supply chains have adapted to the rules and regulations promulgated by the EU. Destroying the EU would destroy the supply chains.

    A ‘populist’ revolt is more likely to be centered around subjects such as austerity, and perhaps migration or the handling of refugees. The EU has only one tool to deal with austerity, and that is the European central bank. The EU can dramatically revise its stance on refugees, just by listening to the anti-refugee wishes of its constituents. But dealing with declining prosperity, other than by creating ever more debt, is something that the EU cannot do. So it cannot deal with the anti-austerity mood of the population.

    Which leads me to the conclusion that a European population absolutely determined to deal with austerity will have to explode the supply chains and probably default on the debts. A lot of chaos, in other words.

    Don Stewart

    • In Germany, the EU is seen in general terms in a very positive light. This is because everybody has got a job, is earning quite well and the infrastructure up and down the country is relatively good.
      That the Italians, Greeks and Spaniards are struggling, that is due to their own lackadaisical nature, and their unwillingness to knuckle down and get the job done. Yes, I know – nationalist stereotyping is very un-PC, sorry about that, but it is how people think. ( not me of course, I am very PC ! )
      The biggest issue here in Germany is immigration.
      Sure, it is off the headlines of all the mainstream media outlets for now, but it is foremost in the minds of most people. The authorities have tried to mask over the problem, but the problem has not gone away.
      The AfD party are continuing to make gains in the polls, and Angela Merkel is very unpopular. The main issue is that politicians are talking about reducing the number of immigrants, while the people are discussing ways of repatriating 99% of them. That is how “out of touch” politicians are. The government need to increase the population so that it can increase its GDP. They need more consumers to keep the numbers up !
      However, where the German people are out of touch is in believing that their prosperity will continue for ever, and that they are masters of their own destiny. Little do they understand that the GFC-II is going to pop their bubble too !
      They are far to smug and comfortable in their little bubble world, truly believing that their own hard work is the only reason for Germany’s prosperity, and that an undervalued Euro has got nothing to do with it.

      I can see in a few months that Mr. Erdogan will close the Incirlik airbase, leave nato, and will open the flood gates for Syrian refugees into Greece and on into northern Europe.
      The AfD are going to have a field day !

    • Immigration, perhaps even more so than (accurate) perceptions of declining prosperity, was certainly behind much of the pro-Brexit vote, although much of this is sotto voce.

      And it is arguably the reaction to Austerity and generational inequality which may bring Corbyn to power, although he is cutting a poor figure of late and a subject of much, very crude, press vilification (and also treachery) in his party – I have seen a hint that former Blairites are hoping his health may give way, being so elderly.

      My step-mother is an anti-Austerity politician in Spain, currently in power in her region, and I shall be interested indeed to see what happens to her party and coalition in the 2019 elections – they have been reversing privatisation, and increasing public spending in areas of ‘social politics’, finances being in not too bad a state. Will it pay off in votes?

      The genuine Left in Spain talk a great deal about creating a ‘Europe of the Peoples’ rather than the current ‘Europe of Capital.’

  33. One more comment about Europe
    I referenced an article in the Guardian which began with the notion, seconded by the former head of the Federal Reserve in the United States, that economies could be put on auto-pilot and then it didn’t make any difference who the people elected to office. The Germans made similar comments about Greek elections after the Greek debacle…who cares who they elect?

    It seems to this outsider that the formation of the EU was the high tide of the notion that nation states and their politics didn’t make any difference….that objective market forces would enforce a rational set of policies on everyone. But those EU mainstream economics assumptions (exponential growth forever on a finite planet) have turned out to be disastrously wrong. But the other side of the EU was that ‘civilizing regulations’ would also be adopted…it would not be completely unfettered free enterprise. Now the ‘civilizing regulations’ have created a specific set of supply chains that will malfunction if nation states re-emerge and begin to enact protectionist legislation in response to declining prosperity.

    If Britain really wanted a clean exit from Europe, the simplest approach would be the historical ‘free trade’ position of Britain. Imports from everywhere are welcomed, with minimal red tape. I don’t hear anyone espousing that position.

    So, we might argue whether protectionist policies would, themselves, be disastrous, or whether they might permit the hegemon (the US) to game the system in its own favor, or whether at least the Italians could go back to quarreling among themselves rather than blaming the Germans….but the fact remains that economic activity would slow rather dramatically and the debts will not be repaid.

    I welcome explanations from the Europeans pointing out the errors in my thinking….Don Stewart

    • Don, I was typing at the same time, so on this second point:
      The UK does not want a “Clean Break” from Europe.
      Like for the past 300yrs, the UK wants to cherry pick its deals.
      For a nation that exports very little in the way of physical goods and needs to import almost everything then sure, an open border accepting imports from everybody is the way to go !
      But the reason for these “Brexit negotiations” is purely to protect the City of London, and all the other Money Laundering centres that it administers throughout the world. ( Guernsey, Jersey, Bermuda, Cayman, Virgin Isles, etc. . . you get the idea ).
      Rothchild spings to mind,
      “give me control of the money and I don’t care who writes the laws”

    • Geography dictates that the UK is always part of Europe. Historically, Britain as a maritime power always looked further afield, so the requirement was to prevent interference (worst case, invasion) from Europe. This was particularly acute when England was Protestant and the major European powers (France and Spain) were Catholic. Therefore, the aim was to maintain a balance of power between contending European factions.

      Vestiges of this policy are discernable in more recent times. The UK never became a fully committed member of the “European project”, and has long promoted widening (rather than deepening) of the EU.

    • The original Treaty of Rome in the preamble referred to the peoples of Europe being desirous of an “ever closer union” would enact the treaty.

      It was meant to be a union of peoples not states. Also, and implicitly, the mechanism was to be trade. It was an organic concept which would take many years to be realised.

      What has happened since is that the “ever closer union” has become a union of states and that it is an explicit objective to be actively pursued. The Euro was an attempt to force this as it needs political union to work and I believe that a crisis was foreseen as a means of forcing this. After all many people said that the Euro could not work at the very beginning.

      As to market forces being the driving force here it’s interesting to go back to Adam Smith and his “invisible hand”. Most have assumed that the godfather of the free market used this phrase as a way in which private interest was reconciled with the public good. However, this is wrong. He actually used it in connection with foreign trade where he recognised that entrepreneurs might well want to produce overseas at a great advantage to themselves but they were restrained by a “home bias” to produce in their native country for moral reasons and this is the “invisible hand”.

      How does this concept sit with your assumption that life is driven by the deus ex machina of market forces? I don’t think it does. These are social constructs as Adam Smith knew and this lesson seems to have been lost along the way.

      It is not the assumption of growth that is wrong; it’s more fundamental than that.

    • Most great thinkers, certainly in economics, have one core idea which is a “lightbulb moment” in our knowledge. Keynes, for example, described demand management. With Smith, the great idea is competition, otherwise known as “the invisible hand”. From that flows opposition to monopoly and oligopoly.

      The market is where competition takes place. To function to best effect, it needs to be “free” (of monopolistic and other distortions) and “fair” (based on honesty and transparency). Smith himself recognised that monopoly and dishonesty can be profitable, precisely because they undermine the effectiveness of competition. This ‘incentive to cheat’ means that markets won’t stay free or fair by themselves. This in turn means that regulation is imperative. The state alone can supply this regulation.

      This means that Smith does NOT say any of the following:

      – ‘The state is bad, and should be mininised’

      – ‘Regulation is a hindrance and should be eliminated’

      – ‘Private is always better than public’ (because a private monopoly can be at least as bad as a public one)

      – ‘Caveat emptor’ (the customer is his own and only defence against dishonesty)

      Taken together, Smith tells us how markets drive prosperity, and Keynes tells us how to manage cyclicality.

      Add to this (a) the need for sound money, and (b) the critical role of energy, and you have all the ingredients you really need for the effective interpretation of the economy.

  34. We are told that the New Labour government opened up the Uk’s borders to ‘rub the rights noses in diversity’. Perhaps there was another reason – they wanted to push the GDP to make spending and borrowing commitments look more affordable.?
    I wonder if Dr Morgan has a view on to what extent mass immigration has driven the expansion the GDP figures and whether without it growth would be negative?. Of course adding the population of Newcastle to the Uk every year is totally unsustainable but as we have seen the politicians are blind to this.

    • The question isn’t really whether immigration pushes GDP up (which, probably, it does) but whether it increases GDP per capita (on which any effect is likely to have been neither dramatically positive or negative).

      The legitimate questions about immigration, it seems to me, are:

      – Does migration push population numbers up more rapidly than infrastructure and other services can be expanded in response?

      – Is there a globalist agenda involved, increasing the supply of labour to weaken the negotiating position of labour vs-a-vs capital?

      – Has the public been consulted?

  35. If you hurry you might just be able to get your inoculation in time before the contagion from the Turkish Lira spreads. It looks really serious.

    • It’s also part of a broader malaise with EM currencies, including the Brazilian real and even the RMB, not to mention Argentina and Mexico.

    • Erdoğan is going to have to come to his senses quickly. According to the Guardian one of the fallouts could be refuges that Turkey has taken in from Syria – spreading over Europe.

      Spanish – French and Italian banks are also exposed.

      It’s a mixed up World where a member of Nato decides to buy Missiles from Russia.

    • I see no likelihood of Erdogan ‘coming to his senses’. He seems to me to be an extremist, determined to concentrate all power in his own hands. Tens of thousands are imprisoned, seemingly for no reason other than opposing him. Portraying himself as bravely standing up against America (etc) isn’t convincing. Russia might be happen to see Incirlik closed and a NATO member detatched. Beyond that, though, I’d expect Moscow to sup with a very long spoon.

      Unless there is a change of direction, Turkey’s economy could implode, very rapidly. Even if offered without strings, a bail-out wouldn’t work.

      This is tragic, from both a short- and longer-term perspective. The secular state built by Attaturk from the ruins of the Ottoman Empire has been, overall, a great success.

      More recently, Turkey’s economy had been doing well. According to SEEDS, prosperity per capita increased by 27% between 2007 and 2017. But currency collapse and inflation could destroy that progress very quickly indeed.

      The Turkish situation poses a need for the EU to gets its act together on migrants. Merkel’s open-doors policy looks politically toxic. Other EU members are unlikely to accept large numbers arriving in Greece, leaving Athens with little choice but to close the border.

      One bank each in Spain, France and Italy are particularly exposed to Turkish debt. Many Turks, both individuals and businesses, have borrowed in foreign currencies – so the local value of their debt has soared, as has the cost of servicing it.

    • Very sad indeed although the UK has had no qualms selling arms to him (and of course the Saudis).

      I remember that after the Gulf war there was a period of relative calm (and I mean relative) in the World both financially and socially.

      Since 2003 – Iraq – GFC 1 – Syria – ISIS – terrorist bombs throughout Europe – EROEI – debt bubbles – collapsing prosperity per capita – Venezuela – Brexit and now Turkey (not an exhaustive list)

      So many mistakes have been made by misguided and self serving politicians – if only we could turn the clock back to around 1993………..

    • 1993 might have been an early “peak complacency” year – a title rivalled by 2007.

      It’s worth noting that other EM currencies are under the cosh. The rupee is at an all-time low against the USD, and the rand is very weak as well. RUB has weakened even though the fundamentals for Russia look pretty good. RMB looks very vulnerable – because how can China tackle credit acceleration during a trade war?

      If the US is set on reducing imports, that reduces the flow of USD into the rest of the world. As ever, scarcity drives prices upwards – so USD strengthens and other currencies decline. It’ll be interesting to see if GBP joins the weakening group.

    • Well even if I have to stay in a tent – nothing is going to stop my annual hiking trip to Switzerland.

      I have already bought my currency at a decent rate some time ago and I hope that hotels are friendly to UK travellers (although they’re catering more and more for Japanese and Chinese tourists).

      All we can do is watch GBP where exclaining ‘Heavens above’ might not necessarily mean it’s hitting new heights.

      Regarding 1993 we could have started a firmer stance against oil use (I know that there was a Government policy at some point in the 1990’s 2000’s) and invested in Nuclear power and also got our infrastructure in a good state of repair.

      Instead we feasted on cheap oil which probably encouraged some to have larger families which has now put too much stress on our services.

      Regarding stress in our services my Stepmum (90) had to go into hospital on Saturday. It turned out to be severe catarrh caused by a lung infection.

      The nurse said she wasn’t well enough to be discharged and I informed her care home that she wouldn’t be returning until Sunday at the earliest.

      To my surprise the doctor overruled the nurse and said she was well enough to go home (this was at a7:30pm)

      I contacted the care home who were very surprised. I then left my Stepmum in the hands of the staff as they were arranging the ambulance back to her home.

      At 9:30pm as I was contacted by the care home to say that she still hadn’t arrived and they could not take any admissions past 10pm as a senior is no longer on duty.

      I rang back the hospital and was advised the transport still hadn’t arrived so I informed them clearly that as there was no senior on duty at the care home so she couldn’t be admitted for safety reasons.

      The hospital said they would arrange a bed for the night (she was in a temporary bed in A&E)- I then relaxed thinking everything was in hand.

      The next morning I got a call from the care home saying that an ambulance had arrived at 11pm with my Stepmum and had to be sent away

      I’m loath to raise a complaint but this attempted transfer not only compromised my Stepmum’s safety but wasted the resources of an ambulance. As it was she had to spend the night in an A&E overflow section.

      I can only assume that there were no ward beds available and so basically they didn’t want her there despite already knowing there was no senior at the care home available.

      I spoke to my Stepmum’s physiotherapist about it and she said that she left the NHS (where she was a nurse) because she had seen old people’s safety being compromised in A&E and being sent home when they were in severe pain.

      As we all live longer the situation can only get worse.

    • The North Sea bonanza could have modernised Britain’s industry and infrastructure. Instead it was spent on tax cuts (to buy votes) and unemployment (to break the unions), whilst gas reserves – never abundant – were burned for cheap electricity, and exported for quick profits.

  36. Erdogan’s fundamental platform has been ‘MGTA’, and a great deal of anti-West rhetoric, and his largely lower-class, unsophisticated voters have bought into that.

    A renewed Ottoman greatness sounds rather attractive to them, if not to anyone else (he even referred to the great days of the Empire in a speech in Eastern Europe, not very tactful!).

    It’s interesting that both secularists and Islamists united to try to overthrow him in the recent elections – both reacting to his ever more obvious megalomania.

    Now we see threats of prison to those ‘economic terrorists’ seeking to undermine his kingdom – it really doesn’t augur well, or seem that rationality is his strong point, to say the least…..

    • I’m not sure there ever really was a ‘great’ Ottoman period. True, they beseiged Vienna twice, but their invasions of Europe, being ‘living off the land’, ‘scorched earth’ affairs never had staying power. Obedience to Turkish rule diminished the further you got from Turkey, making Ottoman rule largely nominal in much of the empire.

    • Quite: the Ottomans ran a primitive tribute empire, relying on extreme cruelty to enforce their rule and, as you rightly say, often losing real control of large areas.

      I can never read about them without feeling slightly ill – the condition of the peasant class was generally appalling, as British travellers were quick to note in the early 19th century, and property was never in the least bit secure. Their fall was well-merited.

      But, you know, some people get nostalgic about the SS, so Ottomania has its adherents…..

  37. Migration is now becoming a bit of a hot potato in Spain, as the new Socialist government
    of Sanchez is making a great show of opening arms wide to the boat people (more now landing in Andalucia than in Italy) for moral reasons (and something specious called ‘European Solidarity’ – cue photo op with Merkel) and industrialists welcome them to address a ‘labour shortage’ due to the very low birth-rate.

    But in the comments sections one can see this being said:

    ‘We have among the highest levels of youth unemployment in Europe, and the lowest pay, with a prevalence of insecure short-term contracts and a substantial emigration of graduates and others to Germany, the UK, etc) : so how can importing large numbers of unskilled young men from primitive countries be sensible?’

    The pimping of GDP, and perhaps birth-rate, as urban migrants do tend to have more children – not having to pay for them – seems to be the clear objective in this case.

    And there is an element of social and racial engineering on the part of the radical Left: which, however, is bringing them into direct conflict with their unemployed working-class and even middle class voters – who are not happy when they see this policy also being endorsed by ‘the bosses’.

    Many radical Left politicians have, like their more bourgeois counterparts, never done a day’s work in their lives – having graduated with degrees in ‘Union Studies’ and ‘Politics’ – and they are now being viewed with resentment as ideologues out of touch with ordinary people.

  38. I posted this comment earlier but it hasn’t appeared. Maybe it was too long so I’ll shorten it.

    It’s actually startling how bad the UK economy is doing, even before you take into account the adjustments made by SEEDs. I was just looking at some figures. GDP per capita declined 15% between 2014 and 2017. Real Average Weekly earnings are still 6% below their 2008 peak, a full decade on. Productivity growth has stalled due to the surge in low wage jobs. GDP forecasts are continuously being revised down.

    Then just look at private debt. Between January 2017 and January 2018 each person in the UK took on an additional £1,077.51 in debt. Mortgage, credit card, car loan debt all up. See more here:

    So basically, many many people in the UK don’t own their house or car or even much of their consumer goods. It’s all borrowed money and the level of borrowing is still going up. And Brexit hasn’t even hit yet! How prepared is the UK to deal with a massive shock like Brexit? The country is riding for a fall.

    • Thanks – I don’t know what happened to your earlier comment.

      I agree, and have said before, that you don’t need SEEDS to tell you that the British economy is crumbling, and increasingly is built on debt, itself often collateralised against assets whose inflated valuations cannot be monetised.

      Another point is that reported inflation doesn’t capture what is really happening to the costs of essentials. Further, official wage stats probably fail to capture the full effects of an increasingly casualised and insecure labour market.

      It’s like a ship heading towards the rocks – with no look-outs, and everyone squabbling over the helm, whilst the engines are falling to pieces.

  39. I suggest the wheel is spinning without a helmsman.

    While a rather odd bunch who all think themselves qualified are busy trying on the Captain’s uniform in the mirror because they rather fancy themselves in it, everyone else is too busy having fun, sex, gambling at the casino and stuffing themselves at the all-you-want buffet…..

    The charts, – if anyone were to think of consulting them – are out of date, and the instruments faulty.

    Not to mention the structural damage from the last collision which was never properly addressed.

    So, take time to familiarise yourself with the exits.

    • Thanks Jackie, an interesting read. I do find it a bit much to assume that Mr Rees-Mogg must share his father’s views, especially when based on a book twenty years old.

      In so far as it’s possible, I try to minimise the ‘gravitational drag’ of politics on how I interpret economics. For instance, I assume both Mrs May and Mr Corbyn are decent and sincere individuals, even if I disagree with a lot of their views. But I do make no secret of a personal view that “New” Labour was a disaster.

      Ultimately, the conflict in politics now isn’t between conservatives and collectivists but between a ‘liberal-globalist’ elite and an insurgency often labelled “populist”.

    • Interesting extracts from the book – an intelligent view of the then future – no mention of moped gangs though 🙂

      Vannevar Bush also had a big say on the future in terms of how capital should be used and the power of computers – not bad for someone born in 1890.


    • Having read the article this has distinct echos of libertarianism; if you’ve read the words of Hans Herman Hoppe you’ll know where I’m coming from.

      Although Hoppe has postulated in the context of the continuing nation state that a Hobbesian sovereign is preferable to the “democratic” structure we have now he has also admitted that radical decentralisation, which is his core proposition, could ultimately end the nation state. What I struggled with was how all this utopia might come about as it was such a radical change from the present structure. What this book seems to do is partially answer that question; the change is facilitated by the information revolution from the bottom up

  40. In Spain you will see conservatives of the old stamp (C’s and PP, PNV) , the Church, neo-liberals (PP, C’s, PSOE, PNV) and collectivists (radical Left, esp. Podemos and Bildu) all at it! Note the conservative/socialist-neo-liberal cross-over in the status quo parties…..

    Everyone ends up with about 15-20% of the vote.

    Collectivism -the radical Left – is a very strong force in European politics at least, if not in the US or Britain.

    Macron was invented to head them, and the French nationalists (FN), off. Lots of people out there in Euroland do wholeheartedly identify as Marxists, or Che Guevaristas. In Spain, the neo-Francoist Citizens (C’s) party was invented to take up the role of a collapsing PP mired in corruption and face Podemos and Catalan separatism.

    The sudden invention and funding of parties by the status quo is fascinating.

    In Britain, it takes the form not of a new party, but the unprecedented vilification of the soft – collectivist Corbyn, who – being such a chump – helps them out a lot. I’d call him a 1945 nostalgic, not an agent of Russia as the Mail likes to insinuate.

    ‘Populism’ is merely a contrived and disparaging label, imposed on any significant opposition, by the status quo parties and organisations such as the EU. As such, it is not, surely, in itself a distinct ideology?

    It’s rather like the sticking of ‘fascism’ on anything the Left don’t like: palpably inappropriate in most cases, as fascism is essentially not a coherent economic or political ideology, but the belief that all men are warriors’ and all women ‘breeders’, propelled by a racial destiny, and only a society organised around those core truths is pure, and not decadent – even Mussolini never got much further than that in trying to elaborate on what it meant. I must buy his collected works one day. 🙂

    ‘Populism’ is more like a cry when your toe gets stepped on hard (see Brexit as a response to steady impoverishmnet and immigration; Hungarian and Polish resistance to muslim migration, etc) : but the status quo response is to say that the pain is not legitimate, has some other cause – sinister and sinful – and to keep up the pressure regardless.

    In some ways this is all pre-revolutionary; but then, the system is perhaps far too complex now to accommodate revolution?

    But perhaps we think too much about mere politics: it is the wave of ecological destruction provoked by globalised industrialism which will sweep this civilization away, bearing all before it. What will remain after the catastrophe, unfolding over decades, is anyone’s guess: some kind of hominid might be left to scurry about, but not as the dominant species…….

    • We covered this area here a long time ago, suggesting that the real duality is between corporatism (whether private or state) on the one hand, and individualism on the other.

      I raise a wry smile every time I hear the word “populist”, because surely it defines the incumbency as “unpopulist”.

      The BBC reported recently that Steve Bannon has “designs” – not “plans”, note – for linking up American and European populists. Almost everyone they asked thought it was a bad idea, but then, to paraphrase Christine Keeler, established politicians ‘would say that, wouldn’t they?’

      Throughout history, elites have risen to power, then becoming arrogant, greedy, out-of-touch and incompetent, after which they are toppled. The current ‘globalist-liberal’ elite are no different. We may not know what comes next – Marat, Robespierre, Napoleon? – but we can be pretty sure that the king is dying.

  41. I put a comment into the Telegraph under an article about Amazon basically saying that many of our workforce are having to accept low paid jobs –

    This is a reply from Walter Raleigh (Obviously before his knighthood)

    Walter Raleigh 14 Aug 2018

    I don’t know what planet you’re on, but the last time I looked, the supposed poor were enjoying Sky on their big flatscreen tellies, sporting the latest fashion trends, munching on chicken wings and fries…poverty in the UK is a long way from real poverty…

    Have you been lying to us Tim? 🙂

    • You could have reminded him that the real Walter Raleigh, to show his loyalty to Queen Elizabeth, threw down his cloak in the mud. Perhaps that’s where his ideas belong?

    • Yes good idea – you never know who these people are – obviously he enjoys using a grand name.

      Sadly I’d forgotten Sir Walter was beheaded to appease the Spanish – can’t see that happening to someone in Brussels.

    • And another reply to my comment – obviously the moderator in the Telegraph doesn’t have very high standards :

      Arthur Pendragon 13 Aug 2018 11:26PM

      Whatever, the unskilled coolie labour is being paid closer to what it is worth


    • That comment makes Marie Antoinette look concerned and caring – at least she wanted them to have brioche!

      Incidentally, isn’t “coolie” a racist (and anachronistic) term?

    • Yes there is a definition that is certainly racist.

      I love the Benidorm story – very much like the old Torremolinos sketch from Monty Python.

    • The problem is. of course, the specious ‘comparative poverty’ meme.

      So all kinds of people are labelled ‘poor’ who are leading the life of Riley compared to the destitute of, say, Malawi.

      But there is no doubt that Britain is becoming increasingly impoverished: and in a sense it is the perception of comparative changes that moves politics in a democracy.

      I went to a provincial capital (Norwich) on Saturday, and I have to say most of the visibly ‘poor’ people were definitely drunks, drug addicts or mentally ill – an astonishing number! Or maybe it was just the effect of Friday Night……

      The real story is not them, of course, but the working poor.

    • A lack of compassion often (though not necessarily always) correlates with low intelligence.

      More broadly, there is one set of attitudes which says “if I’m OK, nothing else matters”, and another which values interaction with others. The latter is at least borderline psychopathic. Additionally, anger and hatred usually spring from fear, itself often rooted in a sense of inferiority.

      This is one reason why racism so often correlates with fear, inadequacy, low intelligence and weak self-esteem. Most people who dislike ‘foreigners’ are actually afraid of them based on feelings of inferiority.

      This, incidentally, is why a lot of PC censorship probably isn’t really necessary – those who oppose racism can usually run rings round racists, intellectually. If I had a public debate with a racist, I am utterly confident that I would expose his or her arguments to ridicule. Likewise, most anti-semites are idiots, prone to grandiose ‘conspiracy theories’.

    • Tim I hope you meant to say ‘the former is borderline psychopathic’

      When any of us post comments to online newspapers we can never be quite sure who the people who post a reply are – a lonely retiree – unemployed youngster – someone just wanting to vent his or her anger or those with extreme views who will put insulting replies no matter how reasoned your post is.

      As you will no doubt have seen Brexit has caused a furious outpouring of opposing views on media platforms.

      Anyone who wanted to divide our country must be amazed (and delighted) at just how much turmoil the vote created.

    • I get the feeling there are large numbers of people, men mostly, of ‘a certain age’, who post this sort of stuff. They are likely to be Tory voters, of limited education and intellect, who believe that what appears in The Daily Mail is gospel truth. They’re likely to favour the return of capital punishment, don’t like ‘foreigners’ and haven’t travelled very much.

      It’s interesting that, in the Confederacy, support for slavery came more from the poorer working classes than from the better off. Slavery had become economically marginal, and was harming trade – but workers feared competition from freed slaves.

    • But surely Tim the Daily Mail is the gospel of truth. I have a lifesize figure of Paul Dacre in my front garden – there to encourage new followers with his right hand pointing in the direction of nirvana.

      Seriously though I didn’t know that the support for slavery came more from the poorer working classes. I look on some modern day jobs as slavery and I’m sure with better conditions and nicer bosses productivity and happiness would improve. Some hope.

    • Why is discrimination on race so much worse than any other type?

      It is a sad occurrence that in today’s excessively politically correct culture, people are all too quick to pull the racism card in order to discredit someone’s claims – or even them – and stifle debate.

      This also applies to claims of anti-semitism against anyone that says anything remotely critical of Israel or its undeniably racist ideology Zionism.

      The same tactic has of course been adopted by Muslims when they hear a hint of criticism against Islam.

    • The short answer is that discrimination on the basis of race can lead very quickly, via exploitation, segregation and ghettoes, to ethnic cleansing and genocide. This puts racism in a class of its own. I regret that other forms of discrimination have been conflated with it under a portmanteau ‘equality’ label.

      ‘Playing the race card’ is contemptible, not least because using racial difference, of any sort, in pursuit of any advantage, is itself racist.

      As long as others – Christians, atheists etc – are prepared to live with criticism, so should Islam.

      Personally I oppose PC. It’s a form of censorship, it causes resentment, and drives underground views that are better out in the open.

  42. Information Revolution
    I’d like to comment a little bit on the supposed ‘electronically mediated information revolution’. I’ll try to be as brief as possible, while providing enough context to be intelligible.

    Those who believed that the internet was going to (or still may be about to) save us all should study Jaron Lanier’s book Ten Arguments for Deleting Your Social Media Accounts RIGHT NOW, and Dmitry Orlov’s essay today on the co-ordinated Censoring of Alex Jones (which may be behind a pay wall). The internet was the great hope of the libertarian/ individualist movement, and has borne some useful fruit. But, just as with the demise of ‘free enterprise’ in GFC1, and the promotion of addiction by global corporate power, we now see the comeback of the nation-state (the US in particular) as the hegemon of public opinion. Not that Europe or Japan or China have clean hands.

    The cleanest example of populist individualism is probably afforded by taking a look at Ramp Hollow, which traces the partially successful (but eventually fruitless) efforts of the immigrants to the United States (particularly the Scots-Irish) to settle the western frontier. Of course, they were agrarians who took the land from the Native Americans, many of whom were hunter-gatherers. They were also racists, who were quite content to evict agrarian Cherokees once gold was discovered on Cherokee land. But in terms of a young man and his bride being able to pick up and move to virgin territory and start a family, the American frontier was a relatively unique episode in well-recorded history. It also provoked a counter-attack from the likes of Alexander Hamilton, who detested so much individual liberty.

    I suppose the closest one could come to such a story today would be a single young person who moves to a place which welcomes ‘creatives’ and surfing whatever current wave they can catch. Which leads us back to Jaron Lanier’s book on how that has all gone horribly wrong.

    Dmitry Orlov, after a lot of careful research and actual experience with a variety of lifestyles, has chosen homesteading in Russia. I don’t think that option is going to win many beauty pageant contests against the notion of striking it rich in some ‘creative’ enclave.

    Meanwhile, supply chains have become byzantine and truly global (except for the occasional Russian homesteader).

    The neuroscience I am familiar with convinces me that it is actual experience which teaches us…not reading on the internet.

    Consequently, we are currently presented with widespread dis-enchantment with the globalist agenda, and the reduction of the ‘creative class’ to subservience to advertisements, and ‘no way out’ for those who want to escape from the global supply chains.

    Nation-states and their creations like the IMF can only keep on piling faggots on the burning pile of debt.

    Don Stewart

    • An unnerving article. I can just imagine Zuckerberg – having been asked why he betrayed millions of FaceBook users – saying ‘They got me a long time ago’ (line from 1984)

    • There is a simple solution to it.
      People need to stop using Facebook and other such platforms.
      I have never used it, and I still have friends here in the real world.

      Facebook is a company that could fold overnight if enough people just ignored that it exists and started to phone or email their friends instead.

    • Well MySpace has nearly disappeared while Facebook is swamping TV with ‘We’re sorry’ ads which are about as sincere as Richard Nixon. They’ll be up to no good again very soon.

      I’d love to see it collapse because I feel Zuckerberg has gone mad having been gobbled up by his own creation so he can’t tell right from wrong and still believes its primary purpose is to bring people together despite all the revelations that have unfolded.

    • I think there are several threats to the FB model. First, it depends on advertising, where aggregate spend seems to have stopped growing. Second, younger people may turn to alternatives, seeing FB as old hat, and something used by their parents’ generation. Third, of course, the regulatory environment may change, with respect to its market share, and its view that it is simply a platform, not responsible for content placed on it by others.

  43. Tim, what do you think will happen with the end of QE? Hasn’t this been artificially propping up our economy and house prices? It is due to be phased out at the end of this year. This could coincide with a rise in oil prices at the end of the year also.

    • I don’t think QE will end as planned. It’s the only available recourse when things crack up.

      Take China as an example. China knows that the rate of growth in debt is dangerous (we had an article on it here), and has been gradually tightening. But, at the first whiff of trouble (trade conflict with the US), they immediately backtracked, loosening again.

      I expect the same with QE. It’s clear that the economy faces trouble, and that this will manifest itself in currencies. As soon as this happens, QE will return. The only possible ‘solution’ – short-term fix, in reality – is to pour yet more cheap liquidity into the system. QE is a drug – dangerous, addictive, but very, very hard to kick.

      Ever since the authorities chose not to bite the bullet in 2008 and pay the price of a reset, there has been no road back to normality.

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