It is amazing really how long the Government and the media take to cotton on to real world events.
As readers here will know, as soon as the Ukraine war broke out and sanctions were applied to Russia, an economic disaster was set in train.
There was no hope of controlling the oil price, a weak pound and strong dollar has accelerated the damage. Then we have China with a frankly insane covid-zero policy that has hugely derailed their economy and will continue to do so.
The effects of the above are galloping inflation, a huge excess of supply over demand across the West and energy input costs up nearly 300%.
With all of this a recession is to be expected, indeed the Government must want the demand destruction of a recession to help reduce inflation.
The idea that a -0.3% read, hugely impacted by the reduction of spend on test and trace, is only a passing feature is for the birds.
More likely this summer is petrol and diesel at well over £2 per litre and a further big drop in the stock markets. Until the global supply chain is sorted out, there will be no let up to the economic stress.
As for our Government, they continue to profiteer from energy prices via VAT. They are not alone, much of the inflation now is profiteering with suppliers sensing they can push up prices if they want too.
The inflation genie will be very difficult to control now. However, time also to keep an eye on sovereign bond yields across the EU. As we know from the 2011 Euro crisis, Italy and other economies cannot withstand inflation pressures in the Eurozone when devaluation is not an option. Germany may find itself bailing out the Euro as well as Russia.
20 comments:
With the supply chains, I'm wondering if any lasting lessons will be learned?
As someone who has been a fan of globalisation and JIT supply chains, it's come clear that it has been a hubristic position, and the pursuit of efficiency to be a failing along the lines of knowing the price of everything and the value of nothing.
Resilience has a cost, but a worthwhile one.
"a huge excess of supply over demand ..."??
The US (who drove the Ukraine "maidan" and who drive the NATO expansion) is e the Reverend Jim Jones, and the governments of the UK and EU are People's Temple devotees glugging down the sanctions Kool-Aid.
I took a 3 day break in France and diesel was 10p a litre more expensive on my return!
Meanwhile apparently we are sending record amounts (admittedly by value) of oil and gas to the EU. You couldn't make it up.
https://www.theguardian.com/business/2022/jun/13/uk-gas-oil-exports-eu-amid-russia-ukraine-brexit
E-K - very sorry to hear your news, and Timbo's too. For any parent, losing a child that way is awful.
"It is amazing really how long the Government and the media take to cotton on to real world events. "
No its not, they've been ignoring reality for years now, particularly over the whole 'climate change' malarkey. The political class have created an alternate reality, and whenever the real world intrudes on it they just use that as a reason to double down on the fantasy. Hence the current issue with farming policy - its blatantly obvious that what is needed is UK based food production, not birds and bees and re-wilding. Instead we get told that the current issues with food supplies and prices will be 10 times worse in the future due to climate change so we need to go even faster to destroy the UK farming industry, to save the planet......they have talked themselves into such a corner that they cannot get out of it without destroying all the things they've spent the last 15 years saying were absolutely imperative. So all the policy responses to our current woes will be more of the very things that have landed us here in the first place.
I note that the Reform Party have just brought out their policy package to overcome the current cost of living crisis - tax cuts, cuts in State spending and hitting the fracking button. Personally if they have a candidate in my area next time he/she will be getting my vote, as that makes more sense that the b*llocks talked by any of the 'Big 3' parties.
"its blatantly obvious that what is needed is UK based food production, not birds and bees and re-wilding"
Can't we have both? Bees are pretty important for pollination, while birds just lift the spirit.
We could make a start by stopping inward immigration, but we still import half our food.
Anyone remember when we had bread rationing ?
Don
"We could make a start by stopping inward immigration, but we still import half our food."
My point exactly. One of the things we could do to try and improve things is stop importing more and more people into the country at a time when housing and public services are stretched to the limit. But in political clownworld that can't be done because 'diversity' is double plus good and thus more of it will make things better.
1946
After the war.
Was not rationed before.
There has been a govermental capability and goverment competence recession for well, most of the 21st century (in the uk)
The ruling class successfully blamed the europeans for a while. That one will wear thin as we fall further behind europe and america and other developed countries.
Even now none of the politial al parties are putting forward ideas to increase productivity.
Everyone knows the obvs answers
1. Adult education
2. Cheaper housing
3. Improve public transport (outside london)
4. Make international trade as friction free as possible
This govt is working hard on making all 4 worse.
Caeser Hēméra said...
With the supply chains, I'm wondering if any lasting lessons will be learned?
As someone who has been a fan of globalisation and JIT supply chains, it's come clear that it has been a hubristic position,
2:20 pm
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Yeah. Globalisation's been great. Oligarchs love it. The rest of us are simply fodder for them in the great new Global society.
andrew said...
There has been a govermental capability and goverment competence recession for well, most of the 21st century (in the uk)
3. Improve public transport (outside london)
11:44 pm
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We here in rural Somerset feel honoured that our taxes go to endless improvements in public transport in Khanistan, whilst what we have gets worse by the year.
>We here in rural Somerset feel honoured that our taxes go to endless improvements in public transport in Khanistan, whilst what we have gets worse by the year.
One thing to be said for devolution is that it does mean that some transport infrastructure gets built outside of London. I give you the Borders Railway, Edinburgh trams and metro systems in South Wales, Swansea Bay/West Wales, and North Wales.
Etb
I live in clevedon (effectively a satellite town 13m from bristol) in 98 there were 5 busses that took about 45m between 7 and 8.30 there are now 2 that take over an hour.
The last bus back is at 9.15pm
If you do not have a car you are stuck with the jobs in clevedon.
It means that employers do not choose to set up in clevedon due to the restricted talent pool as well.
Contrast that with the services provided to most of london zone 6.
Lack of labour mobility is one of the main drivers behind london getting richer and the rest of the country getting poorer.
And now we have 100bn++ spent on hs2 that will probably link london and birmingham and thats about it.
I can understand why many think this govt is deliberately trying to destroy the uk. Being charitable i believe in incompetance and a general inability to solve problems - or understand there is a problem.
Andrew: Pretty much the only economic activity in Clevedon is the many old peoples' care homes. Without transport, you can be a carer or a caree.
It's long been clear that the 100bn for HS2 would be far better spent in small lots of a couple of billion here and there, spread around the country. It would have bought an awful lot of metro systems, trams, guided busways, etc. Just another example of our dysfunctional system of governance.
@ Bill Quango
I know when bread rationing started. I wondered whether anyone else can remember it.
I had some toy transfer green lettering and used it to record the date in my exercise book. Food matters when you're six.
Anyway, the point is that some of us are well accustomed to food shortages.
Don
The problem with HS2 is that nobody in government had the remotest idea how expensive it is to build a railway in the 21st century. It's obviously a nice plan to have more and faster railways but we no longer have cheap labour.
Don
The Government is spanking us for tax-on-tax.
This 'Conservative' Government needs to stop it. It also needs to give us a 'delay' on going green for the Covid years.
All it has to do is reduce itself and let the private sector breath.
Socialist Sunak/Johnson have their boot on our throats.
The chumps in the rail unions have just provided their life line - a Maggie moment (only nothing of the sort.)
In my sector we are now talking about having a JIC (Just in Case) Supply Chain rather than JIT.
When dealing with food this comes with added challenges as you want to build food resiliency without increasing food waste.
We already pay a premium for assured supply and I've seen suppliers having to air freight lettuce over from America when there's been crop failures in Europe.
Politically the government want/need to reduce inflation but economically it must be welcome as it helps to inflate away the massive debt incurred with all the covid money printing. The added bonus is that benefits and government wages falling behind inflation helps to bring down the huge amount of government spending in relative terms. Also some zombie businesses go to the wall. Politically this is difficult to swallow but it's needed to bring a dose of reality to the government and anyone living beyond their means. The trick is to get the economy growing at the same time and keeping a lid on benefit/government wages which is difficult.
Jan
Snag with using inflation to pay down the debt is that our economy becomes less credible. Food, for example. Even that which we rear or grow ourselves goes to the highest bidder abroad.
There are plenty of well resourced nations with impoverished populations who do not get to enjoy their own produce.
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