Energy crisis continues - where is the clamour?

If anything, I am amazed at how little the energy crisis is hitting home. Gas prices are 200% up and this means that we will shortly be paying well over 100% increases on our domestic bills. So much for keeping a lid on inflation, this alone will drive inflation to over 2% per annum without any other factors. 

It still seems to be just a business news page issue, the petrol shortage, although energy for transport is seen as something different. To be blamed on Brexit or the pandemic as per your choice. 

The energy crisis has none of these factors. The Government is 100% squarely to blame over the last 10 years. Cutting gas and oil stations too quickly, not replacing nuclear and then over-relying on Wind and Solar when they are not fit for core supply with the current lack of battery capacity. This is before we get to Nick's post of the lack of gas storage. The whole of Europe is suffering the same issues. 

How these costs work themselves out will be both interesting and horrifying. Costs and prices will go up as input costs are hugely increased - no both wages and energy. Countries, cough America, with domestic supply will have a huge advantage for the next few months. China is struggling, rationing power all over the place where it can. 

Why the media and opposition can't see what a hole the Government is in over this and one which for which there are simply no short term answers.

Our new £2 trillion debt

So we know Covid-19 is not nice and has caused the UK Government and indeed the whole world a lot of problems and lives.

What is really shocking though is the economic cost. Throughout the pandemic economics has taken a back seat to protecting lives in most countries. Especially, the UK with its NHS worship and fast growing numbers of left-wing nutjobs, is particularly nervy - not that it saved us from being one of the worst affected places to date. 

But the economic numbers are brutal. Now we have £2 trillion in UK debt, albeit £745 billion is  QE debt which is owed by the Government to the Bank of England, which is sort of owns anyway. This equates to a 100% debt to GDP ratio last experienced in the aftermath of WW2 and economic catastrophe. 

Worse is that Government spending continues at £27 billion a month, already this year we have spent as much as we did in the whole of 2009 or 2010 - the height of the Financial Crisis and its costs. But is is only August and the furlough and money spending continues. 

All with an economy that is currently 20% smaller than it was, even if this bounces back in future months we will end up with an economy at least 5% smaller for the next few years. All those airlines and small retailers are not coming back quickly. 

There is no evidence that I can see that the Chancellor Rishi Sunak is going to apply the breaks, nor that the Prime Minister can awaken the country when all the talk is of second waves and a terrified populace. 

So by the end of next year, there is not way we won't have £2.2 trillion of debt - a 20% debt increase in the space of 18 months - unheralded outside of a major war. The only positives are thing slike furlough are easier to cut, but benefits for the unemployed will rush in to keep the Government spending. 

All that austerity and the political and personal costs of it has been wasted away by this new black swan event. the whole 2020's will repeat the 2010's in terms of economic exprience - little money for Governments to spend, creaking infrastructure and whining people asking for subsidies that don't exist.

There is a way to reduce this, which is to rapidly end government support that will force people and companies back to work - but there is no backbone in the government to do this and the ever present fear of a second wave stops this. 

I saw pictures of a huge gig in Wuhan this week, not much worry about a second wave there I note. 

What purpose does keeping financial markets open serve today?

In normal times, markets are a keep lifeblood of a capitalist economy. They send the singal to participants and the Government about the state of the economy and are a general barometer of health for a market economy.

But in times of crisis they are scary places. The markets are run these days by both human traders and their pet algo's. This means they experience both euphoria in the good times and fear in the bad times. Sometimes the algo's are designed to exploit the fear even further.

At this unprecedented time of crisis, I don't see the point of the markets remaining open for stocks and shares. We know the crisis is only going to get worseover the next few weeks. Then hopefully better. As such the markets are just going to keep dropping on every bit of bad news.

Meanwhile, Government's like the UK have stepped in to effectively nationalise the workforce. A completely unprecedetned move. Plus loans and tax holidays for businesses. These may work or may not work.

So to me the unknowns are so large that the markets will have no real option but to fall much further. This only unbalances the economy further for any recovery - hurting savers and allowing well-heeled Private Equity a chance to buy up lots of companies on the cheap at a future date. The answer surely must be to halt trading for 6 weeks.

Forex can continue for trade as can commodities as these are life essentials for a function global economy. But stock markets are a one way bet and the lack of price information is not going to change how our Governments make decisions in the next few weeks.

I am amazed at the lack of discussion of this in the media - this can only be because the responsible types at the Financial Times worry that this discussion will cause a stampede to cash by retail and other investors and thus another steep fall.

However, we need to be rational, a collapsed market will not be the basis for a quick bounce back and reset in a few months time if we are lucky enough to get to that point.

Debate needed..

UK in Housing Crisis according to the Government

Really, Sajid Javid has a reputation as a high flying City Banker, lowering himself in service of his country by taking a Government job.


Allegedly, his ego remains that of a City High-Flier.


However, coming out today to say there is housing crisis, young people can't buy or rent and the Government should do something about it is pretty thin. Rarely these days do the labour opposition make any good points, but to say the Government is complicit in not doing anything serious about housing for 7 years is spot on. Allegedly there were some ideas about planning reform floated last month, but these do not seem to have seen the light of day.


Actually, now is a good time to get building. The higher end property market has gone for a burton, freeing up labour and companies to look again at more mid-range projects where prices are more inelastic (as are the profits though..).


A good old house building boom is long-overdue. Indeed if this comes alongside falling immigration and falling household formation then more is the better - we could see a real improvement in the situation.


Of course a real improvement also means house price falls (or, no nominal increases) for the foreseeable which will be very unpopular with our Banks and Lenders. But suffer they must, jus don't buy any shares in them.


The real issue though is the Government has not really committed to anything as per usual, so not doubt I will be re-writing this post again every year for the next decade. I somehow doubt prices can go beyond 8x income ration which is where they have reached, but then again I thought that at 6x Income and 7x income!

NHS Questions

Finally, Jeremy Corbyn had a good PMQ's today. He managed to focus on the NHS and the Government, as every Government seems too, looked a bit wobbly.


I have 3 questions to pose....


How much extra money has been spent on the NHS since 2010?


How many extra appointments are now needed in addition to service levels 2010?


How many immigrants has the country allowed in since 2010?


I only say google yourselves because my light research was fairly stark in its answer and yet I am sure just asking these questions condemns me to the alt-right loony bin in the eyes of many....

Open Thread - Cabinet Appointments

We lost Osbo!


If I had not been in the office until 10pm last  night that would have been worth a drink. I see Hammond as being a far better Chancellor - no more scheming Brownian nonsense in No 11.


On the downside, we gained Amber Rudd as Home Secretary. Rudd truly is useless. Luckily, Home Secretary is not that important at the moment and no doubt she will screw up really quickly and be gone; at least her fingers are off energy.


Boris is a terrible choice for Foreign Sec, should have swapped him and Fox around but there we are.


Lots of Brexiteers is good news for Brexit and the Country. Hopefully we will quickly move to WTO now and avoid the fudge - here is hoping anyway!


So...let's see what this morning brings...

So what next now the dogs of war are slipped?

So whilst I was in the far East last week, quite a big fuss was made on the news agenda there about this debate that was happening in the UK about bombing Syria.

Firstly, I had hoped to avoid this debate, so it was a bit disappointing to still be assailed with it.

Then the debate, as ever, meant nothing. There is no plan to get rid of ISIS, there semms little mention of unhelpful facts that the Russians keep bringing up like the role of Turkey and then the peaceniks just say war is bad as if that is all that needs to be said.

Anyway, there was a vote and now we are bombing tiny bits of Syria as well as tiny bits of Iraq. Already the blowback has started, with stabbings in London and now in Abingdon today 'triggered' by our involvement.

Where was the real debate about WTF to do about radical Islam in our own country? This surely is the real pressing security need. Wiping out ISIS will be fun and is no doubt nescesary, but it is not the top level defence of the realm requirement.

Indeed, given attacking Syria will likely increase domestic terror attacks (it has already) then surely the most important thing to do is investment and working towards curbing these. Then thinking about the partial source and inspiration - preferably after long chats with friend and foe to find an actual workable strategy.

At the moment, Syria looks a lot like Libya on steroids, in fact had Gaddafi survived he would be a Assad clone for how the West viewed him. Libya did not work out so well, so how will Syria.

Finally, more to the point. How stupid are our politicians? Having the wrong debate about the wrong issues and turning it into a big deal?

Royal Mail now...BBC next?

It is not that surprising for the Government to put the Royal Mail privatisation away at a good price. After all, its a dog of a business with a limited future. Think Yellow pages of 5-10 years ago. The model of delivering me 90%+ junk mail is a poor one and the likes of Amazon etc are edging into full-time competitive behaviour or doing joint ventures with commercial rivals like Argos.

Royal Mail has a strongly unionised workforce and a commitment to the Government to maintain unaffordable business like universal delivery. So to sell the idea, they price it cheap, don't account for land values and let this slip pre-IPO as well as taking on the pension liabilities for the taxpayer. It's a good story for investors today and if you trade the share there is a good chance of making a nice 15%-30% upside. Long-term, a dog is a dog, the world is not going back to sending hand-written letters and nor will people always send real Christmas cards which is a significant chunk of the business.

However now that this taboo is broke ,we know there will also be public offers for Lloyds in Q1 of next year and possibly for RBS too. Merrily, a slate of privatisations. This leaves one commercial monster out there for the Government, the BBC. This would be the holy grail as the BBC is after all a very good business with a market share that won't easily be attacked by the competition and some very strong content and services, like its website, that should prevail even in a competitive market. Plus, subscribers, that is everyone, can be given shares for free on account of them building up the business.

If these privatisations prove popular in the short-term then this should be in the manifesto's of UKIP and the Conservatives for the next term of Parliament. It's for the BBC to work out how it copes with the end of state-enforced revenue-raising, but I have a feeling that a giant endowment from the sell-off will go a long way to easing the blow.

The apology bandwagon

In light of the recent outcry surrounding the Telegraph's unwarranted publication of MP's expense claims, I have been asked by my parliamentary colleagues to join the Prime Minister and the Shadow Prime Minister, and the other fellow in apologising for the recent scandal..

We are very sorry.

Very sorry that the gravy train has temporarily hit the buffers. We are sorry we have been found out, despite our best efforts at maintaining secrecy. We are very sorry that the security arrangements for keeping expenses from undesirable elements was not adequate.

We apologise for not being able to tippex and indelible marker pen away the names and addresses of MPs quickly enough before the claims were published.
The house is extremely regretful of ever having been stupid enough to have voted into law the freedom of information act, that was clearly meant to be in relation to corporations, and not parliamentarians. This inexplicable lapse of sound secretive judgment cannot be excused.
We are very contrite at having failed to prevent publication using tried and tested methods.
Through the courts, the European court, the Speaker of the House of Commons, the official secrets act, gagging orders, the terrorism act , the Metropolitan police, MI5 and other proven methods of publication prevention that have worked so well in cases as diverse as 'Spycatcher' and the Saudi arms deal. In this instance, for reasons that have yet to become clear, these formidable institutions failed parliamentary democracy.

We, the Honourable Members of Parliament, are regretful that we have been found out, compunctious that we have been exposed. We remain penitent that some members may have taken the expenses system too far, while others secretly think, in light of some truly amazing claims, that they have ,perhaps, not taken enough themselves. We fully realise that the current system of second homes allowances is unsustainable. The whole house has therefore pledged to reform the system to ensure a less transparent, easier to conceal, much more impenetrable and significantly more secure to access, and hopefully more profitable arrangement.

In conclusion, MPs of all parties are mightily sorry.
Sorry that you found out. Sorry that we are embarrassed. Sorry that a temporary loss of income must inevitably take place and sorry that our MEPs in Europe are carrying on as if nothing has occurred there, where of course, nothing has.

Finally, with the coming cuts in public spending and inevitable massive tax rises and looming inflation I should like to indicate that in the not to distant future, you, the taxpayers, will as likely be as sorry as we are now.

Bill Quango MP.

Death Spiral, the sequel

Back in September and October last year, the markets crashed on the collapse of Lehman Brothers. Th governments of the world decided that it would not let that happen again, so now we have round after round of bailouts to keep zombie companies like AIG and Northern Wreck going.

But this week is a new turn for the worse, markets are falling precipitously since last Friday, the FTSE is down over 10% in 3 days; many are saying they see little support for prices until they hit 3000 or less. Even gold is falling again as deleveraging kicks-off with renewed vigour.

In the midst of this, Ben Bernanke is sounding off about US Fed policy, Brown is being snubbed by Obama and throwing his phones at the wall in the Whitehouse ante room.

Meanwhile, the markets fall and fall. The Government intervention is cack-handed and ill-though out. Look at the current Lloyd's debacle, the company was set to announce the Government asset insurance terms on Friday, here we are 3 trading days later and the share price is down nearly 50% on no news. Terrible PR handling, terrible Government.

The markets are the telling the UK Government what it thinks of its plans, just wait until the bond markets catch-up. We need a concerted plan, waiting for the G20 in April is a bad option.

FSA in mercy killing of UK bank shareholders

Well, that could be one view of the FSA's decision to allow the banning of short selling UK financial shares to lapse on 16th January.

I don't subscribe to the view that it was shorting that caused the bank share prices all their pain; it was their dodgy balance sheets.

Sadly, these are not improving very fast and so the situation remains that shorting may re-commence with a vengeance.

Perhaps the one chink of light for the Bank Shareholders is that the Hedgies are a bit shorter of ammo than they used to be.

In reality, let us hope that the FSA and the Treasury are speaking about this; there will need to be some sort of shoring up announcement from the Government to help support their own shareholding position. I expect that to be announcing some guarantees for future, erm, non-dodgy?, loans made by the banks. As an outlier there is the chance a 'bad bank' (AKA Northern Wreck) will be created to stiff taxpayers for generations to come.

Either way, if the Government announces nothing expect a wild times in financial shares from mid-Jan...