The collapse of European economies has now begun, starting with the continent’s weakest economic link: Britain.
This country’s collapse was triggered by the release of the new Government’s budget last Friday. The budget was ridiculous – an expansionary package in an economy with high inflation and an enormous trade deficit – and it sparked a sell-off in the gilts market, which soon spread to the market for sterling. Pension funds are now facing huge losses. Next will come more inflation, a recession and higher unemployment.
The media has leapt to blame the Government – as if a single budget announcement could trigger a full-scale economic collapse. “Are you ashamed of what you’ve done?” BBC Radio Kent asked Liz Truss, in a shallow spectacle that has become all too common in contemporary Britain.
The truth, however, is that the budget was just an excuse. The financial markets have been making noise about the economic situation for weeks. At the beginning of September, traders were jokingly referring to the “British peso”; rumours were circulating of British bond trading desks handing off their trades to the emerging markets crisis desk. Anyone with any exposure to the City knew what was going on. That should have included the Bank of England and the Treasury – who appear to have been asleep at the wheel since the war in Ukraine started; nay, since the lockdowns started.
What was the City worried about? High inflation and an out-of-control trade deficit. At the end of August, Goldman Sachs projected inflation in the U.K. would reach 22% next year. A few days later Deutschebank projected a current account deficit of 10%, something unprecedented outside of basket-case emerging markets that experience serious financial bubbles.
What was the cause of these imbalances? The answer is simple: energy costs. Britain imports a lot of energy. When the cost of energy rises, imports balloon and the trade balance collapses. These higher costs are passed on to consumers and henceforth comes inflation. This is a crisis not simply facing Britain but all of Europe; Britain fell first because it was the slowest animal in the pack.
This is because Britain has long relied on the City of London for its prosperity. Britain does not have a serious manufacturing base, so sterling relies on financial inflows to the City. In an economy that relies on manufacturing – like Germany – the current crisis takes longer to manifest. In Germany, energy prices will have to rise a bit further before industry starts to shut down. At this point, exports will collapse, inflation will soar, European bond markets will sell off and the euro will tank.
This is already happening, but gradually.
In Britain, the whole crisis can be priced in immediately because all it takes is for the City of London, and the international banks and money managers with whom it does business, to realise the gravity of the situation, and then press a few buttons. That makes Britain a sort of canary in the coal mine for the whole of Europe – something that European politicians are gradually waking up to.
There are now two possible paths. The first is that the sterling and gilt markets continue to sell off in the coming weeks and sterling follows them down. The second is that they calm down but then, as winter bites, inflation gets worse and the trade balance deteriorates, it starts all over again. At the time of writing, the former seems more likely.
Is there a way out? There was until Monday when someone sabotaged the Nordstream pipelines.
Most people – myself included – thought that after the economic chaos this winter, Europeans would cave on the Russia sanctions and Nordstream would be reopened. That is no longer an option. Energy prices in Europe are now permanently higher – at least until we start building new capacity, but that will take years. There is simply no way out. The collapse of the pipeline on Monday was like that scene in the movie where the cave entrance is covered in rocks and the hero is trapped inside.
All of this was perfectly and tragically obvious. By May, it was undeniable that the Russia sanctions were not working. But we pressed on anyway with the media pumping out idiotic nonsense week after week. When Russia started to cut off the gas, it was equally obvious that the economic consequences would be devastating, especially for Britain. But those of us who said anything were dismissed as Putin apologists – and the media gave a voice to those who made promises about LNG (Liquified Natural Gas) that could never be kept.
Well, here we are. The cheque has bounced, and the economy is in freefall. Nordstream is a smouldering wreck at the bottom of the Baltic Sea. There is no turning back.
Philip Pilkington is a macroeconomist and investment professional. You can follow him on Twitter here and subscribe to his Substack newsletter here.
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God Bless America.
Or, are they indeed The Great Satan. Guardians of the Free World. Lol.
Meanwhile, amongst the soon to be freezing (or maybe smouldering wreck of Europe).. Our Great Leaders will themselves never be personally affected by the Great Sacrifices we have had to make upon the Altar of Covid and Ukraine.
Dam them all to Hell.
As with the covid panic, it’s instructional to see the reactions of the supposed right-wing MSM to all this. In the Spectator and Telegraph, the reams of copy slamming Truss and Kwarteng for taking risks are matched only by those ludicrously pushing Starmer and Labour as a new hope. So is the question held within the cozy, familiar surroundings of the Palace of Westminster.
The truth, as any thinking person can see, is that the budget is a sideshow to the mountain of terrible, terrible decisions made by HMG and fulsomely supported by His Most Loyal Opposition over the last many years. Every time I think we have one of the worst governments in history, an even worse one comes along.
Seriously, is there any reason why one shouldn’t? And will the likes of Polly Toynbee apologise for mocking those who for many years have been warning that the world is going to hell in a handcart? Or will these people find some way of rationalising even this?
Incidentally, I see that James Delingpole has been talking to an exorcist (Laurence Fox, GB News). I must say it is high time that a serious look at the demonic element in all of this was taken. The presence of evil in the world seems particularly obvious in these times.
“The presence of evil in the world seems particularly obvious in these times.”
The vast majority cannot understand the level of evil that is about. I’m not sure I can but I fear the depravity that is coming our way these next few years. Sadly most people bury their heads in the sand and refuse to accept what most on here see very clearly. There is not one person in my social circle who shares my views. Not one.
So sorry to hear this, HP. It must be quite lonely. I’m in a lucky position where I already knew a lot of like-minded people. Then I started attending the Stand in the Park meetings near here and although a few of the people are out and out conspiracy theorists of the wackiest sort, there were also some good sound people there too. I don’t have much to do with many of my oldest friends because they’ve been drawn into the narrative and it’s just pointless engaging with them about anything important. If you were down the road, we could hook up for a pint or a cuppa but I think you’re up north and I’m down here in the south.
I’m also down here in the south and my experience of my local SitP meetings is similar. I keep in contact with my old (pre-Covid) friends and they accept that I’m “a rebel” and always have been ….. but there’s no point having anything but a very superficial conversation with them since they’ve completely bought into the narrative.
Thanks Aethelred. I much appreciate your kind comments.
That’s the spirit! May I also suggest joining a centreRight challenger party too!
Go and check out Paul Levy and what he says about demonic forces. He is a Jungian who went through a personal journey of darkness and came to an interesting understanding and healing. His website is called awaken in the dream (dot com). It’s fascinating stuff and he’s no fruitcake either. This is an excerpt where he mentions wetiko – sort of a demonic force:
To quote Jung, “there is a terrible demon in man that blindfolds him, that prepares awful destruction.” This “terrible demon” (in modern language, an “unconscious psychic force”) within humanity that creates a destructive blindness in us is none other than wetiko (which is a form of “psychic blindness”). It should get our attention that Jung felt that the most vital and urgent task facing modern-day humanity was “an exorcism” (in my words, “dispelling wetiko”) that would free us from our state of possession by the unconscious.
It takes a special kind of form to publish two The end of the world is nigh! articles in a row which claim there are completely different reasons for the imminent collapse. This suggests that two different people are trying to market their different, somewhat hidden agendas using the usual terror marketing of the woke left: We must X or the world will end!, examples of X being lockdowns, Net Zero or don’t vote for Trump (who was rumoured to start a global nuclear war due to his allged retardedness and mental instability).
I have a much better idea: No more terror marketing. Whoever tries to scare people to make them support something wants to achieve something that’s better for himself than for the people he’s trying to scare.
“Completely different reasons”? Both articles are predicting economic collapse because of a serious energy crisis. The crisis is due to 1. Failure to prioritise energy security over green fantasy 2. The decision to launch economic war against one of the region’s biggest fuel suppliers.
What hidden agendas do you think the two authors have?
Differing ones, obviously. I suggest government investment into fossil fuels (or at least, end of government punishment for that) and lifting of sanctions against Russia. But as this hasn’t been spelled out, it’s just a guess.
Nuclear war? Voting for Beijing Bidden instead of Trump (or big tech doing so at any rate) reminds me of those poor unfortunates who avoided air travel after “9/11” and ended up dying in road accidents.
I have responded to that already Hugh. We are on the same page.
Sadly.
I don’t claim that this MOST.DIRE.WARNING made any sense, it was just being circulated at the time and fits the pattern I wrote about.
“The Real Cause of Britain’s Economic Woes”
Thoroughly dishonest politicians. That’s it.
See my reply to VWTS above.
Good to see a financial article on the DS. I’d pretty well go along with most of it (although I have no background in finance).
Where I sort of disagree is the statement:
the Bank of England and the Treasury – who appear to have been asleep at the wheel since the war in Ukraine started; nay, since the lockdowns started.
The BoE and the Treasury have been asleep for a very, very long time. Certainly since 2009, and arguably for a decade and more before that.
As the article points out, the mini budget is merely what has precipitated the latest panic, not what has caused it. Long term effective zero interest rates and massive QE have, in effect, done for the currency, and thus the economy. KK’s budget is pretty irrelevant in comparison.
Oh what a bitter, bitter sight it was to see Mark Carney – MARK CARNEY of all people – criticising the budget. Along with Osborne, more than any individual he is responsible for the country’s current economic woes. For 7 years, along with Osborne, he was responsible for the ridiculously low interest rates and the long-term QE – and thus the resultant long-term living far beyond its means which has plagued this country since at least 1997 and BoE independence, but more especially over the last 13 years.
As far as I’m concerned, on my personal hate scale, Carney is up there with Whitty, Valance and Ferguson.
Asleep at the wheel and tangled in terabytes of terrible spreadsheets.
Ok, someone ruin my day – when will interest rates go above inflation rates? Hammering prudence is madness in a country in possibly terminal demographic decline.
The interest rates are certainly low cf inflation, if anyone has a pot of cash in hand, but there are parts of the world with a long term history of negative rates – such as Japan. I suppose one could argue that the net rate is actually negative here, given the inflation rate.
“As far as I’m concerned, on my personal hate scale, Carney is up there with Whitty, Valance and Ferguson.”
Carney got the BoE gig precisely because he was a WEF stooge. I never understood it at the time – I do now.
Carnage Carney was placed in order to do the ground work – the continued ridiculous borrowing, the crazy low interest rates. He was setting the scene for the nation’s coming impoverishment.
Yes, Carnage Carney is up there with the other criminals you mention. A spiteful, evil little man.
This is nothing that Dr. Vernon Coleman hasn’t been predicting for the last couple of years.
His book “Endgame” is well worth a read.
Absolutely. Dr Coleman is years in front of anybody else on this Reset horror. And always right.
I think he writes for The Expose now, certainly no article in The Light.
I’ve always found his predictions and grasp of the current malarkey to be 100% accurate.
He also has a cutting sense of humour – his “Passing Observations” especially so.
“Are you ashamed of what you’ve done?” BBC Radio Kent asked Liz Truss, in a shallow spectacle that has become all too common in contemporary Britain.
How do you ask the BBC if they’re ashamed of what they’ve done, including but not limited to virtually ignoring the “vaccine” death of one of their own journalists?
If we were to put £20 notes in a suitcase then 1 suitcase would contain about £100,000. So 10 suitcases would be £1,000,000.
Now imagine a (very big) field that contained 500,000 (half a million) of these suitcases.
Now imagine getting all those suitcases and putting them in a big pile, pouring petrol on them and setting them alight.
That’s in effect, what we have done with the taxpayers money spent on Covid in the UK ALONE, a virus that, at worst, is cured by a Lemsip Max.
That is why we, and the rest of the world, now have eye watering inflation.
It’s not rocket science.
Anyone care to estimate how much of the hundreds of billions of pounds we have squandered on this shambles we can ever hope to get back?
We will get back diddly squat, apart from even more economic pain.
“Someone sabotaged the Nordstream pipelines”
Obviously the MSM is blaming Russia, basically saying Putin is showing Europe that all our other subsea infrastructure (pipelines in the North Sea, Internet cables etc.) is vunerable if we continue to support Ukraine. To me this makes a certain amount of sense.
The other possibility is the U.S. because they don’t want European countries, particularly Germany to go begging to Russia when the lights are about to go out this winter, and row back sanctions in order to get the gas flowing again. To me this also makes a certain amount of sense, especially as Biden said at the beginning of February that if Russia invaded Ukraine there was no way that Nordstream2 would ever become operational.
Mr Pilkinton wishes to spread doom and gloom economic messages (‘full-scale collapse’ ‘no way out’ etc) in Britain and the West in general.
No matter what level of material deprivation may ensue in these regions in the near future they pale into insignificance before the implementation of the humanicidal nuclear threats (with an especially vindictive focus on the UK itself) which have been issued by the Russian Federation on an almost daily basis.
Or the mass death and destruction continuously being suffered / inflicted in Ukraine.
By the same neo-fascist Russian Federation / Putin regime which Philip Pilkinton is suggesting we should have continued to do normal business with.
I have news for all those promoting this ‘the West is finished’ mantra.
Multi-party liberal democracy, though by no means perfect, is infinitely more in tune with the true human spirit than tyrannies such as Russia and China, and will inevitably prevail.
At an economic level measures (again in spite of the article’s check-mate fatalism) are already being put in place to outflank Russian energy monopolism and blackmail and consign them to the dustbin of history.
As soon as the West fully awakes from its current Net Zero stupor (as again it inevitably will) the naturally far more innovative and successful nature of democratic societies will lead to complete economic dominance over ultimately time-limited totalitarian ones (CV the collapse of the USSR).
Don’t believe the hype.
When the war in Ukraine started I did read that the UK imported 4% of it’s gas from Russia. Therefore stoppage of this would not have a significant impact on our energy.
As I see it, the costliest cause of a lot of energy problems is the adherence to the ‘Net zero’ mantra.
If all the green taxes were abolished and our coal fields were once again opened surely that, along with oil and gas from the north sea would have a major impact on energy security.
But is that too much common sense?
Exactly, it is the now three and a half decades worth of self-destructive ‘Climate Change’ based energy policies which have fundamentally led to the current dire economic situation, not Russian sanctions and counter-sanctions (though they did represent a tipping point).
And we can relatively easily and speedily pull ourselves out of this entirely unnecessary mess by taking the fossil fuel exploiting measures you recommend.
A reality which anti-democratic Russian and Chinese forces (and their fellow travellers in the West) are desperately trying to obscure by continuing to promote the Catastrophic Anthropogenic Climate Change myth / suggesting that Russian sanctions are entirely to blame and need to be lifted.
This analysis of the underlying economic situation is spot on but the Government’s mini-budget further fanned the flames. The media has not helped either, by manufacturing as it did a climate of fear over Covid. Now the great panic has spread to energy supplies, mortgages and pensions. Government intervention can not really change anything and the media have reinforced that perception. Nonetheless eating a bit of humble pie might help a little by reversing all of the tax cuts. This is not the right time and lowering the top rate, from a relatively modest 45% was an own goal.
The Bible predicts two versions of the four horsemen of the apocalypse:
Revelations: conquest, war, famine and death
Book of Ezekiel: sword (war), famine, wild beasts and pestilence/plague.
There are also predictions about money becoming worthless.
Looks like the Globalists have got them all pretty-much covered.
No, no, no. The energy situation is a separate, unhelpful, issue.
Inflation is always monetary. Increased prices, wages increase are symptoms not the cause.
Too much money going into the economy chasing too few goods; a seemingly endless policy of too low interest rates – too cheap money – which causes over-demand and misallocation of resources by businesses.
The Government has pumped hundreds of billions into the economy over the last two years increasing demand without increasing output and where global output has been more or less shut down, supply lines empty, production disrupted.
Much of that money was for people not to work, and for both they and businesses not to produce, but also for non-productive activity, CoVid testing, Track & Trace, unused Nightingale wards, ventilators, NHS sitting around twiddling its thumbs, PPE, advertising the coming Armagheddon, etc.
Britain has always imported most of its energy, and those import prices have skyrocketed before without causing economic collapse. The problem is supply. Having nixed cheaper, reliable coal in favour of expensive, unreliable wind, to keep the lights on needs back-up by gas powered generation.
But gas has to give way to wind when the wind is blowing, so it is denied revenue. Further the gas stations have to stay turning, burning gas, ready to take over when – not if – wind power drops out. This is a cost without revenue to cover it. So gas produced electricity is higher priced than need be, otherwise gas stations would go bankrupt. So not the higher price of gas per se, although that doesn’t help.
This higher priced gas produced electricity dominates the mix in terms of pricing. So gas prices determine the price of ‘free’ wind (stop giggling) and ‘low cost’ nuclear both industries cashing in on selling at gas prices – the result is we are paying more for electricity than we would if there were no wind mills and we still had coal providing base load.
Solution to inflation: increase interest rates, gradually but quickly, and to a level above inflation before it gets anywhere near 22%,, start removing money from the economy, increase taxes – VAT would be best to decrease consumer demand, cut public spending. Yes, yes… recession. But we are going to get that anyway.
Solution to energy: build coal fired power stations, stop subsidies to wind and solar and scrap them: stop sanctions on Russia.
Unusually for the Daily Sceptic, I think this article is bunk. Sorry.
Energy prices certainly are not helping. But in normal times we would weather such a storm.
The real root cause of our economic woes are THE LOCKDOWNS. They massively reduced production across the world for months at a time. Reduced production means reduced consumption. Most countries in the world have tried to avoid that by borrowing – but if world production is down, world consumption MUST fall one way or another.
The current crisis is the invoice for the lockdowns. The government and most of the people of our country were stupid enough to think they were free. The invoice must be paid one way or another and anyone who pretends the pain can be avoided is lying.
Hello sceptics. Energy comment…
My grandfather was NCB head engineer of coal mining – he assesed the German mines, in a military capacity, after WW2. He said that there would never be an energy crisis in Great Britain, because we have proven supplies of coal under our shores to last 1,000 years! Now we have the technology to burn it cleanly. Add into that, the abundant natural gas deposits we have, then we should be laughing all the way to the BRICS bank of the Petro-Ruble.
But why not?
One of the best articles I’ve read here, and I’ve read a lot of superb ones.