Is Britain Bankrupt?
Boris Johnson's illicit booze, illegal cakes, and other dramas distract from the United Kingdom's dire economic future.
BoJo is in trouble.
His latest crimes: regular piss-ups in government offices during Britain's Covid-19 lockdowns …While the police handed fines to thousands of citizens who did the same.
This being 2022, simmering outrage is ready to boil over.
Boris might hang on for weeks, months, or even years, but Partygate matters little compared to the economic problems coming at Britain. Problems which have finally started pushing though to the front pages:
The fact is that the British economy does not produce the standard of living its citizens enjoy. And for decades the gap has been filled with borrowing and printing money.
This is unsustainable. And economic history suggests it will end badly.
Who can save Britain?
The main candidates to replace Boris are not impressive. It is safe to say that:
- Rishi Sunak will be a bad prime minister, if he gets the job.
- Liz Truss will be a bad prime minister, if she gets the job.
- Keir Starmer will be a bad prime minister, if he gets the job.
How am I so sure these politicians will perform poorly?
It's not to do with their individual qualities, the problems is Britain's dire economic outlook.
Today, Ofgem, the UK's energy regulator, will announce a rise in the cap on energy bills. This will bring price hike on record, and could push average home energy bills to £2,000 a year from April.
This rise of more than £700 could plunge millions of Britons below the poverty line.
So the British government is offering a £200 rebate on energy bills, which will still leave everyone more than £500 a year worse off … Not counting rising inflation in other areas of life. And there is worse to come.
The Superbubble view:
The importance of particular politicians is often overstated when it comes to the big economic megatrends.
I count 19 different prime ministers in the last 100 years. After Stanley Baldwin, every prime minister oversaw declines in the value of the pound.
These charts do not show how much further the British pound could fall. Rising prices is another way of saying declining currency values and a declining currency is the key thing happening to Britain now.
“How did you go bankrupt?” Bill asked. “Two ways,” Mike said. “Gradually, then suddenly.”
These lines from Ernest Hemingway’s The Sun Also Rises, shows how financial collapse sneaks up slowly – over years and decades – and then seems to happen all-at-once.
We are getting closer to the 'suddenly’ stage. And there is not much an individual politician can do to avert that.
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Updates:
Britain pays 5,000% over normal price to prevent electricity blackout
2022-07-25 London only avoided a blackout last week by paying a record high £9,724.54 per MWh (more than 5,000% higher than the typical price) to briefly import electricity from Belgium.
Last week, unknown to most UK citizens, parts of London came very close to a blackout—even as it was recovering from the hottest day in British history. On July 20, surging electricity demand collided with a bottleneck in the grid, leaving parts of London short of power. Only by paying a record high £9,724.54 (about $11,685) per megawatt hour — more than 5,000% higher than the typical price — did the UK avoid homes and businesses going dark. That was the nosebleed cost to persuade Belgium to crank up aging electricity plants to send energy across the English Channel.
The crisis shows the growing vulnerability of energy transportation networks—power grids and gas and oil pipelines—after years of low investment.
The pound risks becoming an “emerging market currency”
2022-05-31 – A Bank of America report claims that the British Pound is in danger of becoming an “emerging market currency” as falling growth and growing risks cause investors to flee sterling, according to .
Short positions have been mounting against the currency as the global economic challenges of the war in Ukraine, inflation, supply chain bottlenecks and slowing growth converge with domestic risks stemming from the Bank of England’s unique predicament and the fallout from Brexit.
An economy on the brink
2022-05-05 – The UK economy is on the brink. Bank of England Governor Andrew Bailey warns families to brace for a bleak Christmas with the cost-of-living crisis set to bring CPI inflation to more than 10 per cent - the highest level since 1982.
The news reflects economic realities
2022-05-03 – The covers of British newspapers show a shift from Ukraine to harsh domestic reality: "Prices are already too high" ... "Shoplifting to survive" ... "Fuel poverty predicted to affect 40% of households" ... "Energy bills will reach £3,000".
'Acute crisis' coming
2022-03-24 – Ken Clarke, former UK Chancellor, says the economy faces 'an acute crisis.'
Millions of Britons forced to choose between 'heating or eating'
2022–01–23 – Britain’s welfare system leaves millions struggling. The soaring price of food and rent, along with energy bills is forcing families to choose between basic essentials such as food and heat while growing numbers are being forced into debt and relying on food banks.
A failed state?
2021-12-22 – Gordon Brown, former UK Prime Minister, warns that Britain is in danger of becoming a "failed state".
Supply chain crisis to last into 2023
2021-10-19 – UK supply chain crisis to last beyond 2023. Business leaders warn inflation will rise and small businesses will bear brunt of worker shortages and price increases.
Updated update July 2022: Yup.