Can Liz Save Britain?
It's easy to mock their new Prime Minister, but there is nothing funny about the shocks coming at the British economy.
Last year I wondered if Britain is bankrupt.
It gets more obvious every day that the answer is 'yes'. The UK's economic outlook was already grim, and reached the tipping point with the Ukraine war-and-sanctions spiral. It is becoming impossible for millions of Britons to make ends meet, and there is worse to come:
- Deutsch Bank forecasts consumer price inflation for gas and electricity at 80%, compared to a 40% average across the eurozone
- The International Monetary fund (IMF) has come to the Superbubble view, stating that the UK is much worse off than its Western allies
- In an article — which does not include the word ‘sanctions’ — The Telegraph claims that Putin's actions are “inflicting immense permanent damage”
The Telegraph — the newspaper closest to the UK government — goes on to depict a future of "calamitous poverty, civil disobedience, a break-up of the UK, nationalisations, price and incomes policies, punitive wealth taxes and, eventually, a complete economic and financial meltdown and IMF bailouts".
Meanwhile, daytime TV is turning economic collapse into light entertainment. Spin the wheel and get your energy bill paid for four months.
Bail-out nation
Of course, extreme economic problems are brewing all over the world, but Britain gives the clearest example of what happens when a credit Superbubble pops, taking the illusion of wealth with it:
Reality will soon demonstrate, if a country can’t afford to keep its citizens warm during the winter, then that country is poor, not rich. — Doomberg [🔒]
The UK has lived far beyond its means for decades, papering over the cracks with ever-expanding credit issued from commercial banks in the City of London.
The dollar-based global financial system allowed banks to type money into existence without limit. This created a casino economy flooded with easy credit … And this credit fueled a 35-year debt/consumption party that destroyed the productive parts of Britain's economy.
This bubble is unsustainable, unstable and winding down fast … And there is not much Liz Truss or any other politician can do about it.
The 2009 Greek debt crisis is a useful template for what happens next. Back then the troika of the European Commission (EU), the European Central Bank (ECB) and the International Monetary Fund (IMF) gave bailouts to the European banks that fueled the crisis.
But this time around there is no troika to rescue Britain's financial system: Brexit meant a break with European institutions — and the IMF and US Treasury have bigger fish to fry.
What can Liz do?
Yesterday, Liz Truss became leader of the Conservative and Unionist Party. This also made her the Prime Minister of the United Kingdom.
It will not go well.
Not because Liz is incompetent — which she probably is — but because there are only very painful solutions to Britain's economic problems. Expect the Truss supremacy to be short and chaotic — because that's what happens when once-in-a-lifetime credit bubbles pop. And that likely means a succession of short-lived leaders who fail to deal with core economic problems.
Race to the bottom
The Western world is accelerating into politically-engineered crises in food, energy, currencies. supply chains … And just about anything else you can think of.
We can argue about which politicians are most to blame, but that will not help the hundreds of millions of people that will suffer — to varying degrees — across the West and the developing world.
The United States and Germany still have the remnants of productive economies and *could* have better long-term prospects. However, politicians are driving their economies towards the cliff edge — cheered on by a fully compliant media machine.
It took decades to deindustrialize Britain, but Germany is attempting to do it in less than a year. And unless there is a radical change of direction, they will succeed — sending economic depression rippling across Europe and the world.
The next phase will bring balance-of-payments crises, capital controls, currency devaluations and people going apeshit in cities all over the world.
As a 100-year credit bubble pops, there is not much any leader can do. So I recommend maximum distrust of politicians. All of them – the ones you like and the ones you don't like – across the spectrum of righties and lefties and greenies and deniers and whoever else is lying to you on behalf of powerful interest groups.
Hold tight.
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