Every day, journalists, traders and workers of all kinds around the world wake up to do their jobs as they always have. Part of that requires everyone to pretend that life is normal, fixable, and more or less stable. All of this is temporary. It comes and goes and it’s really not that bad.
Strange, isn’t it? Human beings find it difficult to adapt to disaster, in their decision-making and even in their state of mind. Reporters should do their job as they are trained. Traders too. Everyone does it. They make their bosses happy. They don’t sound the alarms. They don’t screech and squeal like they probably should.
But there is a time in the day when work is done and maybe a cocktail comes out or the dishes are washed and the kids are in bed and the room goes quiet. Right now, millions and billions of people around the world know it. Disaster is all around us. We just pretend otherwise, just because that’s what we have to do.
It was like that during the confinements. They must know what they are doing, otherwise why would we have to do it. If we all do our part, maybe this will end sooner rather than later. The experts surely know better than us what is what. What can we do but trust?
Let’s adjust and find a way to normalize all of this in our minds. We are powerless to change it in any case.
And so the peoples of the world have adjusted and will continue to do so as the fundamentals decay and rot, long after lockdowns and most vaccination mandates end, even as all the old rituals and signals of the life as we once knew them are fading away. Memory.
Enough with the dreary existentialism. Let’s talk about living in a one-bedroom apartment in London. The price of energy for heating has almost doubled, seemingly overnight. Really, it took months, but it felt like day in and day out. Energy bills will approach a substantial portion of the rent itself. And the forecast – which is what to do because that’s how energy markets work on the consumer side – shows a doubling and a doubling again.
Here’s what Goldman Sachs sees.
Small businesses cannot operate under these conditions. ‘Celeb chef Tom Kerridge has revealed his pub’s annual energy bill has risen from £60,000 to £420,000 and warned that ‘ridiculous’ price rises are leaving the hospitality sector facing a ” terrifying scenery,” reports the Telegraph.
All this goes well beyond consumer prices in general. It’s only until June. We are already approaching 100% inflation in energy.
Many will have to close up shop. Incoming Prime Minister Liz Truss, who calls herself a conservative, has capped price increases for consumers while pushing the biggest ever spending bill to bail out energy companies. It really seems like she had no choice. Yes, that’s what they all say, but in this case it might just be true because otherwise the whole nation would totally crumble.
It could happen anyway.
“The UK could face a wave of corporate bankruptcies exceeding anything seen during the post-2008 panic and recession,” reports Joseph Sternberg. Some 100,000 businesses could be forced into insolvency in the coming months, bankruptcy consultancy Red Flag Alert warned this week. They are otherwise healthy businesses with at least £1 million in annual turnover. Business bankruptcies of this magnitude would dwarf the approximately 65,000 businesses of all sizes that failed between 2008 and 2010.”
Everyone wants to know why. As always, there are a number of factors. Sanctions imposed on Russia for its struggle on Ukraine’s borders were misguided. This has never stopped the deployment of such tactics: the sanctions against Cuba still in force began 60 years ago, all with the aim of making a foreign state behave in a way that the states States require.
They have driven up the price of energy throughout Europe and the UK. But even then, Russia only supplies around 3% of the UK’s energy needs.
Another culprit is the government’s fanatical attempt to convert an economy based on fossil fuels to one powered by the wind and the sun. For climate change reasons, we know how good politicians are at controlling the global climate by taking away your consumer conveniences.
But really, even those two factors wouldn’t be enough to cause this level of carnage. The real root of the problem is monetary, which in turn stems (again!) from the lockdown policies: the wild depreciation of the currency starting in March 2020 and continuing throughout the lockdowns destroyed the place. How could they not see this coming? It’s ridiculous.
And it happened all over the world. The chart below that I put together looks messy, but it tells the whole story of how a generation of central bankers destroyed the world. The left key shows you monetary inflation rates and the right key shows you price inflation rates. One is behind the other by 16 to 18 months. I color coded it so you can see the relationships.
This covers the US (green), EU (red) and UK (blue). You can see the huge oceans of paper being pumped up to cover up the glaring evil of the lockdowns. Remember when governments around the world figured they could somehow shut things down and still keep the data beautiful with the printing press?
How quickly things fall apart
My friends in the UK are really freaking out. They want to come to the United States just to get away. But many of my friends are rebels and have not accepted the vaccine because they are healthy and under 80 years old. They rejected the vaccine. Now they can’t come to the United States because the United States still imposes rules that prohibit travelers from unvaccinated foreign countries from crossing borders.
These policies date back to the era of lockdown again: March 12, 2020, in particular, when the President’s office decided on its own to make the unthinkable, closed trip from Europe, the UK, the Australia and New Zealand. It has caused family disruption, business loss, and tragedy everywhere. It’s still not normalized, which makes the point: no one in Washington has any regrets.
This is the essence of politics in America today. Truly, people are excluded from our country because they are not loyal enough to Pfizer, which seems to be the real government here at home, at least as far as public health is concerned.
The most striking feature of what afflicts the UK today is the speed of it all. One day life was normal and then suddenly the bills skyrocketed. No one could explain why. It was kind of a mystery, and extremely disorienting.
Why energy, for example? Well, inflation hits in a weird way. It revolves around the thing most vulnerable to price increases. It could be dictated by fashion or politics or both. But when it does, no power can stop it.
The story of going from normal prices to double and triple prices, planning to go much higher, reminds me of books I’ve read about Weimar, how things were going well until suddenly they didn’t were no longer and life itself took a shocking turn.
Until recently, Americans looked at the chaos overseas and thought that was what these weird foreigners were doing, just weird stuff with unstable governments and fragile financial systems. And yet, right now, it’s happening in our mirror country across the pond, a place Americans consider cousins with a royal family.
What is remarkable is that the monetary policy of the United Kingdom was not as bad as that of the United States. The only difference is that there is a larger international market for dollars than for pounds. This gives the Fed some leeway to do more damage.
But can it happen here? Yes, definitely, and it could happen before the end of the year. The policies of the past three years have created an incredible powder keg. No one knows when it will trigger and no one knows what to do when it does.
There are so many other data points: missing workers, food shortages, political instability and the jaw-dropping entrenchment of Xi-backed lockdowns in China.
The world is on fire. Most people don’t want to think about it or talk about it yet. Still.