I finally found a bit of time. Just sat in a coffee shop and finished ‘work’. Some time so I though I would scribble some reflections over the past years or so.
It has been 14 months since I published an article. It is not that I stopped scribbling, but rather kept being distracted by events. Various deaths, family illness, weddings, babies and the like: the circle of life really.
Back in March 22, the Ruskies had invaded Ukraine who were valiantly hanging on. A year on, they look like winners in the making. The lefty liberal wet ‘western’ politicians better not let them loose and there will be no end to Ruskie or Chinese aggression if not. Churchill understood this when he alone stood up to Hitler. Despite his many flaws, Boris also understood this in his very vocal and visible support of Ukraine.
But what of the consequences ?
Well, predictably, inflation has soared everywhere. Whilst the UK MSM loves to bash away, it does rather ignore how bad inflation is in lots of places close to us. Poland for example is circa 14% right now, Germany similar to us but with much more to come due to energy costs just filtering in.
At a personal level, excessive inflation eats away at our wealth and purchase power. It essentially makes us poorer, and we will have to get used to being poorer. Anyone believing otherwise is just not paying attention or looking to history.
At a national level however, inflation is very useful. Unions have been demanding massive pay rises in the public sector and steadfastly not getting them. Personally I feel public patience is thin as everyone not in the public sector does not have the security that they had (especially during Covid). By agreeing sub inflation rises their relative pay goes down. This reduces the burden on the state over time. In addition, the national debt reduces in relative value. Again, this benefits the state.
It is a sad reality, but a couple of years of higher inflation is a great tool to both reduce debt and the state size.
We got addicted to ridiculously cheap money and now have to pay the piper !
Our shopping bill has not changed very much. We had already started shopping at Aldi for some things. Personally I find the Veg and meat of much better quality than most supermarkets, so overall our shopping bill is still about the same (a bit more but not very much). We also started using an Air Fryer. Perfect for the two of us and paid for itself in 5 months. We sold and upgraded to a dual Nynja and whilst not as energy efficient, has way more capability to a point we probably turn the oven on once or twice a month at most now.
It is also noticeable that some supermarkets are no longer selling some premium products. They have downgraded (to match the cost conscious entrants and promoted own brands. One of our supermarkets even turns off every other light – the place is dim and uninviting. Not sure it is working as there are less and less people there when I go (I go there as it is convenient for cat food !).
The place I notice change more is the stock market. I have always looked to a time horizon of 5 years+, but at the very least in some things at least 3 years ahead, so I did not panic sell anything. Had I done so, then our net wealth would be rather higher than it is right now. Some lessons about recognising cycles and mass herd behaviours have been learned. Although it is irritating, I am not at this point unduly worried. There is nothing structurally wrong and the investments still look sound and cash generative.
Nationally, there is every indication that by the year end we should, if not solidly, be obviously back into a growth phase. Yes interest rates have just gone up to 4.5% and like many I do wonder the the Band of England Governor is doing – the man is clumsy to say the best. But they will start to fall by autumn and I expect interest rates in 12 months time to be closer to 2.5-2.8% and the following year 1.8%-2.3%. I don’t need to be an economics guru to see this. Just look at how inflation will fall: by the end of next year to 1% according to the forecasts.
By the end of next year the cumulative 3 year inflation will be in the range 20-30% (different measures depending on view points), pay (particularly public sector) will be half that: a relative pay cut, National debt in relative terms will likely be 20% lower in relative terms and taxes still high. Any real economic growth will generate large tax receipts.
How government uses that tax will depend who is in power but not that much as frankly there is little difference between the Conservatives and Labour offering. Fluff and mirror sound-bites aside, lower taxes are not coming any time soon in my view, just as real public sector reform (particularly the hungry beast that is the NHS) will also not happen. I would almost say that state finances and relative debt levels will be very similar to now in 6.5 years time (end of the next parliament.
That does not bode will for the stock market who require strong growth that will be damped by a relative reduction in purchase power.
I wonder if it will only be massive infrastructure projects such as HS2 and the much touted ‘Green Revolution’ that will keep us afloat ?
The UK is not alone in this conundrum. The EU big states are in a parlance mess with ever increasing social unrest. Parts of France seem in a semi-permanent riot state and regions of Germany are getting very vexed on state and EU directed mandates. Poland and Hungary are leading the charge (now the UK has left) in challenging the supremacy of the unelected and unaccountable Brussels technocrats and across the board they have nearly no unity or strategy of collective defence. Given we are 15 months on from Russia’s aggression on the EU border this is nothing short of terrible leadership. (But then as defence minister VdL ran the German military down so badly soldiers were charging about in 4X4’s with broom handles out shouting ‘bang’ while pretending to be tanks !)
The USA is also in a real political mess.
I had work blocks in the 80’s, 90’s and 2000’s in the USA visiting many times and going all over the US. In April I went to an event for 9 days as my first visit in 19 years. What a different place. The palpable feel was so different, although I am sure someone coming back to the UK after 20 odd years would say exactly the same. Some of my American colleagues spoke in hushed voice of the tinderbox and their genuine fear for civil war. Although given they seem to have a choice between a mentally challenged geriatric partnered with a VP of very limited ability vs what looks like being Trump where would the leadership and defite civil war cause come from. I am not sure the Chinese need to provoke anything in Taiwan that would unify a response. Just let the US break itself and win by stealth.
So where will we be in 6.5 years time I wonder ?
For the first time recently my wife asked me if I wanted to move abroad when her mum died. Whilst I do not wish the lovely lady’s demise, she is 86, frail, a bit doddery and struggling – we don’t want her suffering the way the other 3 did !). But hard to see her being around in 6.5 years time I think.
There are no favourites, but we are going to Caletta de Fust in Fuertaventura very soon for a break. We visit regularly and my wife calls it ‘One of my happy places‘. Its a lovely island. We also love Madeira. But I would not be adverse to New Zealand’s Bay of Plenty – I loved it there and would go back tomorrow (not least as my Doctor and his family are emigrating there soon and he is a terrific doctor).
For us, the future looks more and more where the world is quieter, where the growing social unrest whipped up by our collectively blind and vision-less western politicians, and the economic woes from the spectre of the 1970’s are way less obvious.
Coffee & cake finished … it actually felt good to just splurge out again. I really have to make more time for that.
Now … back to Eurovision party prep …. Last year, we won (sympathy vote aside ha ha)