Money for Nothing

I'd like you to consider two facts.

Fact 1: According to Our World in Data, the population of the globe in 2015 was 7.3 billion people. 

Context: of this total, roughly 3.5 billion people – or just under half - were sustained by food produced using synthetic nitrogen fertilizers, according to estimates based on the Haber-Bosch process.

Fact 2: The Strait of Hormuz is now shut.

Context: Trump, not the most straight laced of guys it appears, is trying to negotiate it’s opening with a bunch of total lunatics, having just wiped out half of their mates. The markets remain convinced this will all be fine, which, by the way, reminds me of the financial crisis – GFC in the parlance – in late 2007, when markets were at an all time high, just as everything was clearly falling apart and the traders on the desk at the bank I was working at went and bought shotguns to protect against the coming anarchy - which was only postponed by the biggest money print since John Law’s time (see: https://mises.org/mises-wire/what-john-law-taught-us-about-perils-printing-money).

What links Facts 1 & 2? Well, just under half of the world’s urea – used to make fertilizer – goes through the Strait: or at least it did, until it was closed. Now, no more fertilizer. This is Very Bad.

Something else to consider: Very Large Crude Carriers – VLCCs – travel slowly and take weeks to get to their destination. The last tanker to leave the Strait as per normal passage – on 28^th February – will arrive next week. Therefore, the majority of the world has yet to experience any physical shortages, because a large chunk of stuff is still floating at sea. They are only experiencing artificial shortgages wrought by the anticipation of actual shortages.

What is coming down the global supply pipe now, is…well, air. And this reminds me of early February 2020, before people quite realised how nuts the world would go over mild flu.

Fact 3 to consider: if the strait of Hormuz remains shut, then the global economy collapses. This is a mathematical certainty. But even if it opens fully in the next few weeks, we still face the largest energy shock the world has ever faced.

So…we are facing a combination of the GFC and COVID, both at once, at the end of the biggest debt bubble the world has ever seen.

Are we fucked? Well yes of course we are, stupid question. But how fucked? And when will this fucking-of-us occur?

To answer how fucked we are, we must understand that energy is life.

Our standard of living is, in fact, measured by how much energy we get to waste.

Now, we as a country are no longer self sufficient in energy. Ed Miliband has banned oil and gas exploration, Alok Sharma actually blew up several power stations using actual explosives (see: https://www.itv.com/news/calendar/2021-08-22/power-station-landmark-wiped-off-yorkshire-skyline), and our slithering elites are intent on powering the country using windmills.

Why is this bad? Well, energy has to be produced at the moment it is consumed. There is no wide scale energy storage technology in the UK. Intermittent renewables, based on infrastrure made by steel produced in turn by burning coal in China, cannot produce reliable baseload. Therefore, in future, energy will not be there when we want it to be, if it is there at all. Closing down our hydrocarbon baseload energy system faster than we can build out a replacement (or even before we know if we can build out a replacement) has already increased electricity prices to higher than anyone else in the sane, and even insane, world. People have started to notice that the platitudes they’ve been fed by our elites around green energy are garbage, and also that there’s large scale preference falsificiation among those that advice our clueless – or likely insane – elites.

Our elites think we can offset this coming energy shortage by importing from Europe. This obviously worsens our critical balance of payments problem, but even ignoring that - according to the Statistical Review of World Energy (see: https://www.energyinst.org/statistical-review), Europe consumes 38 exajoules of hydrocarbons every year, but produces only 5.5 exajoules (an exajoule is a unit of energy equal to one quintillion joules), and imports the rest from a global market critically reliant on the Straight of Homuz.

And now there is a looming global shortage of hydrocarbons, given the Strait of Hormuz is shut. So our country's plan is to continue to shut down our domestic energy production, and instead rely on importing energy from Europe, who themselves import most of their energy – and who are about to not even be able to do much of that.

So what will our government do when the shit hits the windfarm?

Well, the government still spends 5% more every year than it takes in, in tax. The interest on all this debt is now £140 billion – again: that’s just to pay off the interest. Not long ago it was £100 billion. Soon it will be £200 billion.

The government will not default. They will have to print, faster and faster, which will devalue the GBP.

Because of this devaluation, interest rates will have to go up, by a lot, to keep the Ponzi going. The key point is that they can print money, but they cannot print energy, so, QED, our standard of living will go down even further.

Future A: if we're lucky, house prices will tread water in nominal terms and the banks just about stay upright, whilst high inflation causes significant drops to house prices in real terms, and no one will notice. Food prices go up, which we will notice, but it is still at least there, albeit sometimes patchily. Strait opens, we somehow stagger on, something turns up, we continue a gradual decline into the sunset. Rationing and veggies allround. 

Future B: if we're not lucky, the gibbering gaboons in government terrifyingly, try to actually help, by, for example, subsidizing energy consumption, whilst continuing to reduce production, which will hasten a crash. Kier goes sharpish, Angela Rayner comes in. Bond yields spike even faster, way above 5%. The Rayner government won’t be abe to respond as they will have no idea what is happening, or why.

Printing continues, energy starts to run out. And then, in late 2027, we all run out of credit. Nothing works. 

We are fucked. 

So - A or B? Whadday reckon?

 

Backward Nation

I just want to write this post to wish everyone a Merry Christmas!

But before I do, I also need to add that something quite odd is going on in the gold market. 

I’ve been investing in gold for quite a while, on the grounds that I think one day fiat currencies – ie currencies not actually backed by anything, other than government fiat - will collapse, based on simple maths, and the fact that every other fiat currency in history ever tried has, eventually, also collapsed. The temptation for a government to print money, if there are no constraints on creating it (ie it’s not backed by anything), eventually just becomes too overwhelming. Subsequently, people lose trust in the bits of paper being issued, realise it's all just made up, and the whole thing goes down the swanny. 

This is the first time an entire hemisphere has tried this process at the same time, which should be quite wild when it ends.

Buying physical (or non-physical, but allocated) gold is the simplest and, arguably, best way to hedge against this (ps I AM NOT GIVING OUT FINANCIAL ADVICE! ASK A PROFESSIONAL). Silver, too. Houses also used to be good, as long as the rate of debt interest against them was fixed, but I suspect Rachel’s increase on property taxes in the budget is only the beginning.

Recently, the gold price has been increasing by quite large amounts – although to be technically accurate, I’d once again point out that the value of gold has been staying the same (most stuff priced in gold is – within quite a wide tolerance - more or less stable): it’s just that the number of £s needed to buy the same amount of gold has been increasing, as the value of the currency slowly (for now) disintegrates. It’s currently about £3,200 an ounce – when Gordon Brown sold a big chunk of the UK’s (our) gold c. 2000, it was about £175 an ounce (whoops), just FYI. Idiot.

As a side note, this poses a bit of a problem for a gold “investor” – if you buy gold to hedge against a collapsing pound, and it’s gone up in £s more than you think – should you sell? Seems unwise to sell gold in order to get more £s than you thought you could, as the £ has collapsed faster than you thought it would….but I digress. The price of gold often actually initially goes down in a market crash, as that's the only thing that can be liquidated in a panic to cover margins.

Now to the odd bit. Recently, gold has experienced something called “backwardation”. Backwardation is a term used by coke snorti….sorry, I mean traders at investment banks, to describe a situation where the spot price – ie today’s price – is higher than the futures price: a futures price being a contract for future delivery. For example, in the middle of winter, the immediate price of wheat might be quite high, as there’s a shortage: but there’s a harvest in a few months, and there’ll be more then (unless mad Keir takes all the farms away, not out of the question) so the futures contract price for wheat is lower. This would be a case of backwardation in wheat.

However: THIS SHOULDN’T HAPPEN TO GOLD, and in fact almost never does. There’s no shortgage of gold, and no sudden production surge on the horizon – and as it remains constant, ergo no backwardation happens in the gold market. Ever. Except….erm, well, it’s happening now. As of last month. 

Why?

Well, this suggests that coke snorti….sorry, I really should say traders, are losing faith in futures delivery contracts. In other words, they no longer believe in the bits of paper being issued: they’d rather have physical gold, now, than a bit of issued paper in a few months time, even if this means they lose out on other bits of paper. Basically, they’re losing trust in the bits of paper.

This is quite concerning – if the people right at the heart of the system are starting to think that some of the bits of paper they trade with each other every day are actually made up (gosh!), then how long before everyone else realises the same about all of the other bits of made-up paper - basically, everything else…..? 

I still think we're not quite there... but when they do – the system will collapse. When everyone works out that what they think of as money is actually just worthless bits of paper based on a credit somewhere that won’t be paid, then there’s no energy production, as there’s no hydrocarbons to produce energy (note: mad Ed Miliband is doing his best to get to this bit on his own). And if there’s no energy, then there’s no commercial food production.  And what’s the carrying capacity of the UK in this scenario…? I think it’s probably not 70 million, anyway.

So I thought I should point this out, as it is odd. 

Anyway, I got sidetracked – I’m sure we’ll be fine. Have another mince pie. Merry Christmas!

The Pirchforks Are - Almost - Here

Sometime ago, I wrote a post suggesting that the our economy isn’t a game that is rigged – in fact, I pointed out that it isn’t even a game - it’s essentially an activity, where wealth is transferred from the many to the few. And I postulated that when people realise this, they’ll appreciate that the only option they have left is to go to the few that have the wealth, carrying pointy-tools, and…take all their stuff.

I pointed out that London now is nothing more than a random group of people, who share nothing non-geographical in common and often don’t even speak the same language, and who live in a society with income and asset inequality not seen for over a century. The rest of the country would be the same soon. And now the entire debt bubble it’s based on is showing signs of stress.

I posed the question – how do you govern that?

I think we now know the answer – no one, in fact, can. We are, therefore, close to everyone in the country picking up a metaphorical pitchfork.

From the reasonable state of calm that existed not that long ago forming the general hive mind of the populous, the comfortably numb feeling has completely dissipated and been replaced by…well, something akin to despair, in a (quiet British) sense. People aged 20-35 are fleeing in as-yet largely unreported droves. Economic stagnation is now essentially taken as the norm – not that long ago this would still have been regarded as completely unprecedented, long-term and therefore it must be aberration - but we forget these things. Now, no other path is conceivable. People are just quietly giving up. Mad Ed is still hell bent on closing down our reliable energy system, and at this stage possibly even he knows that what he’s doing is completely idiotic, but still, somehow, just can't stop it.

Are we, then, near peak doom?

I actually think we are still not quite at the crash stage. Cycle theory – Kondratiev (friend of the blog) and co I think are still worth basing analysis on, and suggest that 2026/7 is when the shit hits the air source heat pump. We need to be looking out for news, for example, announcing the new “World’s Tallest Building” which should presage the next crash.

But we can’t be far off. Geopolitical factors will play a part in pulling the trigger on the UK's debt-bomb. US debt is now going parabolic – instead of adding a trillion in USD to their debt every 3 months, as they were last year, it’s now…every 2 months. A trillion is big number to get your head around: a million seconds is 12 days, a billion seconds is 32 years, and a trillion seconds is…32,000 years. Basically, two trillion is a lot.

Key to this is potentially the completely delusional EU desperation to confiscate Russia’s frozen foreign reserves, held in US Treasuries (as have been most foreign reserves, for historical reasons) – or at least use them as collateral for a giant loan to Ukraine, to be repaid from Russian war reparations - which obviously won’t be paid, ergo it’s essentially confiscation. I am no fan of what Russia are doing - but would point out that when this happens, it’s confirmation to the world that US Treasuries aren’t actually as good as gold, and henceforth more non-western countries will switch their foreign reserves into actual gold. And the price of gold will go up more, and US debt will be worth less and it’s all a bit bleak…. and, as the UK is the one of the largest holders of US Treasuries, this might be the thing that tips us all over the edge.

So, what to do? Panic? Well, if you’re going to panic, it’s normally best to panic first. So buy gold. Buy a generator. And maybe even buy a pitchfork. And why not? Everyone else will have one soon, hopefully metaphorically speaking – but you never know these days…

Flying Saucer Cu*t

 

I read a book a long, long time ago about a chap that joined a flying saucer cult in 1950s America. This cult – let’s call it “the flying saucer cult” - were convinced that flying saucers would come to earth on a particular spot on a particular day (I think it was Christmas Eve - but I did read it twenty years ago) – and they had to perform particular, peculiar rituals, and live together in a particular, peculiar way, to prepare.

Not to ruin the book for you - but after several years, the day finally came: the cult members took their allotted slots in a specially selected galactic landing field, laid down to wait, and (spoiler alert): obviously nothing happened. The next day, our correspondent got up, dusted himself off, said “righty-ho, I guess that was all completely wrong then but nevermind” and cracked on with his normal life.

But he was fascinated by the fact that other members of the cult…well, just carried on. They saw the fact that the flying saucers didn’t come as proof that their rituals and peculiar way of life…worked. The fact that the opposite of what they thought would happen, happened, meant that they actually doubled down on their bizarre beliefs (it would be unkind here to point to Secret Surveyor blogs passim...) More, better rituals. Higher frequency. More peculiarity. And so on. He was so intrigued that he wrote a book about it.

Which brings me to Ed Miliband and energy policy.

We’re in a very interesting period: it’s clear that our current energy policy is creating more expensive energy. We know this as energy prices are…well, going up. Quite simply, if you introduce more renewables into the grid, you make the grid harder to manage: as you replace reliable hydrocarbon base load generation with intermittent renewable generation, which is...well, harder to, erm...manage. And if you make the grid harder to manage, it becomes more expensive to manage the grid. And energy prices go up. QED.

We know this is the case, as this is precisely what has happened in the UK recently. And there’s been no impact on global carbon emissions (another spoiler alert: what you are told about global warming is, in fact, going to happen. We are going to run the experiment. And it’s going to be bad).

And yet, and yet…

Renewable energy is meant to bring down energy costs, according to Ed. And as we have introduced renewables into our grid faster than anyone else, globally, and prices have gone up faster than anyone else, globally, this must mean that….we should, what, slow the introduction of renew…..NO! MORE RENEWABLES! FASTER! THE FLYING SAUCERS WILL COME!

Sorry, not sure what happened there…

But it is odd. The enormous grid-failure that happened in Spain should be a wake-up call. Sod the energy transition: it’s obviously nonsense, will be counter-productive, will make no difference at all to global ppm and will leave us in an infinitely worse position to deal with the calamities that are heading our way, climate-wise.

But it won’t be taken as a wake up call, sadly, as this has become far too politicised (“Sorry, you’re against solar panels? What are you, a racist?” Etc).

We are now firmly in a world of preference fabrication – I have met numerous physics professors at conferences who know the above to be true, and will happily tell you so after a few pints (ok, we had more than a few). But will they actually voice this at work? Of course not. Why would they? They don't want to be the bad guy at dinner parties. So 90% of people who know the truth about the flying saucers are keeping their mouth shut, whilst the 10% who are committed to the lunacy control the narrative, and make us all sit in the field, waiting for them to come, despite the fact that Christmas Eve has come and gone and we're getting cold and running out of nibbles...

Best of luck everyone.

Next blog: back to the world ending financially. Hurrah!

Bodge It

Happy Ne…sorry, no time for that now. I’m sorry, I can’t hold it in any longer. Why did she do it? I just can’t come to terms with the fact that the Chancellor, Rachel Reeves, lied on her LinkedIn profile about being an economist at HBOS, from 2006-2008.

I just can’t get my head around it.

HBOS from 2006-2008 was one of the worst financial institutions ever to have existed. It not only drove itself into complete bankruptcy in a short period of time, namely 2006-2008, but drove several other institutions into the ground, simultaneously, through monumentally stupid economic decisions. Then Lloyds, which had to take it over, almost became insolvent itself (well, technically it was insolvent, but just about survived, as we gave them a squillion quid of public money) because the HBOS debts it took on were so enormous.

And our Chancellor………..lied about working there. As an economist. At that exact time. I can’t get over it. Mad.

Anyway – she has bigger problems now. Despite the news being full of Very Grim Things indeed, and the Main Effort now of the government is now to Win the Debate by calling increasing numbers of the electorate Far Right (Huzzah! You’re Far Right! We win!), bond yields are now higher that they were under Liz Truss.

Remember when Mad Lizzie drove yields on the 10yr gilt to 4.3% and everyone decided we were bankrupt, and she couldn’t be PM anymore and had to go back to live in her box with all the other mad frogs? Well they’re now 4.7%, and rising fast, and barely a peep in the news. And long bond yields (ie on the 30yr gilt) are the highest they've been since the late 90s.

Why does this matter? Well, yields go up when prices go down – ie yields on UK government bonds (“gilts”: as the actual bond certificates used to have gilt edges) go up when bond investors – people that lend the government money to fund stuff they can’t fund through taxes or money printing, for various periods, eg 10 years, 30 years, etc – decide that the government is less likely to pay them back. And they are seemingly now coming to the conclusion that the UK is broke, and maybe won’t pay them back at all – and we know they do, as we can tell…as gilt yields are going up and up. And to be fair, the UK is broke. This will now, logically, start to reflect in the currency markets: ie, the pound will, not in a straight line, but steadily over time, decline in value.

The trouble is, the main tool to traditionally use here is interest rates. Interest rates are a tool to protect the currency – but the people that set interest rates think they’re a tool to control the economy. That’s another problem. Interest rates are set by a group of 9 people sitting in a room, which is yet another problem - as this is a pretty Soviet concept: interest rates are, essentially, the price of money - and there are no other prices in the economy that are decided by 9 people sitting in a room, as this is what the Soviets did, and we know that running an economy like this is the quickest way to find out what your pets taste like. And if you don’t believe me that this is a communist principle: I’d encourage you to have a look at what the central planks of The Communist Manifesto were (Hint: one of them was establish a central bank).

But if we put interest rates up to protect the economy, then the yield we pay on the remaining government debt also goes up – as much of the remaining debt is linked to the interest rate we set. And as interest rates go up, inflation will go up as the money supply increases, and yields will go up further etc. Get it? Don’t feel bad if you don’t, as the MPC – the 9 people in question in charge of this stuff – don’t get it either, as they think the opposite happens. But it’s simpler than it sounds: say you have a credit card, and can’t afford to pay it back – so you get another credit card: this second card will have a higher interest rate. But now imagine that the first card’s interest rate goes up in line with the second card’s rate: so you need a third, etc and it ends in a teensy weensy bit of an everyone's-going-to-starve-doom loop. This pushes up inflation, as the money in circulation goes up along with the increased rates (as the yields are higher). 

Not to rain on their crazy parade, but this confuses the 9 people sitting in the room deciding this stuff, as I mentioned, as this is exactly the opposite of what they think should happen – it’s called fiscal dominance, by the way. It: a) ends in bankruptcy, and: b) unhappily is where we are now.

Our economy is now dependent on, firstly, the aforementioned group of 9 people, using the wrong tool, backwards, to do something that it isn’t designed for. Secondly, we are in the hands of someone else who has so little experience of the thing that she’s in charge of – the economy – she lied about being part of the worst economic decision making team in recent record, just so she could say she had even some experience.

So we’ll all doomed, right?

Well, yes. But, not for 18 months: there’s one more blast of the money printers to go, in my opinion – they have no choice now. They’re cornered.

But at some point in 2026-2027 people will realize, en masse, that the value of things like bread and cups of artisan coffee aren’t going up – the value of their five pound note is simply going down. What physicists call a Phase Transition occurs. 

Then it’s all over.

And I haven’t even mentioned what Ed Miliband is doing to drive up energy costs (which inversely correlates to economic growth; see Secret Surveyors passim)…but maybe that’s enough doom for today.

So, Happy New Year. Have a good one. I’m off to alter my LinkedIn profile to say I was in charge of iceberg protection on the Titanic…

The Great Leap Forward

From 1958 to 1964, Chinese leader Mao Zedong aimed to rapidly transform China through high-speed societal change, establishing large publicly run enterprises, and  remodeling energy policy in a new structure of production and consumption centred around the utilisation of back yard furnaces.

The policy outcomes were, sadly, disastrous – poor planning and unrealistic targets, along with the dismantling of the established means of energy and food production in a short period of time, led to significant inefficiencies, a subsequent widespread drop in output and – ultimately and tragically – a massive famine that led to the deaths of 50 million people.

On a completely unrelated note, Ed Miliband has just been appointed Secretary of State for Energy Security and Net Zero.

I’ve said this before, long before the right wing nutjobs got hold of the idea and decided that opposing it was a core part of their theology – but Net Zero is going to be wild. Unfortunately, left wing nutjobs have decided that whatever the opposite of the right-wing position is, is now a core part of their ideology. So the odds of us navigating our way successfully through the next few decades have decreased significantly.

We are now however, essentially, aiming to be the first country in the world, since the Upper Palaeolithic revolution 40,000 years ago, to try and successfully increase living standards by decreasing energy production. Ed Miliband is at the forefront of this now, our new Assistant Glorious Leader: a man who lost an election because he couldn’t eat a bacon sandwich normally now wants us all, for example, to reduce meat consumption. I assume this is not a co-incidence.

Now, the economy is, to a certain extent, a derivative of the energy market. A very good book by Vaclav Smil (ok, it is a bit dense: “Energy and Civilization - A History”) shows beyond any reasonable doubt that there is, essentially, a correlation between energy consumption and civilisation: it’s about 0.99 in fact. Reduce energy consumption, reduce civilisational standards of living (by quite a lot, as we’re going to find out).

You can either be a net energy exporter – and produce that energy yourself as a country, which is good, or you can be a net energy importer, and buy it in from abroad – which is fine, but you need to earn money to buy it: ie have a trade surplus. [As an aside: you can be the issuer of a reserve currency and just print money to buy it from abroad, but we Brits can’t do that since we all went on holiday to Suez by mistake in 1956.]

What you can’t do is buy energy in from abroad, whilst simultaneously having a trade deficit. Which is what, since 2005, we have been trying to do: for that’s the year the oil and gas from the North Sea started to dwindle, and we became a net energy importer again for the first time since the 1980s (when we started our last period of growth) – and consequently, since 2005, living standards have stagnated. This is simple physics.

This process will now accelerate: under Net Zero, it is explicit government policy to get rid of our existing hydrocarbon energy sources, and most of our reliable base load power, as fast as possible (ie 73% of current energy production) and therefore reduce energy production in toto (great band) - and try and replace it, somehow, we're not sure how yet, with intermittent renewables. The massive, whopping lie is that this will reduce our dependence on imported hydrocarbons, which would obviously be a Good Thing during a time of global geopolitical instability: this is, demonstrably, a clear lie as these renewables will themselves require vast amounts of carbon emissions to produce in the first place – except now we won’t be able to do it ourselves, as we will have shut down the domestic hydrocarbon sources that would otherwise have been used.

Eh? Whaddya mean?

Well, a wind turbine, for example, is mostly steel. How do you make steel? Well, really, you need coking coal, as that’s the only cost-effective way of getting the energy intensity required – even “green steel” not using coal has massive carbon emissions – as even without the coal bit you need to pump oxygen in to transform the pig iron into steel, which creates…carbon dioxide. Big, fuck off amounts of it. Except we won’t be using our own coal, because Coal Bad, and we won’t be producing our own steel, because Carbon Emissions Bad, but despite the fact it’s 2024 we still want to power ourselves using fucking windmills for some reason - so we’ll instead just import the steel we need from China, where they’ll happily burn anything they can dig out of the ground (including far worse lignite coal).

So as we dwindle down our own reliable energy sources before their time, we’re going to have to instigate large-scale rationing, all whilst killing growth. We’ll print money for a while to try and hide it – as I’ve said on previous posts, we might even get a bit excited in the process and have a sugar-boom - but ultimately physics will win.

What’s even scarier is reading government papers on this stuff (it’s well worth reading the Sixth Carbon Budget, which is now in law, btw: https://www.theccc.org.uk/publication/sixth-carbon-budget/) - as they basically say the above, but in coded language. They talk about demand management: but they mean, shortages and rationing. They talk about managing mobility demand: but they mean, you can’t travel where you want to travel. Go and eat ze bugs.

I should add that I am not a “climate change denier”. My Doctoral research is on Sustainability and Building Climate Resilience and Lots of Other Buzzwords I Thought Sound Good in a Dissertation Title, and I spend my spare time researching engineering strategies to mitigate hurricane activity in the Caribbean - activity which is, beyond doubt, increasing as a direct result of Climate Change (although I did mainly choose this area of research because I get to go to the Caribbean).

However, wind down our existing reliable base-load hydrocarbon energy sources too fast and we will, definitely, without doubt, have a Great Leap: just not fucking Forward.

Wake Me Up When It's Quitting Time

 I was listening to a Cabinet minister talk on Radio 4 recently, idly deciding who I was going to vote for, and quite a stark thought hit me: only a few years ago, saying that the financial system is at risk of collapse, society is on the brink of total anarchy and the world will shortly descend into World War III, used to mark you out as quite “outré”. This outlook tended to be the preserve of a very few, marginal tinfoil hat-wearing loons like me – niche issues of interest to the sort of people such as, for example, the three Very Special People who read this increasingly sporadic blog (I am to be fair only counting the Northern European readership).

Now, it’s quite common for senior Cabinet Ministers to say exactly this sort of thing on the Today programme, and no one really blinks. This is quite a shift.

But why?

I continue to think this is, as I have long argued, primarily down to our financial system. It is inherently destabilizing. In understanding it, the most important thing to get your mind around is simply that what we think of as money – the £10 note in your pocket (or digital equivalent) – is not money: it is credit.

And so, going back to the dawning of time itself (well, ok, 1694) when men were proper men and wore giant powdered wigs - the very first pound note minted by the Bank of England was issued – as a credit note, and issued to a member of the public at a set rate of interest through a commercial bank. So how was that pound paid back? Well, it was paid back at a slightly higher rate of interest – by another pound. But where did that pound come from? Well, it also had to be loaned into existence by the Bank of England. And had interest on it. So you know you have two pounds. And a third was needed to pay off that interest…

Once you have your head round that, you understand that our system requires an ever-increasing expansion of the money supply, or the whole thing collapses. And here we are today, with trillions floating around (until relatively recently, you never really heard the word trillion used in financial discourse, did you? QED). At some point the expansionary graph goes parabolic, and we arrive at our boiling-stones-for-soup stage.

Gordon Brown’s (do you remember his “I’m not Flash – I’m Gordon” line? That was great. What times) total government spend in his last year in 2010, was £550 billion. Since then we’ve had 14 years of Tory austerity, right? So how much will Hunt spend this year? Less right? As we’ve had austerity, innit? Actually, no: it’s £1.4 trillion. Oh.

Except the government isn’t taking in £1.4 trillion – it takes in 10% less than that, which will have to be borrowed. This is because of the nature of the system. Debt increases over time, faster than earnings. Consequently, today we spend more on interest on the debt we have accrued as a country than we will on Defence, and this amount is growing. Amazing.

This is inherently destabilising – because we are getting poorer in real terms as the ever increasing money supply degrades the value of the currency, and thanks to the Tory’s more or less open border policy there is no pressure for associated wage growth, not to mention the fact that we have had a long-term genius policy to remove reliable base-load home-grown power and make energy progressively more expensive – consequently living standards have been declining for twenty years. It also explains why inflation will come roaring back to even higher levels in due course, after its recent dip: it only dipped this year because the money supply has been artificially strangled, and it can’t keep decreasing for long otherwise the system will collapse, QE(D).  

Taxes will go up and up to try and keep on top of this debt, which it can’t, and at some point people will realize that the cost of their morning coffee isn’t going up – it’s the same cup of coffee, it’s just that the value of the pound is simply melting away. And, I mean, what’s the point of working when costs are sky-rocketing, and taxes are at insane levels? So maybe just check out. Quit your job to raise chickens. Live on a yacht (maybe not with the chickens). Even Tory MPs on their Ministerial salaries are barely covering the cost of their rent(-boys).

A 25% deficit is banana republic levels, realistically, so still a way off – but a financial crisis will easily add 14% to our current 10%, then we’re within cloth-touching distance. And once we have crossed through this phase transition, then it’s time to panic. Buy whatever hard assets you can. Empty the supermarkets of noodles. Quick tip: if you’re going to panic, panic first.

And this will, as I have said, likely be in 2026/2027. Among other things, Kondratiev was a very clever Russian chap indeed, and his commodity cycle analysis predicting major global-macro disasters hasn’t been wrong yet.

So who are you going to vote for? Well, none of the pre-selected candidates we are allowed to grant power offer any alternative to the financial Apocalypse which faces us, as they offer nothing different to our current trajectory. The OBR won’t let them, anyway. So maybe don’t vote. Who cares. I’ve never been fully on board with the view that we must vote, as people died for it: I mean, people died for the Crusades too, but I’m not sure even the famously war-like Liberal Democrats want us to re-take Jerusalem (but then I haven’t read their manifesto yet. Actually: NO ONE MENTION THIS TO RISHI FOR GODSSAKE).

So best of luck everyone. Vote if you want. Here’s to a new Glorious Leader. And wake me up when it’s quitting time.