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.