The Revenge Of the Evictions

I appreciate that the title of this blog makes no sense. But nothing does these days. So why change it?

Anyway.

As a child I discovered that you could completely and utterly lose an argument on the basis of the facts to hand, but as long as your last words were “yeah, but, still…” you could leave with your reputation for reasoned argument in tact, and your argument technically undefeated.

All political debate is rendered thus. So this blog means nothing. These words, however true, however based in actual reality, change nothing.

However, for what it’s worth – here are my views on the Section 21 proposals announced this morning.

According to the BBC, the Tories are ending No Fault evictions –

Residential tenants at present can be turfed out for no reason at all, even if it’s just because the landlord’s daughter takes a dislike to you and asks daddy to turf you out as punishment for being vewy vewy wude (happened to my neighbour. Feudal eh?). This process is formally initiated by serving a Section 21 notice – a so-called ‘no fault eviction’ – as no reason has to be formally stated for the eviction, unlike anywhere else on the planet.

Except….well, except.

The Tories actually only plan to consult on the ending of Section 21 notices. So they are planning to consider if they might.

One day.

Possibly.

This is, without any shadow of a doubt, not a plan to ban them now.

And…well, the Tories have no absolute majority in the commons. They are so terrified of wrecking amendments that they dare not even propose legislation. So even if they do decide it might be a good idea – and we have no idea if they will – then they cannot turn it into law, because they cannot get it through the commons.

Any even if they did one day decide to ban Section 21 notices, and reality ceased to be important in these things and they could actually get the legislation through the commons – this is only the policy of a Theresa May government, and she has said she’s leaving soon, and there’s no plan to finish the consultation before she goes – so her successor will be in charge of implementing this policy, and there’s no reason at all to think that his or her manifesto will include it, as they won’t in any way be bound by May’s previous promises (much like May, actually).

Even if all of that was true, they also propose to consult on making it easier for landlors to evict tenants in rent arrears – at present quite a lengthy process. And they are not banning exorbitant rent increases. So if a landlord wants to evict a tenant for no reason, they can simply raise the rent fivefold. And it will be easier to evict them.

I get that the Tories have realised they face an existential crises – that with collapsing home ownership, they will disappear as a party, but…

…to launch a policy that won’t actually happen, but the announcement of which will piss off their core support base (1 in 5 Tory MPs are landlords, and a large slice of Tory voters) at a time when their existing support base is pretty pissed off, all to attract the votes of people whose votes won’t actually be attracted because it won’t happen, and if it did, would make the situation worse for them, just seems….a bit mad?

Well, yeah, but.

Still.

Maybe It Was Just An Acorn

Following the last post, and in the spirit of New Year optimism: what if our trusty Chicken Licken is, in fact, wrong? What if the sky isn't necessarily going to fall in?

How fast things move. Conventional assumption at the moment now appears to be that my last blog post in fact reflects where consensus opinion has currently moved to - ie a No Deal Brexit is on the cards, and that it would be a Bad Thing. House prices would probably drop by a third, with significant effects on the balance sheets of our major banks. And we would have to start eating zoo animals.

Clearly, being in line with the general consensus makes me feel uneasy, so I feel compelled to correct myself. I have to say, being a tin-foil hat wearing loon (to block out the Martian mind-control waves - it's a thing) is no fun if you look around and suddenly see everyone else wearing the same hats. Combine this with the fact it's always good to look at the counter-arguments  - so, what is the opposing non-sub-optimal outcome, given a No Deal Brexit?

I still can't get my head fully round the numbers, as there seem to be so many conflicting data sets.

However, based on ONS figures (and depending entirely on how you slice them) the base facts seem to be the following:

- Imports of goods and services from the EU are £302 billion annually.
- Exports of goods and services to the EU are £438 billion annually.
- Of our exports, approx. £188 billion are goods destined for the EU.

This last figure is likely to be a high-end estimate, as a number of goods are shipped to ports such as Rotterdam, which are then shipped to a final destination, so wouldn't be impacted by new EU tariffs. Services will not be impacted by a No Deal Brexit, as they barely form part of the Single Market anyway. The government has said that no tariffs would be applied in the short term on goods coming into the country from the EU. So this last figure is the only hard bit of our GDP which will be impacted upon straight away if TRESemmé loses her giant game of Chicken with the British public.

Our total annual GDP is just over £2 trillion. Average WTO tariff schedules are 20% - which would automatically be applied in a default scenario (granted, it maxes out at 35% on some goods, this is just an average). A No Deal Brexit would therefore add a fifth onto the cost of 0.09% of our total economy, or approx. £38 billion in extra tariffs. This is £1 billion less than we would be paying were we to stay - so we would, on a purely finger-in-the-air fag packet calculation, save a small amount of money in year 1 - just enough to cover the cost of Mark Carney's hair stylist (or around a billion pounds). And this is if we did nothing at all - the logical response would be to drop tariffs on goods from the rest of the world, which we currently cannot do because we are hidden behind a customs union wall designed to protect, in many cases, continental EU producers.

The problem then seems to be entirely a logistical one and the general downside risk to sentiment, with a break down in our just-in-time supply chains - although the Calais authorities are moving heaven and earth to ensure that there are as few issues as possible (they stand to lose an awful lot if things go wrong). I have been wondering for two years how the people that run this country (who are, unanimously in favour of the status quo of course) would stop Brexit - and this appears to be how: by making no preparations or alterations whatsoever for leaving the EU, and then at the last minute pointing out that if we leave, we haven't done any preparations or alterations at all for leaving the EU and our homework is in fact in my other bag miss oh and we'll run out of food - so we should have another vote so we can jolly well stay. Great, thanks for that. Not sure I'll ever bother voting again if that happens.

But, seeing as I'm a Chartered Surveyor (pre-Brexit, anyway - post-Brexit I am He Who Structurally Surveys Our Burnt-Out Cave Dwellings For Food Scraps) - what of housing?

I predicted a market value collapse after the last financial crisis (and there was one, of sorts) - but I was staggered by the rise - and rise and rise and RISE - of house prices subsequently. In the interests of full disclosure, I also predicted house price crashes in, erm...2013, 2014, and the period 2015-2018 (including years 2016 and 2017). But this boom was outside my market-modelling as it was down to a Deus Ex Machina, or "ZIRP" as it was known (zero interest rates) - and the pumping of £375 billion into the house market by Mark Carney et al (small hands, smells of cabbage). And, interestingly, the Bank of England have now said that, in a No Deal scenario, they would release another £40 billion or so of QE. And - this would be the key bit, housing-wise - if they didn't in fact raise interest rates, on the grounds that competitive devaluation is a good thing and would help our trade deficit, this extra money sloshing around would inevitably end up being lent by banks to house purchasers. This would lead to house prices actually going UP.

As I say, the above is just a stab in the dark - but despite all the screeching hysteria, very few people have explained to me exactly why the underlying figures look quite so apocalyptic if we leave the EU without a Deal - a melt-down just sort of seems to be expected. But unfortunately, expectation often begets reality (apart from at Christmas, seemingly, I wanted a train-set and OH SOCKS THANKS A LOT GUYS) so I wouldn't bet against it, given the pyramid scheme that in any case constitutes our fiat economy.

I think I need a lie down.

Chicken Licken Was Right

Wondering what will happen with a No Deal Brexit?

Well, here are my thoughts – by the way, the title of this post refers to a story I was read as a kid, about a chicken who had an acorn fell upon her head, and as a result she thought the sky had fallen in. Then she said she would go and tell the king [SPOILER ALERT – she gets eaten by a fox in the end].

I now think the sky is going to fall in. I will explain why, below.

Essentially, I’ve been trying to model what will happen if a No Deal Brexit occurs. I put the chances of this at about 55%-60% - this is, of course, purely speculative.  I think you can be pro-Brexit, but point out that the chance of leaving without a deal should, of course, be zero – but in game theory terms, the incentives for each side to reach a deal are relatively low, in comparison to how insane leaving without a deal actually is (we will have to start boiling stones for soup, for example). I voted for a sane Brexit - my friends tell me this is an oxymoron, but this is a separate discussion.

As it stands, the incentives on both sides are skewed: the people negotiating for the EU (Barnier et all) will not lose out if there’s no deal, as their large EU Civil Servant salaries will be paid in any event – they would, arguably, be pleased as it would stand as a warning to others.

The four great offices of state in the UK (and all of those in charge of the negotiations) are all occupied by people who were (are) firmly remain – and in the event of a No Deal they could presumably say “well, we did say it would be a disaster” and hold their heads high. Most of my remainer friends would at least also starve to death with their heads similarly held high: in fact, can you imagine anything happier than a metro-liberal Brit who actually gets to be a martyr? To make matters worse, Theresa May now seems determined to die in a ditch over the Chequers proposal, something that the EU have already said is not acceptable.

I still think that this could lead to my original prediction materializing: that a loaded gun is put to the head of the British people, and we are asked at the last minute: are you sure you want to do this?

But what happens if we, the electorate, call their bluff and a No Deal Brexit happens? (Specifically in relation to our financial system, that is.)

Well, other than having to start eating zoo animals - two things are likely, both of which I think are reasonable predictions: the first is that there’ll be a run on the pound, and secondly, interest rates will have to go up to defend the currency. Based on historical precedent, by about 3% seems likely.

How will this impact on the housing market and our financial system generally?

Well, significantly. 

This is what my model is trying to war-game. The outputs of my little model, simplified, are below.

By the way, all these figures are approximate, and gathered largely from the ONS or figures put out by the banks themselves.

To start, total housing stock at the moment is £7.14 trillion. Total bank assets are £8 trillion, with UK bank assets at £4.2 trillion. Despite what you may have been told, nothing has fundamentally changed with regards to our financial system since the last financial crisis, which came within hours of ending Western Capitalism: no UK bank has enough reserves to fund itself for very long, they are still entirely reliant on wholesale markets for day to day funding: UK bank’s capital reserves now stand at a meagre £450 billion.

The total mortgage market is £1.3 trillion, roughly a quarter of total UK bank assets. This is based on an average house price of £226k, with 1.18 million houses changing hands every year. Of these, 40% are bought with cash – about 700k being bought with a mortgage. There are 27 million houses forming part of our housing stock in total, so just over 4% change hands annually.

Non sequitor: this is what makes the idea that building more houses will make houses affordable such a bizarre idea – even an extra 100k houses a year only increases supply by a maximum of 6-8% - and average house values are valued at over 8 times average incomes. To make houses affordable, ceteris paribus, you’d have to build well over a million houses a year. But I digress.

If rates go up to historical norms - ie to, say, 4.5% - then in our scenario this will more than double interest repayments in aggregate, and arrears will roughly double, as a rule of thumb.

House price values are driven by transaction prices, and transaction prices are the product of loan affordability – which is driven by average salaries, leveraged against interest rates.  If rates go up in this way, affordability is likely to drop back to approx. 6.7 times income multiples, again based on historical precedent. This would cause a 32% drop in market valuations for new transactions.

The very big mistake people make here is to think that this will only apply to houses coming onto the market: this is a fundamental error. As a Chartered Surveyor, I am more aware than most that values are based entirely on comparables – ie houses that have sold recently. If ten identical houses are in a row, and one sells at a 10% haircut, then every house in the row is suddenly worth 10% less in terms of our current housing market’s financial ecosystem.

If new transactions, based on what becomes affordable with rates more than 3% higher than they were, transact at approx.. two thirds of their values prior to a rate increase, this will force banks to re-value their entire loan portfolios. Based on current aggregate asset values of housing stock, this would mean a total loan book write down to, at least, £860 billion, more or less.

This would mean that if house prices start changing hands for a third less than they are now, which would be likely if a no deal brexit happens, banks would have £438 billion wiped off their balance sheets, within a few months. This is not taking into account any potential panic taking hold in the market – and also the completely unprecedented fact that 5 million houses are now held on short term ASTs, which can come on to the market in a matter of months – previous significant house price corrections have always been tempered by illiquidity.

Given that total UK bank assets stand at £450 billion, as noted above, even the optimistic scenario would more or less render our entire banking system bank-rupt.

Given our banks barely have enough funding to cover day to day activity as it is, I think I might start planting vegetables.

Someone needs to tell the King. Not me though. I ain’t gonna get eaten by no fox, no siree.

Last Chance Saloon

Not to brag, but I’ve just solved the housing crisis. But I’ll get back to that: firstly, I just want to look at where we are. Here’s the problem: about two million people who would’ve bought in the past few years, in normal historical conditions, haven’t been able to, and are now renting. This is a problem on several fronts, but mainly as our economy is essentially built around owner occupation: it is the main way in which most people are able to save and build capital, and plan for retirement, and has been incentivised as such for decades through our taxation system.

As millions of people are now excluded from buying, and home ownership for the under 40s has fallen off a cliff, this means they are not only excluded from security of tenure – renters only ever being two months away from eviction at the whim of a landlord, and the ensuing psychological impact that has over many years, even if the dreaded Section 21 notice is never actually issued – but they are also excluded from any form of capital accumulation, and thus have no stake in the system.

A few other countries have majority rental sectors – such as Germany – but people are encouraged to save in other ways, through the local Landesbanken system etc, and thus can accumulate a stake in the status quo without owning a home, and their home is in any case an actual home as they have decent tenure for rental properties. There is nothing wrong with the owner-occupier model of saving and investing per se, but clearly if most people under the age of forty are excluded from it and there is no route in, then it is not sustainable.

So we now have the rise of Corbyn, and the Tories scrabbling around for ideas to counter his rise to power. And for them, it's now or never. I cannot have been the only person to have watched Mrs May’s recent speech open mouthed: having briefed before the speech that she was going to unleash a new generation of council house building, she announced that she was in fact going to build 5,000 new council houses a year. There are 1.2 million people on council house waiting lists, and this was her answer. I was absolutely, completely flabbergasted. We’ve had the worst decade for real wages since the 1860s, home ownership is plummeting, and the Tory answer is, erm….well, just, well. Utterly bizarre. And Help to Buy is just…..I mean, how will this help affordability for First Time Buyers in any way, at all? AT ALL? I mean, crumbs.

If this is going to be as good as it gets, then Corbyn will win power, without any shadow of a doubt. Now, Corbyn has already talked about confiscation of private property in response to the simply awful Grenfell disaster: I don’t want to go into that because it is too horrible for words and a side issue in terms of solving the housing crisis: but Our Future Glorious Leader’s words were instructive, in that he saw no problem in simply confiscating empty flats nearby as a solution.

Once you start on this road, and are happy with the first ideological leap, then it’s very easy to make the next logical step: there are millions of renters, and not so many landlords, landlords have had it good in the last few years, so why don’t we just…….well, take their stuff, and, well, just give the flats to the renters? I don’t think we’re far from this stage. Fewer than 1 in 5 renters are saving for a deposit, and essentially, now, if you don’t own or have parents who own, you will never own – so taking stuff is going to be the next logical step, as there is no other step that they can see. If I was a BTL landlord, I would spend every waking minute haranguing my local Tory MP to ensure better rights for renters, and to solve this crisis asap, as if not my pension is going to go up in smoke. And the consequences of this sort of confiscation will be: well, total bankruptcy for everyone, to keep the story short. That’s just what happens.

So what do we do? Firstly, build a hundred thousand social houses a year, by letting Councils borrow money. Not difficult. A third of what we built after the Second World War when we were completely bankrupt.

And secondly: there are 11 million renters, and 2 million private landlords: transfer ownership of a chunk of these to the current renters, and the problem is a long way to being solved. If nothing is done, this will happen in time anyway: but through confiscation, and we’ll end up boiling stones for soup. So simply incentivise BTL landlords, right now, to sell to their tenants, at decent market values.

This is actually easy to do. There isn’t really a shortage of properties on a gross level: the ratio of bedrooms to people is roughly static, it’s just that the financial system around home ownership is completely screwed, people are stuck in properties they don’t want to sell as it will financially penalize them if they do, and others are renting houses they would normally have bought.

In fact, most BTL landlords can’t sell, as they have a large (normally 28%) CGT liability if they do, and no other decent investment options: so selling will mean they lose money, for a worse return. The solution is obvious –  say to landlords, if you sell to your tenant, then you will not have to pay any CGT. Suddenly, they save 28% on tax on the increase in value, which will be a big chunk of the gross value, in most cases. And if you are a BTL landlord and put money into the stock market from your property sale, we will exempt you from future stock growth CGT and stamp duty (this bit needs refining, but something along those lines).

The other crazy thing is the mortgage process: we were turned down for a mortgage 18 months ago (luckily not on the second mortgage application or I would be writing this having emigrated) on the grounds that we couldn’t afford the repayments, despite them being lower than the rent we had paid on time, every month, for FIVE YEARS. So say to all private sector tenants: if you can pay your rent on time for 3 years, every month, and can prove that you are funding it through your own endeavours: then a bank -  perhaps RBS, say, which we taxpayers frigging own – will guarantee you a mortgage based on those repayments. Certainty returns, tenants have something concrete to aim at, even if it's a few years away. And hey, why not take some of the 28% CGT saving from the landlord, and loan the tenant a 5% deposit from that saving?

Result: millions of private renters enter homeownership in the next year or two, millions more have a stake in the country again, the rest know if they work hard they'll get there eventually, and if they can't, the state will build them a council house: and the stock market is stock full of private investors and capitalism is saved.

You’re welcome Britain.

Bell Ends

So, it’s ten years on from the financial crash, and Big Ben is about to stop ringing. I can’t be the only one who feels this is bad omen. The bongs are a re-assuring, constant presence on our kitchen radio, or at least they have been until midday today. An authoritive, rich, historic sound signalling continuity, letting us know that everything is ok, everyone will solider on, and that somewhere, an adult is in charge. Especially when they ring at 6pm, and it’s wine time.

Ten years on, and it’s easy to forget what happened 10 years ago, and decide it is all ancient history, and that it won’t happen again. It is easy to forget how close we came to complete, total meltdown. It’s easy to forget that money market funds came within a few hours of drying up completely – and without any liquidity in the global financial system, there’d have been no credit, and with no credit no trade, and then…well, before long, no food in the supermarkets. Don’t MI5 say that we are four meals from chaos? After Hurricane Katrina, it took five days before doctors stopped attending hospitals to protect their own families. The traders I worked next to in the City at the time were buying shotguns.

So, why did it happen, again?

The crash happened because Goldman Squids et al conned the ratings agencies into believing that the crap they were selling (complex derivatives such as CDOs, synthetic CDOs etc) were AAA rated, and by the time the markets realized they were worthless, there were billions of the buggers hidden in bank's balance sheets. No banks trusted any other banks, as no one knew who was solvent, Libor rates went up and eventually no one would lend. Banks that had no actual money of their own for their day to day activities (Ponzi schemes, basically), but instead relied on wholesale money markets etc for day to day funding, like Northern Crock, went out of business sharpish and the whole thing snowballed.

The government stepped in, and stopped the world from ending, but putting in a temporary fix: ZIRP. Zero interest rates, and masses of printed money to inflate asset prices. This temporary fix is, of course, still in place.

What's changed since then, exactly? What's that...nothing?

The cycle goes on. Real wages are flat: most people without assets are poorer. Nothing has been done to try and make capitalism more inclusive, or spread wealth more fairly, or re-capitalize the poor. House prices in London have pretty much tripled (by contrast, during the last comparable financial crisis of 1929-1933, property prices in most western economies dropped 80%).

The amount of outstanding complex (ie no one really understands them, certainly not senior bank management) derivatives globally has quadrupled since the financial crisis. Consumer debt has doubled, asset prices have sky-rocketed and banks have, accordingly, since lent billions to the property market. The leverage ratios imposed by regulators are still pathetic, although they've been tripled, they have basically tripled 'nothing'. If residential property prices drop by even 30%, what would happen to the balance sheets of almost all of our high street banks? By their own models, they'd be bankrupted.

Inequality, the fundamental cause of the last crisis, is still rising. We seem to not be willing to do anything to stop it, before it’s too late, because the cause of the inequality is hard-wired into the system – partly via fractional reserve banking.

One possible answer would be to forget ring fencing currently pushed by the regulators - but actually spin off investment and retail banks, and make retail banks actually capitalize themselves properly, ie primarily through deposits. Of course this would never happen, as our fiat-currency and fractional reserve financial system would collapse and have to be re-built to accommodate it.

So there is nothing we can actually do, just sit and wait for everything to go up in flames again, which it will, but much worse this time. The GFC caused so much anger because the people at the top lost their jobs, but still walked away with millions. This anger is what will end the cycle eventually, and probably not in a good way. Housing is at the route of it, but there's nothing we can do now, it's too late. Even building 400,000 houses a year will make no difference to affordability, until house prices crash, and then no one will be able to afford a house, no matter what the market value is, because no one will be lending.

You may be a baby-boomer sitting comfortably in your big, equity rich house with your final salary pension, BTL portfolio and be thinking: I’m ok. But if I were you, I’d be sh****g myself and getting as much money into a bank account in Antigua as I could.

Now, I am not on the same page as Corbyn – I’m not even reading the same book. But I am perhaps in the same library. And what will happen when he gets in? And he will get in.

I’ll tell you: property confiscation and land taxes. Most people under 35 support this sort of thing, because they are locked out of the market anyway and have nothing to lose, in their own minds: if BTL properties are confiscated from their owners, what do they care? They won’t lose anything. In the same way that the average Zimbabwean didn’t lose anything when Mugabe took away land from the “evil white colonialist” farmers. Until, of course, millions started dying in the subsequent famine.

Corybn is talking about property confiscation already, when superficially things are going well (a thin, empty veneer of false, empty credit growth) and the thirst for schadenfreude is on the back-burner for a while.  But as soon as things take a dip for the worse again and the fact that the system is rigged will once more go to the forefront of people’s minds, the temptation to take people’s stuff will re-surface, because they’ll realise that in a rigged game, that’s their only option. Corbyn will be all over it.

And property prices will tank. Banks will go bust. Traders will start buying shotguns again.

And there’ll be no Big Ben to re-assure us that Britain will soldier on.

The Redfern Review

A blog-lette...

...slightly late on this, as it is too depressing for words – but the report commission by the Labour party into housing – the Redfern Review – has recently said that the causes of high house prices have nothing to do with a lack of house building, but everything to do with an explosion in credit, and the private sector building more houses will do nothing in the short term to solve the affordability crisis. It extensively looked at the evidence, thoroughly and methodically crunched the numbers and pretty much proved that this was the case, beyond reasonable doubt.

I have said this until I have become blue in the face, like an ignored smurf.

For what it's worth, here it is one more time, for posterity: building more houses in the short term will do nothing to solve the affordability crisis.

This conclusion has been completed ignored by everyone, including the Labour party, who almost immediately after the review was published authorized a spokesman to say “this report shows it is clear we need to build more houses to make houses affordable again” – which is exactly the opposite of what the report they commissioned says.

I give up.

A Complete Economic History of the Entire World

Even a stopped clock tells the right time twice a day – so I won’t gloat too much about the fact that everything completely bat shit crazy I have written over the past few years now appears to be accepted as fact by the wider media, politicians and academics. Even Mark Carney, who built his career at Goldman Sachs advising client firms on outsourcing jobs and financing the process of globalisation, and thus hastening inequality, has now given a speech saying that globalization and outsourcing jobs is bad, inequality makes our economy unsustainable and leads to the rise of demagogues (and, incidentally, also that none of this has anything to do with him). I note my last blog post, written quite a few months ago, was entitled ‘the pitchforks are coming’ and it even seemed a bit mad to me then, and I wrote it – except now they are now getting pretty close…

But anyway, everyone now appears to share my diagnostic of the world’s economic ills, and entirely the wrong consensus has been reached – namely, that global trade is bad. This is, of course, nonsense.

I want to take you back in time, to a table in Athens in Ancient Greece, at which sat Euripides. He’s munching on a bit of bread, perhaps some crumbs get in his wise beard. He’s wearing a robe made with silk - he didn’t want to buy the robe, incidentally, but he accidentally tore it in the shop and –hey, Euripides, you buyya dese…

But I digress: what he knew, and what we know, is that the bread he is eating is made from wheat grown in the Ukraine, a thousand miles away. The silk is from China. The original farmer in Ukraine got richer, the Chinese silk producer got richer, the merchants who shipped them to Greece got richer, and Euripides got…better bread and a slightly ripped robe (and wise crumbs in his wise beard. So wise).

Move forward a few hundred years – to, say, 600AD – to a Celtic merchant sitting in his hovel in Sussex (we Celts hadn’t been thrown out yet and pushed into soggy western bits) and eating his meal – off a plate made in China, flavoured using spices grown in northern India, and washed down with wine grown in southern Europe. All parties to this global trade benefitted.

My point is that trade has been global for centuries – the global north traded with the global south, global south traded with global north, and both north and south benefited.

There were a few hiccups – there was a global financial crisis in the sixteenth century, as too many goods were flowing East from China and were being consumed by Europeans, and too much gold from Europe flowed East in return, which caused an imbalance and a global monetary crisis – surely something that would NEVER happen these days. But then the Spanish found enough gold to ruin the world forever in South America, and global economic balance was restored – at the cost of millions of lives, of course, and set the pattern for western exploitation for a few centuries, which hasn’t really stopped.

Then the world trundled on, man exploiting man, until after the 1970s, with global trade ensuring, at least, general economic progress and a sense of hope. The Soviet alternative meant at least western governments had to pretend to offer a better world, otherwise we would join the Bear and spend our time playing chess whilst drinking vodka. Nazdarovya!     

Then, around the 1980s, accountants, after staring at their balance sheets for some time, worked out something – and they took this to their CEOs in the US, and together they and US executives worked out that they could do something new – outsource actual labour. This made their shareholders richer, and themselves richer, and their workers poorer, and started a process of growing inequality which has accelerated ever since.

Now, this isn’t global trade – labour is a liability on a balance sheet, not an asset – and outsourcing this cost is a zero sum game ultimately benefiting no one, not the global south, not the global north – no one that is, apart from the executives (and possibly the accountants). We Britaineers were a bit late to the party, but after 1997 our executives worked out something similar – we could outsource jobs, but without moving the jobs themselves – by moving in cheap labour here from abroad. This would also destroy collective bargaining, further making their lives easier, and also - WINNING! - lower wages, which were a liability on their balance sheets. Hurrah!

Inequality mushroomed – but was covered up initially by an explosion in credit, which masked this inequality as the slowly destroyed middle class could pretend they were getting richer by borrowing more – from bankers such as Mark Carney. Except for every pound they borrowed, because of our fractional reserve banking system, everybody got fractionally poorer – except the bankers (such as Mark Carney – sorry Mark, I’ll stop in a second) – and inequality continued to increase. This inequality caused massive piles of cash to swash around financial markets, which ultimately created instability in the global financial system and the inefficient allocation of resources – and, eventually, the global financial crisis. To which central bankers responded by lowering rates, printing money (sort of) and exacerbated inequality even more, which is what caused the problem in the first place.

And now, predictably, we have the rise of demagogues like Trump – who want to stamp down on global trade, which is exactly the one thing that isn’t causing the US problems. And he is, sadly, just the start.

Now this theme has been picked up by politicians, the media and think tanks, what should be done about it?

Easy – strengthen labour laws and give workers better rights, clamp down on executive pay and then with regards to housing – and this is the easiest and most important bit – give people security of tenure so at least the majority of the population have secure homes to come home to, think innovative thoughts about how globalization benefits everyone and sit around eating artisan bread from…Kent, and sparkling wine from…Sussex…okay, we’ve gone backwards on that a bit. Silly hipsters.

And, what will in fact be done?

Well, nothing, obviously.

Those in charge think they don’t have to – there is nowhere else for us to go, at least until the pitchforks come out in full. They think they can do what they like now, they have us trapped – the best thing we non-pitchfork types can do now is put on a Santa hat, down the third free glass of warm, cheap white wine at the office Christmas party and try and seduce that chap or chapess from accounts. At least then we can get hold of their balance sheet…