The Bank of England expects the UK economy to tank after inflation peaks at 13% in the fourth quarter this year and remain elevated throughout 2023 despite the economy entering a recession in the fourth quarter this year as well.
The combination of elevated inflation and recession is the classic definition of Stagflation which plagued capitalist economies in the late 1970s and early 1980s.
The end result of the period of repeated capitalist economic crises since 2008 is that the UK economy will emerge 25% smaller than it would have if it had followed the trends prior to 2008. Of course, the Tory government is trying to make working people pay the price of
their system’s chronic failures provoking a massive strike wave to achieve wage increases to at least match inflation.
The Bank commentary published Thursday that accompanied a 50pt rise in the official cash rate was simply scary:
Inflationary pressures in the United Kingdom and the rest of Europe have intensified significantly since the May Monetary Policy Report and the MPC’s previous meeting. That largely reflects a near doubling in wholesale gas prices since May, owing to Russia’s restriction of gas supplies to Europe and the risk of further curbs. As this feeds through to retail energy prices, it will exacerbate the fall in real incomes for UK households and further increase UK CPI inflation in the near term. CPI inflation is expected to rise more than forecast in the May Report, from 9.4% in June to just over 13% in 2022 Q4, and to remain at very elevated levels throughout much of 2023, before falling to the 2% target two years ahead.
GDP growth in the United Kingdom is slowing. The latest rise in gas prices has led to another significant deterioration in the outlook for activity in the United Kingdom and the rest of Europe. The United Kingdom is now projected to enter recession from the fourth quarter of this year. Real household post-tax income is projected to fall sharply in 2022 and 2023, while consumption growth turns negative.
A Bloomberg opinion piece by John Authers noted August 5 that:
Despite being so negative about the economy, the BoE still felt obliged to hike rates because the inflationary pressure is so great. And bear in mind that the UK is less exposed to natural gas prices than several of the bigger EU economies, such as Germany, Italy and the Netherlands.
To show the scale of the long-term damage that has already accumulated, and which the central bank believes is about to be further compounded, this chart from BNP Paribas shows the current forecast compared to the trends before the Global Financial Crisis, and the comparison to the trend of growth between the GFC and the pandemic.
If the BoE proves right, then British gross domestic product in 2025 will be a third less than it was reasonable to expect given the growth rate before the financial crisis:
Two factors contribute to this:
1. The obvious one: Printing money and throwing it at the punters while they couch surfed during lockdowns was always bound to cause inflation.
2. We are are witnessing the crash and burn of green policies based on ‘magical thinking’ rather than science. Energy prices will likely treble this winter in Europe, all thanks to misguided and weak politicians. Policies that not only drove prices up but left them vulnerable to the tyrant running Russia.
Expect protests and the dumping of the established political class.
‘The tyrant running Russia’ is one of the most important men on the planet to-date. We are witnessing a seismic shift in reshuffling the world order and the unipolar hegemony of the West needs to start considering working along side other world powers because the multipolarities world powers are here and stronger than ever.
Andrew and Stephen are absolutely right and the only way out of this is to vote an ACT Party to rein in inflation in NZ. Inflation caused by the Labour Party shutting down the borders, bailing out businesses and paying workers to lie of the couch watching Netflix.
The Freedom and Rights Coalition has pointed out in many rallies and the protest and outside parliament, that mandates and controls helped no-one. So, we hear that Brian Tamaki has been in consultation with at least 4 other political parties regarding a coalition of the willing, to get rid of Labour and the Greens.
Time for some cups-of-tea discussions to really secure a win for the Right of centre coalition parties. Our coalition of the Right would benefit from elderly voters, and the intrinsic Nationalism of NZ First to bring along all those 49% who voted for a new flag.
It’s going to be an interesting few months until all the colaition parties of the right, gets their ducks in a row, especially to defeat Labour’s Speaker Duck.
And the Kantar Poll today shows National, ACT and at least another two parties to be sure. It shows that people aren’t happy, but the minor parties will be the parties to tip the balance. Vision NZ will be one of the the unity of strength to win.
You are right. We need to clear the anti- Russia and anti- Chinese rhetoric out of our heads and see what is happening. The US is fighting back against threats to its unipower hegemonic role as the world’s policeman. There are other strong players on the scene now which the US is finding in its proxy war with a Russia in Ukraine which it badly underestimated – and its attempt to destabilise China by provoking a war over Taiwan. There are new alliances like BRICS which don’t give a fig about the US. It doesn’t seem possible to correct errors in this reply field! Sorry.
Point 2 is such rubbish. Fully pursuing green policies would have led to much higher levels of energy independence, and lower inflation. Green policies done right result in many additional jobs and insulate an economy from oil/gas shocks e.g. insulating houses.
You conveniently miss the real point 2: the UK cratered their own economy because of Brexit, and the campaign to do so was led by the usual Tory grifters wanting to get rich quick by privatising everything that wasn’t nailed down, and Russian dark money and influence campaigns.
Germany has “fully pursued” green policies and failed. They’ve been building wind farms and solar arrays for 25 years now, only to find it didn’t work and so became reliant on Russian gas.
There are three technologies that can reduce carbon emissions:
1. Nuclear power. Ah but the greens don’t like it.
2. Hydro power, but the Greens Would protest any new dams
3. GMO technology to produce more food in a smaller footprint. The Greens don’t like that either.
If you’re a promoter of the ‘climate emergency’ tell me what your plan is. I’d love to know!
In actual fact we have had a business maneouvre carried out on us in NZ. That thing that expanding business does;p do their homework and value all the goodies belonging to some other entity, than put in a bid for takeover or majority shares, have lots of credit lined up with a merchant bank, put in an offer that can’t be refused, pay over all the money made up of a bit of theirs and the rest from selling or realising the current value of the assets and then reduce the numbers of employees while doing the same amount of business so greater profits for the fist few years and so the business pays for itself by being gutted. That’s NZ I reckon.
“the UK cratered their own economy because of Brexit”
Only a Middle Class Marxist or Neolib would believe that.
Dirty White Peasants had the nerve to fight back against their Globalist Overlords.
Correct!
The short term snag was Covid 19 which has confused the Brexit picture. Only in about 5 years will we emerge out of that hiccup and see what the results of Brexit really are.
What many commenters here seem to have missed is that the Uk Treasury forecast was just blunt and upfront: The EU is in an even bigger mess but so far is in denial.
Globalist have been printing money and throwing it at their Imperial Wars, Fossil Fuel/Wall Street rich scum etc for decades with no inflationary effect thanks to the powerful deflationary effects of Globalisation.
Globalism is now falling apart therefore its magically deflationary effect is vanishing. 20 plus years of cheap credit and no inflation is now over unless they can get Globalism up and going again (I very much doubt it.)
While the elite are watching their project go up in flames, what is missing is leadership who understand the whys and can lead the oppressed filthy peasants of Globalism to replace it with something justice.
where the mother country goes we follow
sound familiar?
As pointed out elsewhere, the fallacy of infinite growth is capitalism’s greatest deceit.
I haven’t read this yet but the heading reminds me of Don Brash arguing about the purpose of banks or something with the Governor in England. Don might have some different ideas. I am wondering what they are. I suppose he has been asked. I may find the answers in the post but if not someone ought to ask him. Old financial advisors never die, they just autocratically drive their fiats over a cliff!
Authoritarian Fascist government coming as they move toward implementing a permanent state of Austerity for all.
The West v the Rest!
oh come now andrew don’t forget the utter failure of free market neo-lib economies across the developed world, interesting theory we tried it, it failed…get used to it.
energy prices are not rising because of scarcity but by increased gouging mandated by our fake market in energy..shareholders and company officers are creaming it at YOUR expense
+1.
“Printing money and throwing it at the banks after 2008….”
FIFY Andrew
Exactly ..the foundations were laid in 2008…just amazing the magic show has lasted…this long.
And dont forget the masive economic subsidies Fossil Fuel gets both hard and soft.
Andrew is a fake, his ilk dont believe in a Free Market, they like it rigged seerving their own ideologically and financial interests.
How much is really inflation and how much is price gouging?
UK also has rampant inflation like NZ, and also a lot of overcharging while police and government do very little/nothing – thus sending the message that it is not a crime.
In France sounds like they stop overcharging in it’s tracks by giving a prison sentence! Unlike NZ, who it’s normal to overcharge or defraud people.
Tourist charged $1000 for a 10-minute pedicab ride in London
https://www.stuff.co.nz/travel/travel-troubles/129512055/tourist-charged-1000-for-a-10minute-pedicab-ride-in-london
“In 2018 in Paris, France, two unsuspecting tourists from Thailand were picked up by an unscrupulous taxi driver and charged an exorbitant fare.
They uploaded a video to YouTube showing their stand-off with a driver who charged them €247 (NZ$416) for the 45km journey from Charles de Gaulle airport into the city. The journey would normally cost €55. That driver was sentenced to eight months in prison.”
NZ cost of living crisis, might also be related to overcharging, fraud and crime, that does not seem to be investigate or punished in NZ.
Cybercrime rampant in New Zealand and cases not investigated until there’s multiple victims
https://www.nzherald.co.nz/nz/cybercrime-rampant-in-new-zealand-and-cases-not-investigated-until-theres-multiple-victims/HUU6TURB6SJYU6O27RTXM736MI/
Leading to people just going around randomly stealing.
Good Samaritan car thief: Police looking for man who offered help, then drove off with car
https://www.nzherald.co.nz/nz/good-samaritan-car-thief-police-looking-for-man-who-offered-help-then-drove-off-with-car/5DH3ARWJH2F67TUDECRVO3NER4/
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