Never never land

Prompted to thoughts of UK doom and gloom by the piece in the FT at reference 1.

Inflation

Presently driven by forces outside of our control: the price of oil and the price of grain. Which to my mind means that we either borrow even more and our standard of living goes down in the long term or our standard of living goes down now.

Privately, governments might quite like inflation as it drives down the value of their debt – at least that part of it which is not index linked. Another side of that coin being driving down the value of old peoples’ savings. A wealth transfer from old people: perhaps not such a bad thing, given all the circumstances.

Interest rate

Looks set to rise after a more than a decade of near zero rates. Will young people, mortgaged to the hilt to cope with high house prices, soon be feeling the breeze?

Exchange rate

Rates might float these days, but a weak currency is still a bad thing. Inter alia, a falling pound drives UK inflation up.

Balance of payments

Has been dire for half a century and more. Cushioned in the past by remittances from overseas earnings from our days as a rich manufacturing country. Whereas now the remittances go the other way, to all those foreigners who have bought up UK assets.

Debt repayment

When I was young, something known as the PSBR was a big deal, the public sector borrowing requirement. Getting bigger was thought to be a bad thing. And it must have got a lot bigger over the past couple of years to pay for the plague.

Cost of repayment might become a problem as interest rates rise.

Distribution of wealth and income

Apparently bad and getting worse. Rich people get too big a share of the cake and there are far too many poor people struggling on crumbs.

Curiously, not a phenomenon which translates into votes for the left. Rather, into right wing populists, helped along by campaign contributions from the rich. Some, more or less criminal.

Living beyond our means

The bottom line seems to be that this country continues to live beyond its means, with various groups – such as railwaymen or bankers – fighting for a bigger share of a declining cake.

PS: to add insult to injury, for part of the time of writing, the usually reliable ONS site was unavailable, at least from this laptop. Now back up and running.

References

Reference 1: The British should stop being so relaxed about the weak pound: Devaluation carries a cost, one which has potentially increased over time – Nicholas MacPherson, Financial Times - 2022. MacPherson is a former permanent secretary at H M Treasury.

Reference 2: https://www.ons.gov.uk/search?q=national+debt. 

Reference 3: Debt management report 2022 to 2023: Information on the government’s financing plans for 2022 to 2023. – H M Treasury – 2022. The plan for the year to come. Nicely presented, but not for the faint hearted, probably not for those without inside knowledge.

Reference 4: Peter Pan, or The Boy Who Wouldn't Grow Up – J M Barrie – 1904. The ultimate source of the snap above.