I published the following as a thread on Twitter. It may be of more general interest and probably applies somewhat to other European countries too. 1/ Analysing and estimating likely UK energy policy, its rough cost and its sustainability. 🧵 2/ There is now a scramble to get
You are right about sterling risk, Philip regardless of which side wins the debate. In my view the tragedy is the delusion of the ruling class and their bankers to believe they can actually remedy what's coming down the line. I write about it every week as a sort of log as events unfold and a check against my own and others projections.
IMHO the strategy should be containment and management of the mechanics of the economy but avoiding interventions which only worsen the situation. The western economies will have to muddle through this once-in-250 years process as we transform from cheap and free energy to clean and sustainable alternatives always bearing mind that we will always need to use some hydrocarbon energy.
The amounts quoted by you are staggering and also their effect on the deficit. It is why there can be no catch all solution but only a limited targeted one. In addition there should be a campaign to reduce usage.
The absence of ideas on the right is noteworthy. There is a vaacum in government. In addition the leadership campaign has resulted in all and sundry airing their economic theory, pet tax cuts and vanity, perhaps to obtain cabinet posting. Meanwhile little is said about the cost of living crisis. It may be there is little intention of doing anything. It is possible they intend to just let people suffer and as a result lose the general election. I cannot yet say that is not the position of many. It seems like madness has taken grip of many on the right. But when the hustings are over surely the new leader will get down to business.
The BoE can just buy the debt. But note that interest rates are rising. That means the interest rate the government pays on the debt rises too"
That's a political choice. Government can just cancel the full funding rule and let the balancing item drop through to the Ways and Means account. Since interest rises work, if they work at all, by causing government to spend less (not an option this winter), the whole interest rate raising concept may just trigger an interest/price spiral if we're not careful.
The problem, as ever, is analysing the problem in monetary terms rather than in real terms. The issue at hand is a lack of gas and a shift in the terms of trade so that gas is more expensive in Sterling terms. To actually address the problem requires demand destruction for gas usage, or transferring that demand destruction to some other currency area by manipulating the terms of trade.
Banning or tariffing 'luxury' imports from China seems like a good way of freeing up export space to exchange for more gas. That leverages the Chinese peg to the US dollar and should generate less blowback on UK exports. It would also neutralise the carry trade attempting to flee Sterling. Pandering to 'investors' by trying to buy additional Sterling savings would fast track the UK to Turkey or Zimbabwe status.
The risk I see is that the gas market breaks down when the crunch comes and countries ban gas exports to protect their own people - no matter what contracts are in place. Then there will no gas at any price, and we will have to initiate rationing.
You are right about sterling risk, Philip regardless of which side wins the debate. In my view the tragedy is the delusion of the ruling class and their bankers to believe they can actually remedy what's coming down the line. I write about it every week as a sort of log as events unfold and a check against my own and others projections.
IMHO the strategy should be containment and management of the mechanics of the economy but avoiding interventions which only worsen the situation. The western economies will have to muddle through this once-in-250 years process as we transform from cheap and free energy to clean and sustainable alternatives always bearing mind that we will always need to use some hydrocarbon energy.
I am currently writing Part 2 of my book, The Financial Jigsaw, and posting articles from time to time: https://austrianpeter.substack.com/p/the-financial-jigsaw-part-2-the-end?s=w
The motives on the left are clear.
The amounts quoted by you are staggering and also their effect on the deficit. It is why there can be no catch all solution but only a limited targeted one. In addition there should be a campaign to reduce usage.
The absence of ideas on the right is noteworthy. There is a vaacum in government. In addition the leadership campaign has resulted in all and sundry airing their economic theory, pet tax cuts and vanity, perhaps to obtain cabinet posting. Meanwhile little is said about the cost of living crisis. It may be there is little intention of doing anything. It is possible they intend to just let people suffer and as a result lose the general election. I cannot yet say that is not the position of many. It seems like madness has taken grip of many on the right. But when the hustings are over surely the new leader will get down to business.
The BoE can just buy the debt. But note that interest rates are rising. That means the interest rate the government pays on the debt rises too"
That's a political choice. Government can just cancel the full funding rule and let the balancing item drop through to the Ways and Means account. Since interest rises work, if they work at all, by causing government to spend less (not an option this winter), the whole interest rate raising concept may just trigger an interest/price spiral if we're not careful.
The problem, as ever, is analysing the problem in monetary terms rather than in real terms. The issue at hand is a lack of gas and a shift in the terms of trade so that gas is more expensive in Sterling terms. To actually address the problem requires demand destruction for gas usage, or transferring that demand destruction to some other currency area by manipulating the terms of trade.
Banning or tariffing 'luxury' imports from China seems like a good way of freeing up export space to exchange for more gas. That leverages the Chinese peg to the US dollar and should generate less blowback on UK exports. It would also neutralise the carry trade attempting to flee Sterling. Pandering to 'investors' by trying to buy additional Sterling savings would fast track the UK to Turkey or Zimbabwe status.
The risk I see is that the gas market breaks down when the crunch comes and countries ban gas exports to protect their own people - no matter what contracts are in place. Then there will no gas at any price, and we will have to initiate rationing.