Review – Buckle up! The Liz Truss era is here – James Forsyth via the Spectator

This is an outstanding article by James Forsyth, political editor at the Spectator. Considering that he’s a close friend of Rishi Sunak and that he actively supported Sunak against Liz Truss, the new UK prime minister, it’s very powerful. I have closely followed James’ insights over nearly a decade and for me they have always been remarkably perceptive.

Despite his bias in favour of Sunak, this latest article is remarkably dispassionate. Open the link to read it:

I too must at this stage declare my bias. Between Sunak and Liz Truss, I have been a passionate Sunak supporter. So I too will supress my natural suspicion of Liz Truss and look for redeeming features.

James Forsyth’s articles simply touches all the bases in terms of challenges facing the Liz Truss – he leaves the reader to reflect on the risk of success. I will return to the subject of risk presently.

For me, there are a number of related threads:

Firstly, the concept of a country borrowing its way out of difficult is not new. It’s well covered in Keynesian Economics. Post war, it was very popular, especially with socialist governments. Ineffective application of the doctrine led directly to the hyper inflation of the Seventies. This was finally reversed when Regan and Margaret Thatcher led the way to alternative economic policies. The concept works well when Governments invested in robust capital projects which have a strong economic return financed by low cost government borrowings. Most governments simply lost control, with politically chosen projects chosen despite protests of seasoned financial observers. Another more recent example is China, following the Subprime Crisis. Anyway, returning to the Truss era, there are clearly no projects that have been defined in any substance other than motherhood aspirations of less red tape etc. This is deeply worrying.

Secondly, the Truss team are largely lightweights, with no serious record of achievement, either individually let alone collectively. These are political flunkies. What’s most obvious is the remaining heavy-hitters are on the back benches, out of government, or they have retired.

Thirdly, there is serious concern that Truss will win over her MPs in parliament, yet alone the wider electorate with an election looming in couple of years.

Fourthly, there is little consideration of delivery, with possibly the most radical change since the National Health Service was introduced after WWII – indeed from the beginning that failed to match blueprint of its designers. Look to the record of major Government defense or technology projects, with huge overspends, parliamentary enquiries and cries of cronyism.

Fifthly, with the absence of robust costing, there’s certainly seems little thought of risk assessment other than ‘speculative in the round’.

Finally, it’s worth dwelling on the wider economic and geopolitical context. Interest rates are rising rapidly to deal with inflation, triggered by massive financial expansion to redress the economic carnage caused by Covid. Unfortunately, it is necessary to add political risk because of global tensions related to Ukraine and Taiwan. Political risk also penalizes ‘lightweights’ diverging from economic orthodoxy as espoused by the likes of the International Monetary Fund or the leading independent central banks of the world. Collectively, risk specialists would focus on the transformation risk.

If you are unconvinced, simply wait and watch how financial markets behave. Watch for speculators taking a punt on Sterling, and the UK’s major quoted businesses.

Please correct me if you disagree.

Opinion – John Gelmini – ‘Populism: The corrupting of democracy’ via The Economist

Dr Alf with his usual thoughtful precision has demolished the thrust of the arguments made by the Economist whose editors regularly attend “private meetings” as evidenced by the attendance list of the Bilderbergers( Populism at grass roots level is to do with massive income inequalities.

In America just 51% of the entire population earn enough to pay income tax and increasing numbers of jobs are being subjected to robot process automation, AI, offshoring and outsourcing. GE which used to have massive finance departments dedicated to Dr Alf’s former calling as a Chartered Accountant and Financial Director now have much of the work done in India at a fraction of the cost.

The UK is £5 trillion GBP in debt whilst £25 trillion sits offshore with half of it in BVI. The Economist has nothing to say about that or the juxtaposition of the two sides of the coin. We have on the one hand Chief Executives earning 100, 200 and in some cases 450 times average worker pay, when bonuses and “other emoluments” are factored into the equation, we have 1.8 million zombie companies which never make a profit and teeter on the very edge of their banking covenants and we have local and central government services costing triple those of Switzerland.
At the same time, we have 1 million people using food banks, average gross pay at £30,000 GGP and houses costing nine times average pay thus denying 80% of future adults any prospect of ever buying a home.

Within 13 or 17 years, 50% of jobs will be gone thanks to AI, machine learning, RPA, cybernetics and nanotechnology. This was predicted by Eric Schmidt of Google in 2013 and 2014 at the Grove Hotel, Watford, England and on You Tube and by the Oxford University and Chinese Government surveys all of which the Economist were privy to. People in America,Europe and the UK, unless they were in the top 16% of wage earners, have all seen their living standards drop and remain low for the past 25 years thanks to the banking crisis, “Cyprus style bail-ins”, quantitative easing (debasement of the currency,) and the loss of traditional blue-collar and lower middle class white collar jobs.

We know from Jordan Peterson, the Canadian psychology professor, who wrote “12 Rules for Life”, that anyone with an IQ of 83 or less (10% of the global population) is deemed to be incapable of doing ANY job the Pentagon wants done. Extrapolating that into civilian life everywhere as he does means that 10% of the working population are economically useless. That percentage is rising as machine learning improves and AI powers ahead of human intelligence starting this year (Source:Ray Kurzeweil, Chief Futurist and CTO of Google).

People, even at the most intellectually challenged level, know that something is wrong, potholes abound in roads, they are told to buy electric cars at £30,000GBP each when they have less than £500 GBP in their bank accounts at any one time ( the same figure that prevailed in the 1990s when GE Capital conducted a survey to size the market for secured loans and impaired life annuities). Their children cannot get jobs and even if they can they are not reflective of their expensive degree courses. It is much more than being “down on your luck” but is a malaise in which hope is completely lost by those at the sharp end which is where MAGA, the Gilet Jeunes and the EDL, PEGIDA etc, all populist movements along with ANTIFA, Momentum et al spring from. These movements cover the extremes of the political spectrum and are representative of populism.
The phenomenon will not go away until there is a clear and coherent plan to reskillill people, stop the reverse Robjn Hood phenomenon which emboldens plutocrats and puts the proletariat in the”olive press”.

The Economist will never talk about these matters because it exists to create the impression that things are fine.

John Gelmini