More importantly, what’s happening in Britain’s economic meltdown is being replicated in other countries where governments are edging closer to unleashing a fresh burst of asset-value destructive inflation as a way of solving budget problems.
Inflating away debt repayment obligations by allowing a currency to fall, which means repaying what’s been borrowed with debased money, is one of the oldest tricks in the book of bad government with Germany in the 1930s and Zimbabwe in the 1990s perfect examples.
Without inflation doing its work for heavily-indebted governments, the only other avenues for fixing broken budgets is a continual round of tax increases, or a politically damaging reduction of government services and vote-buying subsidies.
At its simplest, there is a dawning underway which became obvious to me during three weeks working in London that most reasonably wealthy people in Britain are looking for a way out with gold an easy international escape route from an economy wrecked on the rocks of hard-core green economic ideology.
This week’s rise in unemployment to 5%, the highest in four years, and forecasts of an interest rate cut to try to stimulate growth, is the latest measure of Britain’s slide.
Australia has a similar set of problems but also has time to correct its economic course if government, at a national and state level, learns from the British experience which starts with a bloated social welfare system and rolls up to a hugely expensive shift from fossil fuels such as coal, oil and gas to seductive but high cost and unreliable renewables.
The energy issue, which is forcing the national government in Britain to hand out billions of pounds in home heating grants, is becoming an economic flash point with a plea from the Prime Minister, Sir Keir Starmer, for oil companies to resume investment in the North to boost declining gas supply.
Australia has also seen the first hints of a “green reversal” with promises to clear the way for gasfield developments off the WA coast, if the legal obstacles erected over the last 20 years can be removed without endless litigation.
What every country is discovering is that “energy is the economy” and if power costs are too high or supply unreliable the entire economy suffers as industries close (or migrate to a cheaper jurisdiction), jobs disappear, and demand for increased social welfare spending rises.
Investors, because of their sensitive hip-pocket nerve, can see what’s happening with the richest simply relocating to a more inviting country, such as the U.S. or Dubai, leaving those less mobile with the option of shifting their wealth to a country where it is welcome in a transportable form, which means Switzerland or Lichtenstein and gold.
Last month’s 11% gold-price correction, which saw it a fall from US$4378 an ounce to US$3889/oz, has been largely reversed as the underlying case for gold becomes more widely recognized, especially when set against the poor case for government-backed currencies.
A second issue which Australia shares with Britain is failed immigration policy which in Australia’s case can be seen in pressure on housing availability and prices, but in the U.K. can be seen in a flood of services-hungry illegal immigrants.
The cost of housing, feeding, and clothing people who simply turn up in small boats on the Kent coast is a massive political issue in the U.K. and while there’s isn’t a direct link to funding pressure on other services, it does appear to be evident in the appalling condition of roads outside London.
If you can tell how civilised a country is by the way it treats its prisoners, a comment attributed to both Fyodor Dostoevsky and Nelson Mandella, then my test of a country’s economy is the state of its roads and on that measure Britain is undoubtedly third world.
A third measure of the crisis washing over the British economy is a direct result of excessively generous social welfare system and the way it discourages work.
A perfect example of the work problem was when I heard that builders have discovered that they are better off financially to only work for three days which enables them to claim maximum social welfare payments, with the net result being more cash in their pockets and an increased burden on government finances.
Some of the blame for what’s dragging Britain down can be attributed to the crazy/brave decision to quit the European Union which forced a relatively small country to try and stand on its own and compete with bigger and more cost-effective economies.
But an equal portion of the blame can be assigned to a wholesale embrace of “green woke” theory which dominates critical aspects of the economy, especially power supply, migration, and anti-west policies such as the country’s a pro-Palestinian stance in the Gaza war.
Another example of Britain heading in the wrong direction is virulent anti-U.S. reporting by the national broadcaster, the BBC, which could cost the government owned broadcaster US$1 billion to settle a case threatened by the U.S. President Donald Trump over falsified videos.
Collectively, the policies being followed by the Labour Party in the U.K. are hugely damaging to the country’s economy though the recent attempt to backtrack on North Sea oil, a sign that change could be on the way.
The problem is that time is not on the side of Britain which has slipped further down a green rabbit hole than Australia.
Investors can see the issue clearer than government and are voting with their wallets by shifting funds out of the U.K. and/or into a portable form of wealth, with the best option to dodge the damage of a failing government being gold.
It’s for those reasons that the crisis dragging Britain down is a warning to the rest of the world, including Australia, that green/woke politics come at a high cost, generally borne by the people who can least afford it.
Britain’s decay, and the risk of it spreading into other economies, is also latest buy signal for gold, which has risen with central bank demand and now has a fresh tailwind blowing to maintain the upward momentum.
