Global Britain is circling the drain

Originally published at Alex Krainer's Substack

Earlier this month I visited the UK to speak at the Better Way Conference in the beautiful city of Bath, alongside a number of fellow thought delinquents like Dr. Pierre Kory, Neil Olver, Prof. Dolores Cahill, Andrew Bridgen, Melissa Ciummei, Dr. Mattias Desmet, Vera Sharav and many others. 

The conference itself was extraordinary: an abundance of extraordinary content with one speaker after another delivering mind-blowing remarks - the result of years or decades of deep research into important social, economic, scientific or medical issues which the mainstream is trying to obscure to oblivion. It was so much more than one could absorb in one sitting and I’ll have to revisit much of what I’d heard in Bath - it was an overload of awesome.

Poverty on the streets of England

However, the economic and social conditions I could observe during my 4-day visit were disheartening. People on the street - most of them perhaps - do not appear prosperous. Physically, they're not the picture of radiant health, far from it. For a tourist spot, the city of Bath - otherwise a very beautiful place - is surprisingly dirty and homeless people are pretty much everywhere. Bristol, where I spent a day, looks even worse. The fact that the ordinary Britons are truly struggling is now quite visible.

The streets of Bristol resemble a third world country, not what one might expect to find in one of the world’s richest and most advanced economies.

Strikes are erupting everywhere

My return trip was disrupted by a strike and I was unable to get from Bath to the Bristol Airport by train. Indeed, it seems that strikes are becoming increasingly frequent in the British economy:

Statistical measures confirm that the struggle is very real and large segments of the British society are slumping into a Dickensian era poverty, confirming my contention that empires sow mayhem abroad and misery at home. According to the recent figures from Trussell Trust, the number of people in the UK who needed emergency food supplies from food banks has increased from 1.35 million in 2017/18 to a record 2.99 million in 2022/23. One in five households have trouble paying their water bills, and many more are struggling to keep up with their energy bills. Even with the subsidies government provided for last winter, electricity bills in the UK are more than five times higher than the European average! 

Everything points to a horrific cliff-edge

As the Guardian wrote a few weeks ago, "Everything points, in short, to a horrific cliff-edge looming this spring, and an avalanche of debts, defaults, evictions and unpaid bills to follow. ... Put simply, frighteningly large numbers of people just don’t have enough money to absorb the shocks that are coming. Wages are too low, benefits too mean, and the cost of living too high for them to afford even the basics.   ... The CEO of one British retailer complained that his stores were losing customers to food banks or simply “to hunger.”

When businesses are losing sales to poverty, rather than competition, we know that the financial parasite has begun to kill its host. And it is not that the government isn't doing enough social spending: more than half of all British households (54.2% of households, or 36 million people) receive more in benefits from the Government than they pay in tax. This is the highest ever level of dependency. It has increased from 24 million, or two-fifths of households from the turn of the century, when Sir Tony Blair was in power. In other words, the system is locked in a slow, steady and consistent deterioration which now appears to be accelerating.

Creators of this disaster: aloof and tone-deaf as it gets

At the same time, monetary authorities who are the creators of this appalling state of things, are beyond tone-deaf. In a recent interview, Bank of England's top economist, Huw Pill, thought the best advice he could offer to his fellow Britons was to just accept being worse off. He literally said that, "Somehow in the UK, someone needs to accept that they're worse off and stop trying to maintain their real spending power by bidding up prices..." 

Last year, the Bank's Governor, Mr. Andrew Bailey admonished British workers not to demand pay raises in order to do their part in the fight against inflation. Thus, the top genius in the country seems to seriously think that British people could help counter inflation by embracing poverty and by not eating? At the same time, immigration into Britain has reached the highest figures ever recorded: 606,000 people in 2022. And this is all awesome, because immigration supposedly helps economic growth. Somehow however, the first 8 million immigrants over the last 25 years did not yet do the trick. Perhaps the next 100,000 or so will improve things? If not, another million or another ten? Perhaps professor Neil Ferguson will know how to model the right figure. This is a failed system and calling it successful will require increasingly absurd level of lying and increasingly harsh suppression of truth.

Economic consequences

The more predictable consequences of all this include further quantitative easing as the Bank of England will be forced to backstop the gaping bad debts on the balance sheets of the British Banks, more government intervention in the economy through greater deficit spending, higher interest rates and higher inflation - the recipe that's been tried and tested by nations including Zimbabwe, Argentina and Venezuela, and which invariably yields the same results. I pointed out these developments in an article titled, “The Fall of Global Britain,” making the following prediction:

“A severe crisis at home coupled with the dramatic loss of international leverage and a very costly addiction to imperial prestige. The UK will likely make all the mistakes made by other powers in that similar position through history: it will suffocate its domestic economic growth by imposing hard austerity at home while at the same time increasing military spending and foreign adventurism. Britain’s public debt will continue to outpace its GDP growth and the government’s budget deficits will be covered by Bank of England’s monetary inflation. This recipe reliably leads to stagflation and possibly to hyperinflation. … At a macro level, we can expect the following developments over the coming months and years: asset prices will probably continue to rise (i.e. a bullish cycle for the FTSE 100), but the government bonds will continue to slide along with the British pound.”

Here’s how that prediction, made on 27 October 2021 panned out thus far:

I expect that things will continue to evolve along the same trajectory. Social tensions and strikes will only accelerate the progression of this crisis and while predicting what its full unravelling could entail, historical precedents suggest that the decline of fallen empire can get very ugly. The chart below shows the way German imperial 3% bond fared during the opening decades of the 20th century:

Britain’s crisis might not quite reach these dismal proportions, although I do expect that the policymakers will continue to make all the mistakes committed by their counterparts in the past, ensuring that the crisis will continue to get worse. Unfortunately, it will be the people of Britain who’ll pay the highest price. Let us hope that leaders like Andrew Bridgen will gain enough political power to pull the nation away from the precipice and out of costly imperial adventures that are dissipating the wealth of the British people which could be better spent at home.

Navigating the fallout

For investors and people with savings to protect, navigating the unravelling of a crisis will be difficult. While nobody can predict the timing or magnitude of events like the decline of the British pound and the government bonds, one thing we know is that large-scale price events (LSPEs) invariably unfold as trends which can span years. As the above charts show, British pound, Gilts and the FTSE each followed a very different trajectory and their decline/rise unfolded at different time intervals. The most reliable way to navigate these trends by following high quality trend following strategies, precisely the kind of decision support we offer through I-System TrendCompass reports.

Alex Krainer – @NakedHedgie is the creator of I-System Trend Following and publisher of daily TrendCompass reports which cover over 200 financial and commodities markets. One-month test drive is always free of charge, no jumping through hoops to cancel. To start your trial subscription, drop us an email at TrendCompass@ISystem-TF.com

For US investors, we propose a trend-driven inflation/recession resilient portfolio covering a basket of 30+ financial and commodities markets. For more information, you can drop me a comment or an email to xela.reniark@gmail.com