Brave New World?

Brave New World?

Well, with apologies to Huxley, the world is not anywhere near that depicted epoch cast so far well into a future. A future of uncertain events which generations will of course never see and many will have to adapt too, or endure or change to live through. Pick a date, any date beyond a normal life span and it can be certain that any attempt to describe what a future will be like is bound to be tenuous in fact and fractural in visualisation, with little intrinsic certainty to give comfort that any society can plan or indeed secure its continued existence. However the nature of humans is to have a narrow focus on reality that exist within the day and extends slightly to assume there is a number of tomorrows to live for and of necessity limit their efforts to those that are significant to themselves. Which is why perhaps that so little communal effort is put into developing plans that would at least offer the multitude of other people’s children, the superior chance of a better future, one vaguely imagined drawn from the application of controllable sustainable(?) resources and protected in trust by the current generation for the possibility of a future use. In this there is a degree of certainty that the exploitation and ultimate exhaustion of non replaceable resources done without devising methods of replicating or replacing them, will almost certainly be guaranteed that there will be no better future than what has gone before.

There is an assumption that ‘things will always get better’ and inventive progress will solve any problem, this depends on having key resources to use to develop alternatives and environmental degradation is manageable, both of which have a short expendable time frame measured in decades to a century or more?. Time enough for a deprived generation to curse or wonder on the actions of those gone before. Although there is now a consciousness of the consumption of diminishing resources and the increase in the inability to offer a better future for the worlds maturing younger generation, there is in some sectors an urgent endeavour to at least begin to enact mitigating measures for the protection of a ‘better future’ yet this awareness is struggling against challenged vested interest and a number of vocal intolerant belligerents very much opposed to any idea of environmental or resources degradation. This make it difficult for authorities to create a framework that overrides the power of well funded embedded commercial / industrial lobbyist from whom they seek “commercially confidential” expert unbiased consolations, all too easy to overcome any extemporised professional factual detail or empirical evidence and the proletariat public often has no input or idea on what is being decided until the game is set on the off.        

So, much of the power that authorities have to consider a future is spent in short term solution and justifying their approach to endemic problems against a back drop of opposing views; for if it means restricting and challenging their own tribe of promoted policy believers that are more concerned with themselves, their strategic position and unwilling to engage in long term solutions, the ability to really act is curtailed and occasionally reliant on extraordinary events to shake apathetic views allowing a modicum of urgency as in “something must be done” supported by populist energy, to lay down something substantive that does aid the proposition of a ‘better future’.  

Although in some respect and in certain parts of the world, specifically the tenuous post- industrial west, there is some element of future proofing things being tentatively triaged, it is though at a time when its productive and financial capacity is stagnating while its technology is outpacing cogent direction and overall cultural beneficial usability. It may be that from an assembled mass of discordant pressures that can produce social uncertainty, reactive actions are instigated in a scramble to offer some stability for events to be seen normalised but evidentially (with a bit of extension and elaboration) one can see that there are trends that move to a view that there are in some restricted parts of the hemispheres, an involuntary move to the creation and application of some of the dystopian elements portrayed as of a brave new world.

  

It has hardly been time enough to obligatory brush the dust of the old year out of the door before one must really take note of the direction of the New Year grime to fall fresh on the situations so recently released. For the United States (us), The Donald benediction, even without being inaugurated yet, has set a few hares off for the runs so it will be terribly fascinating to consider the direction they take assuming the hounds don’t run them down first but by the time they get their scent it may be too late to subpoena them back and good or bad the course will have to be run kicking up a whole lot of grime. One might be unreasonably optimistic; that despite all The Donald has said, he might not be persuaded or able to shake off the election platform of saving the workers and left behinds of an imagined middle america or engage in challenging wall street to mend its ways or “drain the swamp” but once he takes over as president with the power he can exercise he may realise just how tremendously important presidential office is. This may keep him on his electioneering platform; with his unpredictably, bullying and lack of party political responsibility, he could do and say things that a more political tenured individual would not be capable of due to the pressure of self interest party politics. He has gained the freedom of expression no one of the aspired position has ever had before. He is thought to admire Obama and comprehends the party obstacles Obama had to fight over which is, never the less, something he instead has a head start over.

The Donald could be one of the best ‘one-term’ presidents that america has unwittingly gained; nothing thrown at him so far has fazed him. He dissembles anything put to him that calls into question his integrity, honesty, veracity, anything that he takes against; to the point of obscuring truth, reality or fiction and so far supporters are relaxed and accepting while others are bemused or astounded. He will gain a close shield of sycophants to fend off unwarranted attention who may extend the furtive politic PR dictat over him of the blatant ‘don’t want to know that – don’t tell don’t know’. He could set the scene to drag america into an enlightened direction if he wants to be great, for as president, initially free of the need for party collusion, he has little to fear other than resigning, and impeachment or being bumped off, for a brave new world.          

Unfortunately dust of the old year is increasingly matched by the laying grime of the new. Unlike the us which will have a whole new broom to play with, the uk has nothing other than the existing owners of a mangy bulldog to play with while cogitating their own navels and examining the accumulated fluff which involves reinterpreting and reinventing history which currently is looking at the failure of the Bank of England (BOE) in its forecast regarding the Brexit fiasco. The Brexit vote is done and no matter what happens the uk has lifted anchor to sail in uncharted waters but and it is a big But the old crew after ditching the captain onto a gravy train are still in charge with the Brexit remainers getting more of a clue as to where the reefs are and the Brexiteers mouthing ‘whinging mutineers’, we see no problems only clear blue water ahead. Unfortunately their myopic sight only makes out the stillness of the dazzling blue water of the harbour exit and not the reefs to be charted or hear the rough weather warning of the bleating mutineers. And here, in the uk, one can draw a parallel to that of the antics taking place within the us; it’s called Trumpism; attack, dissemble, fabricate; promote idealism for a brave new world.

 

The delusion surrounding the eighty odd MP’s that pushed for an exit is not dented by the growing realism that getting to the new world is not wholly under their or the captains control for the wind is not blowing in the ships favour and the fog off the new world might hide a land of belligerent natives not amenable in giving it up. Still they will press on for a landfall even if the land is less fertile than the one left proclaiming that thing will only get better and as proof of their optimism they are unashamed to discredit any ‘expert’ chart reader, state interminably how experts got it, the (Brexit) effect wrong and use limited short term confusing beneficial elements to support their belief in the direction to the brave new world.

Up to and beyond 2007/8 most economists did not see the creation of the Credit Crisis (CC), the Queen asking the question ‘why no one had seen it coming’ did not get an answer and still most do not believe why or how it really it happened. The uk treasury did not publicly rise alarm  (Alistair Darling was locked away in a safe room for daring to ring the Lutine bell), the BOE did not call it out, financial institution kept quiet about malfeasance to keep the money rolling in and Messrs Joe and Josephine public got stuffed on easy debt access. The result was an orchestrated austerity drive with its chief easy target being the evisceration of public sector spending, the public acceptance of austerity being the only way out of the mess and the instigating of QE to bail the banks and markets out to the tune of £440bn up at 2016. None of this money flowed into the general consumer economy, left to become victim of a 20% depreciation of the pound, no rise in real incomes, no increase in productivity and a declining interest rate for savers. All this carried through to the following 6 years, to date. From this stems the 23^rd June 2016 debacle and a briefing by the Bank of England that the uk will likely suffer a downturn in jobs and productive investments, a squeeze on consumers spends, a drop in the value of the pound, a GDP reduction with higher uk debt and deficit.     

Now today the self promoted Brexit buccaneers and a few economist are using the argument that the BOEs cautious pre-Brexit ‘forecast’ was wrong then and continues to rubbish the BOE and other re-moaner ‘pessimist’ on the basis that the economy had improved previously to 2015 and more so after the Brexit vote. One can understand this tack for with the BOE chief economist Andy Haldane making a recent play to offer an exit door from the unforeseen event of the CC forecasting failure, by all economist, including the BOE, with his reference to this failure as a “Michael Fish” moment in which the weather forecaster took a panning for deriding the suggestion of an imminent hurricane that was the next day the great storm of 1987. He did say it would get very windy but the implication over this ‘oversight’ followed him ever since, ridiculed and called into question the value weather forecast. The analogy that Haldane makes with his “Michael Fish moment” is widely off the mark; the forecasting at the time used the best available data to predict the movement of a weather front with high winds and did gave a public warning; most economist consider their ‘profession’ to be of a scientifically basis and pride themselves that economic is a rational predictable near perfect system yet no public warning, not even a breeze, presaged of the CC.

One might think that the Brexiteers should be more cautious and not be obviously pompous in their enthralling virtuous stance. It is true the economy since the vote has done better than expected with the UK having the highest growth of any EU country of >2.2% 2007-2016 average but the value of the pound had dropped again by another 17% due to the uncertainty of the impact of the vote!

Some of the figures below indicate a near return to pre CC days with huge variation, down and up post CC, up to 2016:-

   

Deficit at 2005   was 20bn up to 104bn at 2010 then fell to 40bn in 2016. (2% of GDP)

Debt at 2005 was 0.5 Trillion up to 1Trillion at 2010 then at 1.6T in 2016 (80% of GDP

Inflation at 2007 was 2.3%, then at 1.2% in 2016

Interest rate at 2007 was 5.5% then fell to 0.25% in 2016.

Consumer spending at 2008 was 208bn; at 2016 it is 192bn, some 67bn funded by credit cards.

Much of these blind figures hide the actual effect of the desperate years of the CC which is still having a huge drag on the economy. The not unreasonable expectation was that the Brexit vote would create market uncertainty to have a depressing impact on the economy. However it is the lift in GDP growth, sustained employment, export rise and some small investment commitments rates that gives the Brexiteers such bombastic righteous bounce to charge on with a departure from the EU hard or soft. The extent of a consolidated positive view from above, would seem to a impartial observer, that neither the CC, the Austerity Policy nor the Brexit vote had little negative impact on public confidence to now see how much consumer spending is returning to higher rates, assisting the economy to perform better than expected after the Brexit vote, all indicative of a brave new world to come.

It is difficult though to lose sight of pertinent facts that helps give a counter view to such a favourable outlook of the current state of the economy and specifics that are causing some necessary apprehension. QE is propping the economy up. (Unless written off it has to be pulled back at some stage) The pound has devalued by some 40 %. (Of limited benefit to exports, up’s the cost on imports). Consumers are disregarding risk in expanding credit. Personal savings are low and being withdrawn re-bank of ‘Mum and Dad’. Bank rate is unsustainably too low. National Debt is rising faster. Inflation control will be intractable. Stock/shares are unreasonable high. (The pounds low value helps). Productivity is stagnant. Corporate investment is retrenched (Holding cash). The unfolding impact of withdrawing from the EU is indeterminate. And social infrastructures are fragmenting.

There is little here to give any confidence that things are due to get better and one might suggest that the trend is following the antics of the CC 2007/8; this time the banks may be more secure and they and the economy just now have no need for savers but in time everything else may have to carry a much greater financially painful burden; and yet the uk has not actually left the EU, yet, so little wonder that civil actions lags behind economic facts basking in the deniability of the actual situation. One may hope for a prosperous peaceful good future but it is unlikely to be eased by landing on the Brexit proffered brave new world.

One might think that there is no silver lining in this pessimistic interpretation of existing events but for two players there is; the borrowing profligate are having a good time at the expense of the parsimonious. Borrowing is not discouraged by easy ‘cheap’ credit, while saving is being eroded faster than inflation – winners are the banks and borrowers.

There is one other less acknowledge advantageous factor, known in economic circles and factored in, usefully employed by governments albeit a long term systematic one that it can influence. At its simplest it is that the lower the value of the pound and the higher inflation is, the cheaper and easier it is to reduce government debt, this benefit is not available to all those on fixed or no incomes. There is a name for this process and it is called ‘financial repression’ a way of debt restructuring that is used in the liquidation of government debts that uses excess inflation rising higher than what would be ‘normally’ allowed while suppressing interest rates and if as required, control the flow and application of money.

“A subtle type of debt restructuring takes the form of financial repression is most successful in liquidating debts when accompanied by a steady dose of inflation. Inflation need not take market participants entirely by surprise and, in effect, it need not be very high (by historic standards). For the advanced economies in our sample, real interest rates were negative roughly ½ of the time during 1945-1980. For the United States and the United Kingdom our estimates of the annual liquidation of debt via negative real interest rates amounted on average from 3 to 4 percent of GDP a year.” (1)

It is evidentially clear that all governments now know what the major contributory factors were in the lead up to the CC and were forced reluctantly to adopt the actions required to mitigate the immediate effects of it. However as the contributory factors were of a long term gestation period and promulgated within open, relaxed financial market conditions, the ability to correct the fundamentals of the economic environment does not rest with the political party dogmas that pervade short term party politics horizon, hence short term crude and subtle measure are enacted to provide the appearance that ‘someone’ has control of and understands the problems. The current difficulties:  repressed wages, inappropriate beneficial taxation, low growth, stagnant productivity, uneconomic / excess labour, and increasing debt/deficit of western economies is symptomatic of the hangover from the CC. A race to the bottom of low labour cost, complicit regulations and overall shrinking of revenue / capital expenditure is inimical to the beginning to really address the underlying causes of economic collapse. For the moment some would suggest that there is no choice other than to let the ‘perfect market machines’ run their course, this suits ‘it’ and manipulators purpose, while naive authoritative exponent generates as much broad confidence into rapacious markets and hapless consumers to keep the monetary machine vigorous.

Now for many, the ordinary working class, middle of the road, left behind people; all of the above is just spin and upon the likes of any proffered expert they are being encourage to, if not despise, certainly to dismiss, anything that sounds like an experienced examination of issues that have an undeniably impact on their lives. Even if the issue are complex and raise worries, they would rather have an emotive sound bite or strap line that appears to offer a course of action that “something is being done” to gain a solution that relieves them of actual or intellectual involvement, preferably solutions that do not tax their ability to get on with familiar life until of course when that becomes untenable; until then best to ignore the problem and put faith in a brave new world.

Before one arrives at the imagined bountiful destination, it is perhaps pertinent to observe the immediate surroundings one is passing through and ask how what one sees has it come to pass and are the fundamentals capable of being addressed to offer a brighter future for all.

If one views the state of dilapidation in towns and cities, the obvious things one sees and have become accustomed to, accustomed enough to being ignored and disregarded, then it might be a pointer to how difficult it may be to be comforted by overlooking prescient history; can the future be any different? After a while familiarity of degradation can easily be ignored like; empty boarded up shops, low property maintenance, unrepaired roads, fly tipping, vacant new buildings, begging, opportunist street actors, food banks, more homeless and rough sleepers or subtle things like the lack of volume house building, disproportionate pay divide, employment outsourced, rise in zero hours working, increasing  youth unemployment, down skilling, erosion of civil constructs, hedge rows not being maintained and public services cuts; if one looks enough the list can be extended.

One can say that there are a number of factors that have made these situation shifts possible but the hyped transient benefit of a lift in GDP driven by a reduction in the value of the pound, culminating at 40% drop since 2008, with exceptionally low interest rates, inflation increase non-absorbed by reticent pay rises, consumer product shrinkation for cost efficiency and profit / shares/ stock maximisation; are not the sign of economic buoyancy.  

Empirical evidence does indicate that un-orchestrated sociological action can amalgamate to engender mass movements for populism of any source that challenges unresponsive permanency and the uk has not left the EU yet. So little wonder that civil action lags behind economic facts while basking in the deniability of the actual situation. With the hope for things remaining as good as existing, or presumably better, or fortuitously no worse; to seek the brave new world is desperately understandable but are saps willing to undertake the efforts required for modernisation to the boom and bust trends, that not even “the shining city on the hill” is prepared for!

Brave new worlds indeed.

© Renot

121161616

(1)  The Liquidation of Government Debt.

      © 2011 by Carmen M. Reinhart and M. Belen Sbrancia

     NBER Working Paper No. 16893 March 2011