Thu Dec 11th, 2008 at 10:37:38 AM EST
I sent a Christmas card to a friend last year with a couple of predictions stolen from ET about what would happen this year that turned out to be spot-on. So she's written this year asking for some ideas about next year.
So, ego blown, I started writing. And got to the essay below. However, before I send it my question is how much have I mis-understood ? What is obviously wrong ?
Critique away please ?
Let's just say that Gordon Brown's claims to have saved the world, or even just the world's banking system are somewhat premature. The fact remains that, in enabling a select few to capture more of the world's economy, our lords and masters have allowed the rest of us a lifestyle only built upon debt and the chickens have come home to roost. By putting all of the US and UK economies in the hands of financiers who thought the sun shone out of Milton Friedman's backside and who proceeded to accordingly skew the economy for the banks has been the equivalent of arranging conditions to suit the tail by starving the dog : Sooner or later the tail dies too. We have no idea how much debt is out there, but the working assumptions amongst those economists who were warning about this before it happened are still terrifying. This isn't just a case of regulation to make things better, entire classes of financial trading have to be entirely eliminated (and if the people who organisated them were sent to Guantanamo-like re-education camps I'd personally feel better too)
The banks and the govts aren't doing enough to keep employment going ($700 billion for the banks, $15 billion for Detroit demonstrate their priorities - both were shoddy but one is rewarded the other is bankrupted). With failing employment, quite simply there won't be enough money left in most people's pockets to keep the retail economy going. With retail and employment falling, tax revenues will be squeezed. And Gordo will never tax the rich proportionately to make up the difference. Remove a lot of the exemptions, eliminate tax havens ? Don't see it myself. Cut defence spending ? Pull the other one, it used to have bells on it. So, all through the year we will have a deteriorating economic and employment situation. 3 million might be a forecast on the low side as things collapse.
This time next year there will be a strong push to join the euro. Not the minor noises from the inconsequential but real panicked voices in the Telegraph and Mail (not Murdoch). I don't think Osborne will say it & Hague is definitely against it, but Cameron might be forced to call for it. Darling says what Brown tells him and Brown ? Depends on what the White House think (yes we are that supine) but I think they'll have their own problems and Europe won't factor as one of them. So put money on us actually wanting to. But guess what ? The ECB won't want us (UK controlled tax havens are too toxic for the eurozone to handle). Then we face a meltdown of Icelandic proportions.
House price recovery ? Fuggedaboutit
The oil price has been an interesting thing. Zooming up to $146/ bl dented a load of smug assumptions, which have sadly been put back in place now it's fallen back to $40. This is as artificial a low as the 146 was too high and is a result of futures traders dumping options they bought in the summer, it's very temporary. However reduced economic activity may suppress demand for a while yet and the progress back up may be advantageiously sluggish (2 - 3 years). We should be taking the opportunity to bolster railways, instead we're pissing it up a wall as usual.
However, liquid fuel is not the major part of the energy market and I see our more pressing concern is gas supplies, the price of which is bizarrely tied to oil. Unfortunately I don't see the UK taking advantage of this to change the internal energy markets towards the way that the rest of europe does (ie long term gas contracts - we concentrate on "efficient" spot prices that work out expensive in the long run).
Now for structural reasons the UK electricity generation market is unbalanced between "base" load (ie expensive to replace but always there) & that which services fluctuating demand. There are considerable debates happening in europe about how this can be addressed, irrespective that, as you can imagine, there are numerous conflicting "best" solutions. Nevertheless, they are working hard on innovative energy schemes to address the problem of CO2 output whilst maintaining energy output. Some of them are barely technically possible, but the general level of discussion and activity is boggling. The complete absence of similar urgency on this side of the channel is...disturbing.
So, as the old magnox nuclear stations are mothballed and idiotic replacements like kingsnorth become subject to the same sort of action we associate with nuclear a winter energy crunch becomes entirely possible. Not this year, possibly not next, but 5 - 7 years it becomes a serious danger.
Finally, on climate change we have been in a false position with a solar minimum and an el Nina combining to suppress temperatures this year, a situation that will continue through next year and possibly into 2010. After that, invest in water and sun tan lotion. things are gonna get bad going out to 2013. Climate scientists are now at hte point of genuinely scaring each other about what they're seeing, we are past the point of gradualism and some are even saying that it's too late and the atmosphere has gone into a new state from which we can't pull back. The diminution of Arctic sea ice is now too advanced to stop and when that goes, Greenland goes next and that's a 10 m sea level change.