Sunday, July 21, 2024
 
 

The UK Economy – Another Twist in The Tale

A guttering candle or a financial flame for the future?
His Majesty's Treasury, occasionally referred to as the Exchequer, is both the UK's economic and finance ministry

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Around the world most nations have been trying to recover their financial strength and where possible find some growth. Above all, they have been searching desperately for that elusive tincture which is the founding base for any successful economy – confidence.

Now we are starting to see how effective and successful the policies of various countries have been. However, there is a significant problem for any of those leaders operating in the democratic system and that is time. Currently one can see how very fragile our democratic systems are.

We live in a world where we want things to be done instantly, whether it is immediate deliveries of just about anything (usually from Amazon), to actions from our leaders to solve our domestic requirements and needs. The problem is that our politicians are expected to deliver their policies as quickly as Deliveroo which creates a conflict between shorter-term populist policies, and longer term extremely important developments.

If you want to be elected then you will be expected to have managed out immediate issues such as, say, potholes in the road, but we seem to have little or no interest in longer-term issues, such as our railways or a new power grid. Yes, they are all important but in our “Amazon” world we want our trains to arrive as efficiently as our pizzas.

So, the politicians find themselves being pushed into populist policies rather than longer-term responsible ones. Two good examples are pensions and care for the elderly, along with operating an effective NHS. So, the voting public wants it now and also wants someone else to pay for it. After all, regarding the NHS, which I must say has been brilliant to me, none of us actually know what the price of the drugs and medical facilities are. We have been told they are free, and it is our right to have it!

These issues have no instant solution, but they will take time and money to resolve. The problem for our politicians is that we don’t have the money, and they don’t have the number of years to seriously address the longer-term issues. A five-year term of office would never be enough.

We have a matter of days before our General Election, and we will all have to decide which candidates would be the ones to inspire us with confidence that they can really deliver something we actually want – as opposed to those who seem to be merely proffering a “confidence trick” to get our vote.

Our prospective leaders all have the same problem, and that is – we have no more money! We had the seemingly ubiquitous “Money Tree” which we would know as Quantitative Easing (QE) and could apparently provide a seemingly never-ending supply. Now, though, reality has hit, and our money tree now looks more like that of that desecrated sycamore tree on Hadrian’s Wall, which was chopped down by some thoroughly disgusting vandals.

Desperately Seeking Data

Economic theories often seem to have more in common with alchemy rather than mathematical science. Never have investors (be they individuals or investment) had access to so much data with their related views and opinions. Yet has that meant that most investment houses are any better? Often not it would seem (although they should be capable of providing their services at a far lower cost – but that is an issue for the industry and its regulators to address). What voters and, come to that, investors need to consider is a longer view and not react to cheap (actually not so cheap) tax offers. In the supermarket world they are used to “BOGOFs” which can often be a charade, so perhaps we should do the same for politicians with “sod off” in trying to buy our votes with tax “gags.”

Inflation has fallen back from its peak last year, though not for the reason given by the politicians, but rather through the easing pressures of supply lines caused through the wars and trading issues around the globe. Interest rates could have already been reduced as this inflation was not consumer generated. The problem has been that interest rates were kept too low for too long: after all, these were the rates from the banking crisis. We could have seen rates drop by half percent, but the Bank of England felt that was too risky. Now with further concerns over the Ukrainian war, the Middle East and the Chinese economy, these have been given as excuses for rates to stay where they are – and the result? Further weakening of confidence.

So, over the next few weeks, we will reach in vain for those small shards of positive news, but if a nation with all its varying companies and consumers has little or no faith in its development, then the cogs of the national economy will rust and grind ever slower. If, though, there are some shafts of sunlight in this period of economic and financial gloom (such as house price stability, a clear government mandate for corporate, and especially smaller companies’ growth after the election), then this can, if properly nurtured, provide just enough confidence to see the wheels of an economy start to grind forward at last.

With some small rise in confidence then consumers (and yes that includes us) may just start to open their mold-encrusted wallets, blow the accumulated dust from their cash and credit cards, and start spending again. The same will also apply to companies as the more adventurous will see such moments of recovery as an opportunity to invest, spend and look to grow again. Let me then also add the nations and governments themselves, or more precisely those with the responsibility of making decisions (such as finance ministers) be attracted towards those nations who will have who have seen to manage their way through this economic turbulence.

So maybe we are beginning to see some green shoots of recovery and that is to be welcomed and encouraged but beware some of the older debt-ridden companies which should have already been cleared out. They will not be seeing green shoots – but rather more likely advanced mold.

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