uk – Learning, Science and Society

Good morning gentle readers and welcome to another week in which we shall together learn even more about Science and Society. We’ll concentrate on the Society bit today, via economics. Because when two minds as acute as Katy Martin of the Financial Times[1] and Heather Stewart of the Guardian[2] coincide, we suspect that Society may be unravelling rather fast indeed.

WHAT KATY AND HEATHER SAY Both highlight disquieting instability in the US Bond Markets, particularly long term US Treasuries..Remember: this is the key metric by which foreigners judge a country’s future soundness and judgement, it filters out the short-term sound bites of spokespersons, and foxes the spins of friendly media. For US bonds, the outlook is becoming troubling. Yields are rising. And every intervention by Mr Bessent, however well intended, only seems to be making the markets ever more uneasy about US policy signals. What’s worse, all this worry seems to be bleeding into the dollar, the sheet anchor of the world financial system. We should be clear: Bessent is firefighting. The long‑term debt is not his creation, nor his remit. That belongs to Congress and the Presidency, and currently neither seems willing to confront the colossal $40 trillion IOU .Ok, financial ladies summarised :here follows our own gloss.

WHAT WE SAY Well, ever since the 1890s US Treasuries and the dollar have been the rock-solid anchors of the world economy. It’s like that when a superpower is at its peak. Everybody wants your currency: which in turn makes you strong because if you own the reserve currency, you can keep issuing in it long after everyone else runs out. Think the gold and silver backed currencies of Imperial Spain at its zenith, and the enormous role of Sterling and the Bank of England’s gold reserves before 1914. The first signs that these Empires were in decline was series of financial crises. Spain’s manifested themselves as a series of bankruptcies under Philip II and his successors. British readers will recall the interminable series of financial and balance of payments meltdowns -1914, 1931, 1940, 1947, 1956, 1967, 1976-are just the most outstanding as their own Empire declined from world hegemon to just another country in Europe.

Which begs the question: is America about to go the same way? Perhaps, but with some caveats. Firstly this is August and there are always some funny trades around in a quieter month. Secondly AI is competing mightily for funds in the capital markets, putting a squeeze on sovereign debt. And do not forget: this is still only a trend, America still has enormous economic potential. There is still time to elect a different Chief Executive and a different group of lawmakers to undo some of the damage of the last 20 months or so. But the warning from the ladies’ articles is clear: the margin for error is starting to narrow fast.

[1]Bossing the bond market around never works For once an FT article not behind a paywall, huzzah!

[2]Jumpy bond markets make it clear: Trump risks driving US into debt crisis | Heather Stewart | The Guardian

[3] Decline of Spain – Wikipedia

[4] British Empire – Wikipedia

#Scott bessent #US treasury bonds #financial crisis #dollar #imerial spain #imperial Britain #economics #finance #geopolitics

According to one tale, the great Chinese statesman Zhou Enlai was asked “What are the consequences of the French Revolution?” To which he replied “it’s too early to say.” Like many good stories, it’s probably apocryphal; but it illustrates a wise truth. Don’t rush to judgement. In historical terms, the UK decision to quit the EU in 2016 was a seismic event at least as big as the French Revolution, or China’s own Cultural Revolution. Nine years on from the ballot, and three from that final sundering, can we make out anything at all?

Superficially, the case against Brexit appears to be overwhelming. GDP is down by anything between 2-5% each year.[1] Business investment and capital formation have taken a severe hit [2] Life expectancy, that key indicator of a thriving society, has actually started to fall is some areas. As for the much wished-for trade deals with the Leavers’ beloved White Commonwealth, these are either highly disadvantageous the to UK (Australia, New Zealand) or non- existent (Canada). Meanwhile the UK Government rushes to subsidise factories here, there and everywhere, with money which might be better spent on Defence or transport, all in the name of keeping a residual manufacturing presence. Case closed? No. Firstly because the analysis is too simple. Secondly, because we think that humans are not, primarily economic animals.

For starters, the above-quoted statistics are UK-wide. They disguise the fact that certain regions have weathered the Brexit storm better than others. Northern Ireland (membership of Single Market) and London and the South East ( residual proximity to the Continent) are two cases against. As for the life expectancy figures-these are a long term trend, and probably owe their origin to the years after 2010 when Remainers Cameron and Osborne introduced their programme of austerity.

For the second argument: let’s go back to basics. The European Union was founded first as a peace project, and only secondarily as an economic one (it was the failure to grasp this which led to the UK’s disastrous negotiating strategy-but that’s another story). The EU has indeed kept the peace between those ancient enemies Germany and France. But with the rise of Vladimir Putin, the days of peace are over-everywhere. As for prosperity-was it really all it was cracked up to be? More food seems mainly to have led to higher obesity. More money meant more fast cars, more items of throw-away fashion and easily- forgotten holidays. All of these may have to be dispensed with if our economies have to be diverted to defence. So-was Brexit simply an act of foresight, preparing the British people for the hard times that lay ahead? And there is one other factor, which we think is more important still.

When the UK coal miners struck in their bitter dispute of 1984-1985, they firmly declared one thing. It was not about money. It was, they said, about preserving community, belonging and their sense of identity.[3] And these feelings are rooted very deeply in the human psyche. Probably far deeper than a desire for shiny kitchens or luxurious furniture. These are the profound sentiments that Brexit touched upon-and we ignore them at our peril. History has not been kind to those mineworkers and the children, it is true. But it still remains to pass its judgement on the children of the Brexiteers. Let’s wait and see.

[1]https://www.economist.com/britain/2023/01/03/the-impact-of-brexit-in-charts

[2] https://www.ons.gov.uk/economy/grossdomesticproductgdp/bulletins/businessinvestment/apriltojune2021revisedresults

[3]https://www.channel4.com/programmes/miners-strike-1984-the-battle-for-britain/on-demand/73990-001

#UK #EU #brexit #gdp #miners strike #identity #trade

Tag: uk

Bond market worries: is America beginning to go the way of Spain and Britain?

Has Brexit really failed? It’s too early to say