Beginning to see the Light: A new column for a new era

I decided to wite this as an epitaph to ‘We Don’t Need This Fascist Groove Thing’, which I spontaneously retired on New Year’s Eve.

The decision was taken instinctively as, when I was writing the last piece, it was clear that the original subject matter had ended and it was time for a refresh.

As my publisher said in his editorial that follows each piece, it has been 4½ years since the very first article, ‘Brexit, the never-ending story’, and to my amazement the story has ended. Or, perhaps I should say, that chapter has ended!

The new column, entitled ‘Beginning to see the Light’ will continue with a commentary on the weeks’ events, highlighting what I believe is the biggest issue facing us, the wealth gap, that has created such an unequal society.

As an example, the world’s 2,000 or so billionaires got $1.9 trillion richer in 2020 as financial asset prices soared on the back of government largesse supporting markets. 50% of the US stock market is owned by the richest 1%.

At this point, and before anyone criticises this comment, I readily accept that global warming is a more pertinent threat, but there are people better qualified than me to write about that.
 

the world’s 2,000 or so billionaires got $1.9 trillion richer in 2020 as financial asset prices soared on the back of government largesse

 
The wealth gap closed dramatically after the two world wars but began to reassert itself with the ascent of Thatcher and Reagan in the 1980s.

However, since the GFC of 2008 the gap has increased at a rapid pace, the data above is just the latest example of this.

Why this has happened is simple. Economic policy, led by central banks, cut rates to record lows, creating an asset bubble exploited by the rentiers in society. This was further exacerbated by quantitative easing which juiced-up markets still further.

The result is that bond yields have tumbled, C.$16tn of debt trades on negative yields. With nowhere else to invest, people have chased equities irrespective of market conditions.

We are in the grips of the second wave of a global pandemic, business and individuals are on government life support, unemployment could easily hit record highs, therefore why are equities rising?

The fact they are can be explained by my previous comment, and the fact that markets are supported by a central bank ‘put’; if prices wobble there will be more support.

Why does this bother me? It’s simple, this has driven political events in recent years.

2016 was the year of the electorate striking back. Firstly, there was Brexit in the UK. Whilst there was a hardcore that wanted this to happen, millions were persuaded to vote for it as they believed the propaganda that told them the EU was the cause of all their problems.  

I called them the ‘left behind’, people who no longer believed that ‘traditional’ politicians and parties cared about them.

The same was true in the US, where Trump rode their tide of discontent all the way to the White House and gave us the most apocalyptic Presidency in history.

Whilst Trump is now leaving office, those left behind are still just that, left behind. For him, like all right-wing politicians, they were a means to an end, nothing more!

What worries me is that ‘rebellion’ still simmers under the surface.

We have seen a rise in nationalism globally, which in some countries such as the US led to protectionism against exporters such a China.

This nationalism has led to populist governments being elected in countries such as the US, UK, Brazil, Russia, and India. Populism has become a polite word for Fascism as, when you examine the two, there are remarkable similarities.

And with nationalism comes racism.

Ultimately, we have societies fraught with divides, old and young, racial divides. But what fuels these divides is the wealth gap, the true divide is between haves and have-nots.
 

what fuels these divides is the wealth gap, the true divide is between haves and have-nots

 
Whilst this may not be new it is more prevalent than before, even the so-called middle class are impacted.

Developed countries are suffering from aging populations meaning that they cannot afford the state pensions of yesteryear. This is further exacerbated by low interest rates meaning that pensions and savings in general produce little in the way of income.

For their children, they leave university saddled with debts, there is no-longer anything resembling a job for life, and property prices force them to rent or stay at home. The bank of mum and dad can sometimes help, but many are stretched funding their own retirements.

COVID is a global event more akin to a war, after both world wars in the twentieth century we saw social upheaval and change. COVID presents that opportunity, which is why I have chosen ‘Beginning to see the Light’ as the title of the next incarnation of this column.

I wish each of you a happy, healthy, and prosperous 2021. Q1 will be grim, but we will come though it!
 
 

Philip Gilbert is a city-based corporate financier, and former investment banker.

Philip is a great believer in meritocracy, and in the belief that if you want something enough you can make it happen. These beliefs were formed in his formative years, of the late 1970s and 80s