I’m So Bored With the USA: In This Ever Changing World…

 

 

 

“But if this ever changin’ world In which we live in

Makes you give in and cry”

 

I am delighted to be able to begin with something positive…big up’s to President Trump for achieving the seemingly impossible, a peaceful conclusion to the tragic events in Gaza. Common sense has prevailed, and the bad guys, Hamas, and Israeli PM Netanyahu, have been bought to heel.

 

Now, we can resume with my usual miserable demeanour.

 

First-up, a brief mention of the UK postmasters, the majority of which still haven’t received their compensation. Whilst it is too much expect for a UK government to actually bring any proceedings against either the Post Office or Fujitsu, the compensation is another matter. Irrespective of the creed of government, this, unfortunately, typifies what our governments have become, self-serving.

They would do well to remember, that when a government fails to serve the people, it fails totally!

Last week’s Tory conference was an exercise in the pointless for a party who, at least, for the foreseeable future, is an also ran. It should also serve as a warning to Labour.

 

‘Last week’s Tory conference was an exercise in the pointless’

 

The Conservative, in their desperate attempts to appear relevant have segued into just another right-wing, authoritarian party. deporting migrants, deregulating business, disciplining schoolchildren, dumping net zero targets, detaining more minor criminals and dismantling the supposedly liberal judiciary. It was pure Reform, with a dash of Thatcherism; all the favourite preoccupations of populists with a dash of yesteryear’s free-market Conservatism.

The Tory peer David Frost, tried to explain the radicalisation of the party, saying: “A good chunk of the public is probably to the right of where [Nigel] Farage is.”

Robert Jenrick, in his speech, said: “The collapse of the old order is in sight. A new one is coming!”

The Labour conference, did offer up a moment of hope, when PM Starmer made the point that, as a country, we face an existential contest between decency and grievance, renewal versus decline, a pointed reference to Reform and their immigration plans. This was then totally undone by the home secretary, Shabana Mahmood, whose immigration proposals were little different to Reform.

There is a simple reality here; After years of austerity, rising inequality and growing public anger at the privatised utilities, Reform’s promise to address these issues, however partially and cynically, makes their reactionary populism more in tune with the times.

As for Labour, well their latest cure for all our problems is allowing pubs, clubs and restaurants to open into the early hours as part of a drive for economic growth!

I would imagine that rather than driving economic growth, it will achieve the opposite, more days lost to hangovers, more drink-related aggression, greater violence against women and even more deaths from alcohol.

 

‘After years of austerity, rising inequality and growing public anger at the privatised utilities, Reform’s promise to address these issues, however partially and cynically, makes their reactionary populism more in tune with the times’

 

Dr Richard Piper, the chief executive of the charity Alcohol Change UK, said: “These proposed reforms, developed without adequate input from policing, ambulance services, local licensing authorities, health experts or citizens are a charter for chaos”.

This might, however, be overcome by the cost-of-living crisis meaning that many can’t afford pubs and restaurants.

This crisis seems to get progressively worse, and last weeks news that water bills for millions of households in England are to increase by an a additional 3% on average, on top of the 24% increase previously allowed, really isn’t helpful.

An independent group of experts appointed by the Competition and Markets Authority decided provisionally to let the companies collectively charge customers an extra £556m over the next 5-years, which was only 21% of the £2.7bn the companies had sought.

The five – Anglian, Northumbrian, Southern, Wessex and South East – serve 14.7m customers.

Emma Hardy, the water minister, made a pitiful attempt to justify the increase, saying: “I understand the public’s anger over bill rises – that’s why I expect every water company to offer proper support to anyone struggling to pay. We’ve made sure that investment cash goes into infrastructure upgrades, not bonuses, and we’re creating a tough new regulator to clean up our waterways and restore trust in the system.”

James Wallace, the chief executive of the campaign group River Action, summed-up the situation much more accurately, saying: “Once again, water bill payers are forced to shoulder the cost of decades of failure”.

“Once again, water bill payers are forced to shoulder the cost of decades of failure”

 

From water we turn to another of our ailing industries, steel, whose latest problem has been described by insiders as “terminal”. Eighty percent of the industry’s exports go to the EU, which is planning to cut tariff-free steel import quotas by almost half, the balance being subject to a 50% tariff.

Brexit strikes again! Thanks, Nigel

For business, Brexit has been a disaster, in May there was Starmer’s somewhat timid “Brexit reset”, and further resets are mooted in coming years.

Between 2021 and 2023, British exports to the EU fell by a serious 27%. Brexiteers boasted that leaving the EU would be worth hundreds of billions a year, whereas, Cambridge Econometrics estimates that over the next decade Britain’s economy will be £300bn smaller because of leaving.

Whilst politicians shy away from the subject, no doubt cowed by the spectre of Farage, the electorate appear able to admit that Brexit was a mistake.

According to YouGov, 61% have concluded that Brexit is a failure, with only 13% regarding it as of a success. Almost half want another referendum within 5-yrs, and 63% oppose loosening ties with the EU any further.

‘over the next decade Britain’s economy will be £300bn smaller because of leaving’

 

The public is clearly ready to see Brexit reversed, and I very much doubt industry would disagree. However, we lack the leadership for that, and they don’t appear to realise that doing so could isolate Farage and Reform, and might lead to their undoing.

As far as Farage is concerned, Brexit is in his rearview mirror, although a bit of EU bashing never goes amiss. His latest hobbyhorse is immigration, which he is successfully using this to blindside many voters from the real issue; the cost of living.

Whilst Russia’s invasion of Ukraine may have been the catalyst for this, some 4-years on the average British family is still suffering huge financial stress. Whilst peoples pay has increased 20%, prices have risen by 28% and fuel bills by C. £500.

In their latest poll, More in Common, found that the cost of living was many voters top priority. Yet, many politicians are ignoring the issue, or, maybe hoping it will go away!

In his headline speech at the recent party conference, the PM mentioned the cost of living twice. Patriotism and flags are clearly his priority, getting five mentions, as he wittered on about “An England that belonged to our grandparents and our history.”

Maybe he thinks wrapping ourselves will keep people warm when they can’t afford to turn the heating on?

 

‘His latest hobbyhorse is immigration, which he is successfully using this to blindside many voters from the real issue; the cost of living’

 

The Joseph Rowntree Foundation published some extraordinary research on the likely future for British living standards between now and the next election, showing that the typical family would be worse off, with the poorest families losing more than £1,000 a year in disposable income.

Message to the PM and Chancellor…..”It’s the economy, stupid!”

Our own economic woes are being exacerbated by trade and Trump’s on-off-on tariffs.

Much of Trump’s economic policy centres around tariffs, and there is still the uncertainty caused by the question of whether he (the “Executive”) has the authority to unilaterally use the excuse of a “trade emergency” to impose tariffs without the approval of Congress (the “Legislature”)?

Decision time is November 5th, when the US Supreme Court (the “Judiciary”) rules. This is a critical test of the USA’s system of constitutional checks and balances: will the Supreme Court support the man who appointed most of them, or will they let the legality of the case and the Constitution guide them to a non-partisan decision?

The decision is likely to decide the course of Trump’s presidency. Tariffs are one of the key precepts of Project 2025, Trump’s libertarian blueprint for Trump’s second presidency, and could signal the moment when democracy gives way to dictatorship, allowing him to undermine the Constitution by creating a precedent that puts him above the checks and balances by Congress or the Courts.

Despite the magnitude of the situation, US, debt markets seem relaxed, especially when you factor in Trump’s massive tax cuts could add $2tn to public debt. It appears that the promise of more Fed rate cuts and the hype around the AI investment boom is allowing investors to keep calm.

 

‘Even if Trump wins the day in court, he still has to deal with the trade war with China which goes from bad to worse’

 

However, analysts believe this situation cannot last, especially as the administration appears to no plans to tackle the deficit, which was 6% of GDP last year even before the tax cuts. Russell Jones of the consultancy Independent Economics, said: “It looks to me like an accident waiting to happen. It’s not a sustainable situation.”

Even if Trump wins the day in court, he still has to deal with the trade war with China which goes from bad to worse. The latest, is his threat of new 100% tariffs in response to the Chinese placing additional export controls on the export of rare-earths and minerals critical to the manufacture of much of the technology the West relies on.

Trump has seriously miscalculated on China; from being confident of doing a “deal” when he was due to meet Xi later this month, he is now threatening to cancel any engagement.

His hope of negotiating a deal to relieve American farmers of the soya-mountains that threaten to bankrupt them, look unlikely as China seeks to control the narrative.

China are able to do this because they have changed the rules of engagement. Whilst western economies focus on immediate RoI and 4-5 year political cycles. China plays the long-game. In the last 25-years it has emerged from within the WTO to being the globe’s premier manufacturing power, with increasingly sophisticated military power.

China has learnt from Trump’s first-term of the dangers presented by trade threats and rising political unpredictability, seeking economic stability and market access, and is willing to compete to achieve that. As a result rather than engaging with the US economy, they now compete with it.

 

‘PM Starmer would be better served taking stock of the global situation rather than flying around thinking he is influencing it’

 

Their success is based on pragmatic decision making and taking a long-term view. For example, they recently scaled back their own domestic Comac airliner programme, and have aligned with Airbus which has substantial in-country manufacturing to move forward its tech. China is now outselling US (and European) cars globally. Aside from Chips, it is virtually self-sufficient.

None of this is an accident or luck, it is the result of years of deliberate decisions, and projects such as the Belt & Road plus associated development banks to build new supply chains into Africa and Europe.

As a direct result the global outlook appears more risky, with the likelihood of a depression triggered by Chip shortages, with stagflation a possible outcome, unless Trump reaches agreement with China.

Trump’s way of dealing with America’s allies only exacerbates the situation, with his unpredictability driving countries to choose between a stronger, more attractive, more trade driven China, rather than an

increasingly isolated USA. China also has the geographical benefit of being situated at the heart of the new global centre-of-gravity of consumer/middle-class prosperity – SE Asia.

Perhaps, PM Starmer would be better served taking stock of the global situation rather than flying around thinking he is influencing it.

The immediate future has rarely appeared so uncertain.

 

“Well, show me the way To the next whiskey bar”

 

 

‘As the two “major parties” battle for irrelevancy, the world is fast changing.

Reform, led by the architect of Brexit, continues to conduct the orchestra, with both Labour and Conservative desperately trying to dance with them. Only, if they are dancing, it is more the “Spandau Ballet”, the death throes of dying institutions.

The more both try to compete, with immigration being their chosen option, the more credibility Reform gains.

Never was the term, “it’s the economy, stupid”, more apt.

Labour’s chosen way of reviving the economy is to drive growth and hoping for a trickle-down. If they want to create growth, the best way forward would be to take away the self-imposed handcuffs that are Brexit.

Flag wavers aside, supporters of Brexit are rarer than virgins in a brothel. Of course, given that pubs might be staying open later, we might as we go full Weimar Berlin and legalise brothels, too.

Trump’s America continues to be the elephant in the room. The economy and markets look overblown, and China’s decision to impose export controls on the rare-earths and minerals critical to AI, might well be the tipping point.

In “Beware of President’s Bearing Gifts”, I talked about how the “Magnificent Seven”, driven by the hopes and expectations of AI are propping up the Index. Today, it looks more like a house of cards than ever.

Last week, Emmanuel Macron, the French president, lamented that Europe was suffering a “degeneration of democracy…We doubt our own democracy … We see everywhere that something is happening to our democratic fabric. Democratic debate is turning into a debate of hatred.”

This doesn’t only apply to France, across Europe, in the UK and the US, distrust and grievance daily deepen political dysfunction and social discord. Belief that democracy is the form of governance best suited to the modern world is dwindling, especially among the young.

History has shown that extremist politicians fare better than their mainstream counterparts in a depression, and right now that’s the very last thing we need.

Lyrically, we start with “Live and Let Die”. Whilst this was a Wings song, the cover by Guns ‘n’ Roses, especially the live version, shows what a great track it is. We end with the “Alabama Song” also known as “Moon of Alabama”, “Moon over Alabama”, and “Whisky Bar”,  an English version of a song written by Bertolt Brech, in tribute to Weimar Germany and our PMs new opening hours. The Doors did a particularly fine cover. Hic!

At least with longer opening hours we can drown our sorrows and pretend we are enjoying ourselves.

Philip’. 

 

@coldwarsteve

 

 

 

 

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

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