Byelections Result – Class Warfare as Strikes Loom– Mortgage Interest Hidden Risk – System Failure – Letter from Great Britain [06-25-22]

My book “The Financial Jigsaw” has now been accepted and published at my academic network.  Scroll down and Hit:  ‘View Full Text’ button for the complete book:  https://www.researchgate.net/publication/358117070_THE_FINANCIAL_JIGSAW_-_PART_1_-_4th_Edition_2020   I will be pleased to email a free PDF on request to: [email protected].

INTERESTING FACT:  Scary chart: https://www.zerohedge.com/news/2022-06-17/why-food-inflation-only-getting-started   “The US has just experienced an 8.8% increase in food prices. The problem (and there are many, actually) is that this doesn’t take into account the spiraling costs farmers are now experiencing.

It’s worth remembering that because farmers pay upfront and only recoup their expenses at the point of sale/harvest months later, all the opex they’ve experienced has a lag. This lag is dependent on produce but certainly, we’re looking at a tsunami of food inflation 12 to 18 months out.”

THOUGHT FOR THE WEEK:  Have you noticed that there is not enough discussion about the corruption of the English language?  We (and me) just accept it and worse, subconsciously promote it by using these new ‘woke’ terms which itself is one of them.  They cover all areas of human interaction and sometimes go wildly beyond any rationale.  Some can be really controversial….

Why can’t we label something as it really is? There are thousands of examples – can you identify yours in the comments below?  Here’s classic language evolution from Doug Casey:

“They used to be termed “bums” or “vagrants.” Then you were supposed to call them “the homeless.” That sounded better because it didn’t imply a moral failing, just the lack of a permanent residence. Now, however, you’re supposed to call them “the unhoused.” This further softening seems to imply that they just don’t have a house for the moment—that sounds no worse than not having a car, airplane, or perhaps a diamond ring, or maybe a pension. They’re “underprivileged” and should have a home in our hearts. No moral failing there.

I prefer to call these people bums, the traditional term. But it’s almost passed out of the language. It should be re-instituted. It’s crazy what the progressives and the wokesters have done to the language. Their euphemisms have made words as dishonest as their policies and philosophies.”

BREAKING NEWS:  TORIES SLAMMED in two byelection results.  “Boris Johnson has faced a double hammer blow to his authority after the Conservatives lost the Wakefield and Tiverton & Honiton byelections on the same night, prompting Oliver Dowden, the party chair, to resign. The Liberal Democrats overturned a 24,000+ multi-year majority to snatch Tiverton & Honiton”: https://www.theguardian.com/politics/2022/jun/24/tories-lose-byelections   When liars get caught, they often gaslight instead of admitting defeat and Boris is a past master at this tactic. Stay tuned as we watch the ‘illusionist’ practice his magic in the coming weeks.

BRITAIN IS A CLASS-RIDDEN SOCIETY which caused serious economic trouble long before the inflation genie jumped out of its bottle where it has been slumbering since 2008. However, I have been shattered to the core by the way inflation has ripped through global economies with a vengeance not seen since the Vikings arrived on our shores 1,200 years ago.  The devastation is no less frightening than the rape and pillages the Brits suffered in those days of yore now the class war has returned.

OK, the overt effects of blood and gore are not evident in our present day environment but maybe it’s even more destabilising being smothered by the facade of a society governed by an apparent rules-based establishment enforced by laws and regulations designed to keep the peasants in a state of fear and distress through lockdowns, military grade PsyOps and the emergence of the biosecurity police state.

Something fundamental changed in late 2019 which turned our world upside down as the ruling class realised they could no longer deny the inevitable and were unable to manage the global economic collapse. Their fearful reaction has been a draconian command economy with statutes reminiscent of totalitarian regimes we all believed had been buried for good.

Some say Britain is reliving the 1970s but I think it is going to be far worse than those days. Mass labour strikes are now in the frame as the Trades Unions flex their emaciated muscles in response to the renewed class war of yesteryear and the yawning canyon of wealth disparity makes its presence felt, first in the vital railways, but it won’t stop there.

The strikes may go on for some time and, as the cost of living bites more widely, they will not only spread across the public sector. The rail-worker’s union has suggested that strikes on the railways could continue for the rest of the year. Train drivers, represented by ASLEF, are also expected to strike soon whilst teachers and NHS workers could take industrial action too and workers at British Airways are planning to disrupt the main holiday season in July to ‘maximise’ their message.

This Monday, criminal law barristers voted to go on strike over legal aid funding, which could see them walk out from next week. If it all comes to pass, this week’s rail strikes may soon look like a relatively minor inconvenience as everyone and their dog jump on the bandwagon.  Wages and pensions have been losing purchasing power for many years.  Even full-time workers are unable to cope with increasing costs and there lurks a hidden risk in interest rates rising and affecting mortgages…

MORTGAGE TROUBLE AHEAD; interest rate hikes hide a risk that could bankrupt many mortgagees.  For the last 10 years or so borrowers, both commercial and retail have had a glorious run by riding the hyper-low (almost zero) interest rate settings by central banks everywhere.  Here are hidden dangers which will become evident as interest rates take their path upward in the coming years with corresponding falls in asset values.

For example, in America during the last 18 months, the year-over-year percentage change in mortgage rates went from negative 27.8% to positive 80.4%, a swing of 108.2 percentage points.  The December 2020 decline of 27.8% is the largest decline in history; likewise the June 2022 year-over-year rise of 80.4% is equally the largest rise in history. 5.37% (US) is not a high rate historically, but it is the highest rate since 5.42% in June 2009. Here are UK averages for popular mortgage rates from June 9, 2022:  30-year fixed rates change to 5.23%; 15-year fixed rates change to 4.38%; and 5-year adjusted rates change to 4.12%.

The actual rate can easily fool you into believing that mortgage rates are still manageable but when you factor in the rate of change, as above, it becomes clear that monthly repayments are going to double in the near future.  But this is only the beginning because we know that central banks are planning further doubling of rates in the near future.

The average UK monthly mortgage repayment was £753 which is a monthly mortgage cost increase of 31% over the last ten years. In 2021 this average mortgage repayment was reported by Santander bank with an interest rate of 2.48%.  Now work out what the likely repayment will be in the coming months as fixed rates come to an end.  Are you prepared to budget over £1,500/mth to service your average mortgage in the near future?  Further information: https://www.yourmoney.com/mortgages/borrowers-pay-thousands-in-exit-fees-to-lock-in-mortgage-rates/

In America (which UK follows closely) Mike Shedlock charts that mortgage rates are up 2.7 percentage points this year and doubling from the average for 2021; this bust is just getting started and with it the demand for goods: https://mishtalk.com/economics/the-current-rise-in-mortgage-rates-is-unlike-anything-in-history

This is why I project that the stagflation stage we are in now will move to a depression stage as consumers are forced to cut back discretionary expenditures and thus the economic cycle will take its natural course regardless are what central banks or politicians claim they can do to change it – they can’t – they are powerless in the face of physics as Charles Hugh Smith explains so well below.

I have always been on the same page as CHS when assessing the illusion of economic growth measured by the gamed GDP statistics. The final reckoning is now in view; we will all have to go through the economic meat grinder before the green shoots of recovery at a much lower standard of living we have experienced to date. The ‘Boomers’ were the most privileged generation in history but the high-life could never be sustained forever – time to pay the piper.

“For the hundred years that resources were cheap and abundant, we could waste everything and call it growth: when an appliance went to the landfill because it was designed to fail (planned obsolescence) so a new one would have to be purchased, that waste was called growth because the Gross Domestic Product (GDP) went up when the replacement was purchased. A million vehicles idling in a traffic jam was also called growth because more gasoline was consumed, even though the gasoline was wasted.

This is why the global economy is a “waste is growth” Landfill Economy. The faster something ends up in the landfill, the higher the growth. Many believe so-called renewable energy such as solar and wind will replace hydrocarbons. But as analyst Nate Hagens has explained, these sources are not truly renewable, they are replaceable; all solar panels and wind turbines must be replaced at great expense every 20 to 25 years.

These sources are less than 5% of all energy we consume, and it will take many decades of expansion to replace even half of the hydrocarbon fuels we currently consume. To double the energy generated by wind/solar in 25 years, we’ll need to build three for each one in service today: one to replace the existing one and two more to double the energy being produced.

All these replacements for hydrocarbons require vast amounts of resources: diesel fuel for transport, materials for fabricating turbines, panels, concrete foundations, and so on. Humans are wired to want to believe that whatever we have now will still be ours in the future. We don’t like being told we’ll have less of anything in the future.  The current solution is to create more money out of thin air in the belief that if we create more money, then more oil, copper, iron, etc. will be found and extracted but this isn’t really a solution.” I can’t argue against his logic: http://charleshughsmith.blogspot.com/2022/06/our-economy-in-nutshell.html

COLLAPSE MONITOR:  Precious metals expert and financial writer Bill Holter said in early April that he thought we did not have much time until the financial meltdown started.  He gave it 60 days.  Two months later, the meltdown started in earnest right on time. AND don’t expect the Fed to come in and save the day like it did in the 2008 financial meltdown.

The Fed bailed out the economy when it started printing money like crazy (QE) and never stopped.  Holter says: “The bottom line is the world’s financial system and, thus, real economies have been on life support since 2008.  What people should understand is when the Fed says they are going to raise interest rates and they are going to shrink their balance sheet that says they are pulling the plug out of the wall.  They are taking the system off life-support.  The bottom line is the system cannot live without life-support. The Ponzi scheme cannot continue without new capital coming into the system.  They are pulling the plug – it’s game over.”  Holter also talks about gold and more on this video for those following this collapse: https://usawatchdog.com/game-over-theyre-pulling-the-plug-bill-holter/

AND: “G-SIBs [Global Systemically Important Banks] have accumulated excessive exposure to financial assets, both on-balance sheet and as loan collateral. With vicious bear markets now evident and further interest rate rises guaranteed by falling purchasing powers for currencies, the one thing regulators have not allowed for is now happening: like a deepening meteorological low, bank credit is contracting into a perfect storm.

Jamie Dimon’s recent warning that his bank (JPMorgan Chase) faces hurricane conditions confirms the timing. Central banks, insolvent in all but name, will be tasked with rescuing entire commercial banking networks, bankrupted by a collapse in bank credit….

Financial assets are in a bear market, driven by persistent rises in producer inputs and consumer prices, which in turn are pushing interest rates and bond yields higher. So far, investors have been reluctant to lose trust in their central banks which have been instrumental in supporting financial markets for decades. But this is now being tested, more so in the summer months, as global food shortages develop.  We have increasing evidence that bank credit is either contracting or on the verge of doing so…” [per Goldmoney].  Kristoffer Mousten Hansen is a research assistant at the Institute for Economic Policy at Leipzig University and he knows his business:

“Whatever happens next, one thing is clear: the crisis is already upon us. Stock market declines and financial market chaos are really epiphenomena, headline capturing though they may be. The damage has already been done. And while I’ve here focused on the covid era, we were already heading for crisis in 2019—the coronavirus just provided an excuse for one last gigantic inflationary binge.

This means that it’s not simply the malinvestment of the last two years that needs to be cleared out—it’s the accumulated capital destruction of the last fifteen years that’s now becoming apparent”: https://mises.org/wire/great-crash-2022

THE NARRATIVE BATTLE:  Here is what Thorsteinn Siglaugsson says about the scamdemic. He is an economist living in Iceland. “Almost from the very outset, I realised there was something fishy about the whole story; there was such a huge discrepancy between the facts and the narrative. In fact, I had been focusing hard on the application of critical, logical thinking in the months before, publishing a book on the subject just before the pandemic struck.

I believe we‘re approaching a tipping point. The facts speak for themselves, and facts have the annoying habit of becoming known; in the end they always do. We are still in the phase of denial, we still cling to our false beliefs, we still cannot comprehend the consequences of what was done to us, what we did to ourselves, perhaps by succumbing to mass hypnosis as claimed by psychologist Mattias Desmet. But this stage cannot last long; this is the quiet before the storm hits.”  https://thorsteinn.substack.com/p/we-must-never-forget

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Author: Austrian Peter

Peter J. Underwood is a retired international accountant and qualified humanistic counsellor living in Bruton, UK, with his wife, Yvonne. He pursued a career as an entrepreneur and business consultant, having founded several successful businesses in the UK and South Africa His latest Substack blog describes the African concept of Ubuntu - a system of localised community support using a gift economy model. View all posts by Austrian Peter