UK Election Meltdown Special : EI Weekend 3003
The July 4 UK election has 3 potential outcomes for the UK Conservatives:
a) Defenestration
b) Decimation
c) Destruction
d) Even worse than the above.
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MACRO THOUGHTS
The UK election of 2024 looks in its own way as fascinating as the 2019 campaign where the blob refused to believe the people wanted Brexit (despite the hefty turnout in favour of the referendum in 2016). This election is a contrast to the French Parliamentary election campaign. The UK is a choice between socialist economics or socialist economics and a new party, Reform which won’t win (yet) but does believe in something other than left wing overspending. At the same time, in France you have a choice between ludicrous nirvana wishcasting super socialism from the government and two other blocs which are even more spendthrift,
“Call Me Dave” being brought back as Foreign Secretary (now Lord Cameron) has only reminded folks that he ran away when he had to face doing some work between box set chillaxing. Thereafter the Conservative Party has been mostly falling apart. All too briefly, Boris Johnson stepped in, campaigned spiritedly and alas, failed comprehensively - apart from his not bad given the circumstances, Brexit deal - to manage anything other than the now discredited idiocy of lockdowns.
Thus after 14 years in office but without - apart from a not bad Brexit deal considering the blob was against it and Theresa May set the negotiating dynamics badly, the Conservative Party may not just lose power, they may face an extinction level event. They deserve to be fully ‘Schumpeterised.’
Rishi Sunak can never be accused of lacking political ambition with his refusal to accept the party membership never endorsing him. So he knifed Liz Truss in the back and began a process of accelerating the Tory party’s demise. Then in the top job, it became patently obvious he is a lousy politician, a spineless PM and generally a liability who finally took one decision, called the election early and guaranteed the annihilation of his government.
Is a comprehensive Tory party demise really possible? Well one lives in hope.
Big Issues
Amongst the election “big issues:”
What Happens Next?
Regardless of whether Labour has a large majority or a really really large majority, the Conservative Party will be left reeling. The trouble is the Cameron era in particular bred a Social Democrat new Labour outlook of continuity Blairism. The UK system tends to favour a two party system and that means there will be demand for a left / centre left party (filled by Labour) and a centre right party (until now, the Conservatives). The Liberal Democrats may talk about being a replacement for the Conservatives after the election but they are too far left to be anything but a third force and not a realistic replacement for the Conservatives.
Therefore how this plays out is either, the Conservatives get the gist that they need to be…Conservative… or Reform will start to shape up as a replacement to usurp or take over the Conservative Party. If the worst forecasts play out and even presuming Reform get just one or two MPs the momentum will be there. This will create paroxysms in the British establishment which is still obsessed with trying to undo Brexit and indeed maintain the current path of UK declinism which has reasserted in a post Thatcher UK.
A Century Later It’s Time for The Right to Reform
In the early 20th century the Labour Party was born and overtook the Liberals. It took 20 years to achieve. I suspect the speed of politics now means it might happen much faster. In the 1980s, the SDP grew from nothing to a stunning market share as the Labour Party lurched very far left but was unable to maintain momentum leading to Liberal-SDP pacts and ultimately the current Lib Dems. Amongst Reform - the old Tories, there is going to be an opening for one right-centre right party. With anger at the blob and the pro EU wing of the Conservatives who tried to kill Brexit still a factor in UK politics, it is feasible that this election may mark a vast shift away from the Conservative party which has shrivelled from “natural party of government” to more one of frustrating afterthought incapable of avoiding endless infighting without much notable achievement.
What to watch for on election night?
A string of Conservative cabinet (and junior) ministers will lose their seats even with record numbers retiring before defeat. That will also dictate the shape of the remaining rump Tory party as it could be that more or less all the promising next generation candidates are wiped out, making it a challenge to find a leader of the opposition. (There are even projections where the Tories are insufficiently popular to achieve opposition although I think this is an outlier).?
A modest rump Tory Party down hundreds of seats is more likely to lean right than the average of the Cameron inspired Blairite selections from 2010. That could leave an open goal for Kemi Badenoch to win as she may be the last woman standing of any note in a shrivelled Parliamentary party. (Boris Johnson may yet fancy his chances of a return to Westminster and a Churchillian comeback by the way).
As for a Starmer government, the problem will be execution. Sir Keir leans left and wants to introduce a fair few tokenistic ‘soak the rich’ policies. However, he will struggle to keep his left wing colleagues on side. That could be tricky as the more seats Labour wins, the more the party is likely to be more staunchly anti-Israel / pro Hamas etc than even the rather left wing Starmer. At the same time, the UK blob is dysfunctional and in denial - something it shares with the EU which it tried so hard to avoid leaving via Brexit.?
The UK National Health Service is an expensive, dysfunctional farce but treated as a national religion akin to some form of cult by labour and much of the mainstream media. It desperately needs reform. Labour will inherit a poisoned chalice due to Tory failures to govern. Throwing more money at the problem has not been an option for years - albeit that didn’t stop the Tories trying the same failed approach.
The outlook for the UK is not optimistic but at least the cricket is still playing and the flat season is on…
The key for Rishi Sunak will be how he deals with a defeat which if he is lucky will only be slightly worse than John Major’s. Major memorably went to the Oval and Theresa May similarly headed to Lord’s when she left office. Rishi Sunak is not a bad man but he has been a total failure as Prime Minister, arguably even worse than all those who failed the Conservative party and the nation since 2010. Hopefully he can go gracefully as an uncertain new era begins for Britain.
IPO-VID LIVESTREAM: NEXT TUESDAY
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July 2nd, 2024
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IN BIGWORLD
From Exchange Invest 2998: Monday, June 24th:
Being a cheery kind of forward looking kid, I can still recall several decades later, politely pointing out to fellow pupils at school that by the time we hit retirement age the UK pension fund would be bust, so relying on that for any element of income was a dumb long-term play.
Anyway wasn't the first time a mass of folks ignored me and won't be the last but in the long-term - alas - my prognosis appears ominously correct.
In 2021, the UK State Pension had a total obligation to the British people of ￡8.9 trillion ($11.3 trillion AKA $169,000 per head for every man, woman and child in the UK). Liabilities are going up as fast while the working age population is declining…
The crisis is acute because the amalgamated union of numpties AKA the spineless league of Parliamentary candidates are all eager to avoid a serious conversation about pensions, particularly as the UK election looms. Worse, major parties support a "triple lock" (every year, the state pension increases by the highest out of average earnings, inflation or 2.5%) to at least counter any form of inflation. That means everybody is increasingly facing vast burdens as an aging population sits on the narrowing shoulders of younger generations!
Worse still the UK government has zero pension provision. All payments come from current tax revenues. Many former government workers get pretty lavish schemes often on a final salary basis.
By 2024 the UK is likely to have 22.7 million residents claiming benefits including the state pension but with only 34 million covering the benefit costs.
As things stand, the average person born in 1956 will receive ￡291,000 more than they put in.
The Adam Smith Institute reckon they have a solution - more here.
But given the spinelessness of the political classes, the prognosis for UK finances are grim (and no better in the rest of Western Europe one might add).
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BITCARNAGE
The Lawyers Win Again
FTX has, let's face it, been a long running pantomime. In the latest episode - appropriately as we must be well past the interval so things are always more boisterous… it’s time for the classic “oh Yes, we did!” “Oh no we didn’t” shenanigans. In the “Oh yes we did” camp are the hedge funds who bought obligations from FTX creditors for cents on the dollar last year when the outlook was bleak.
Then FTX’s liquidators discovered that amongst the silt and underperformance of a great many FTX assets and investments there was at least one hyper performing investment in a nifty AI company and then crypto staged a rally / recovery / dead cat bounce (readers are divided on which it is according to my Inbox…) which raised the payout to 100% and beyond.
There is also of course that other argument because crypto folks want their tokens back but bankruptcy proceedings are conducted in USD not tokens…
Thus Hedge Funds Made A Killing On FTX—Then It Got Complicated, reports the WSJ.?
If you enjoyed this excerpt you may be interested to know that you can read Bitcarnage every day in Exchange Invest.
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OF INTEREST
As always, a review of interesting reading to provoke thoughts and consideration… Not sure we agree with much of it….but it’s thought-provoking!
A fun fact - the next British Prime Minister, Sir Keir Starmer, was at Reigate grammar school at the same time as the DJ / musician Fat Boy Slim. Praise You? Eat Sleep Rave Repeat or Right Here, Right Now? The future of Britain is somewhere thereabouts, I hope it works out okay but have my reservations as the UK teeters on the verge of becoming a lawfare nation.
The Spectator
PLY: The sole argument for voting Tory has become “we may be useless but it will be even more left wing under Labour.”?
Zero Hedge
PLY: Cameroonia, the People’s Republic of hoodie hugging under “Call me Dave” Cameron had a direct lineage as an ‘heir to Blair’ meets Obama AKA oratorical flourish central but somehow nobody can recall a single remark they actually made. It was also the point where “nudge theory” was one of their ‘oh so clever’ but oh so ill-considered strategies. AKA what happens when linear folks try to do lateral thinking. Now the UK civil service amounts to a lavishly funded morass of petty dictation against the people.?
QV The UK civil service essentially stopped implementing Conservative government policy as soon as the election was called, apparently. That leads us to the wise words of the considered Lord Ridley:
The Spectator
Commons Library
PLY: A handy guide ahead of what is likely to be a big swing, bigger even than 2019 and in the opposite direction too.
The Spectator
PLY: Lawfare is a huge concern under Sir Keir’s Labour. The idea the incoming AG also praised Cuba repeatedly is a worry too.
UnHerd
PLY: On the stump. Watch out too for some likely independent wins on the night, perhaps including the colourful former Labour MP Keith Vaz who is making a comeback in Leicester…
The Times
PLY: As Iain Martin notes, overall Brexit is actually working out rather well and also feeds a crazy facet to the general election. Sir Keir Starmer who worked assiduously to try to thwart Brexit as Shadow Brexit Secretary will likely let the EU run riot over the UK. Ironically, Sir Keir has one high profile anti-aspiration policy -? adding VAT to fees for British public (AKA private) schools? - which is enabled because of Brexit! Had Britain stayed in the EU, it would have been forbidden!
The Spectator
PLY: It is vital to not write off the deeply disappointing overall 14 years of Tory led government which succeeded the Blair/Brown administration in its entirety. Two areas were marked successes. In education, the government made great strides to improve standards (QV the broadly opposite approach by the Scottish Nationalists north of the English border where standards have fallen off a cliff in core subjects like maths and reading. Similarly Spectator editor Fraser Nelson notes how relatively speaking - for a government which didn’t get ‘growth mojo’ coursing through its veins at any time - the Conservative government broadly helped the poorest in society. Can Labour do the same?
City A.M.
PLY: Stasis in the planning system is just one example of how the UK state is dysfunctional.
CNBC
PLY: Labour has said it will target the wealthy having introduced restrictions on the so called “non doms” (wealthy expatriates who live in the UK but are not domiciled in GB), moves which were maintained and exacerbated by the allegedly free market Conservatives. 2023 saw a record outpouring of 4200 HNWIs leave the UK. This year it is estimated to reach 9500 according to the Henley Private Wealth Migration Report. 16,500 millionaires left the UK between 2016 and 2023.
Is there any cause for optimism in a UK about to leap to the left and see vast tax rises to pay for even more outrageous spending?
Telegraph
PLY: Grim reading…and further proof that while Labour may try to reverse key Brexit elements, it was the right move to get away from the iceberg chasing monolith of integration.
FT
PLY: Worth considering as Sir Keir Starmer pronounces a vast mandate for his party. Quasi-Marxist terrorist lover Jeremy Corbyn (once lauded by the incoming PM) polled 12,877,918 votes at the 2017 election and 10,269,051 votes in 2019 when the nation resolutely backed Brexit. How many more votes can Starmer garner??
IPO-VID LIVESTREAM PODCAST
Our 4-time IPO-VID guest, Dr. Rainer Zitelmann returns to the show for a captivating discussion about his latest work: "How Nations Escape Poverty." If you're passionate about global development and economic progress, this episode is a must-listen!
?? Available on different podcast sources:
Books worth reading:
FINANCE BOOK OF THE?WEEK
"Good Derivatives: A Story of Financial and Environmental Innovation " is the story of the creation of the Chicago Climate Exchange and its affiliated exchanges. Richard Sandor elegantly demonstrates that market-based trading systems are a far more effective means of reducing pollutants than “command-and-control”.
Richard Sandor was our IPO-VID 123: The Father of Financial Futures guest.
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VICTORY OR?DEATH
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