https://www.zerohedge.com/economics/citi-issues-apocalyptic-warning-uk-inflation-hit-18

Citi Issues Apocalyptic Warning About UK Inflation; German Central Bank Fears Further Surge In Prices

A startling new report forecasts the inflation rate in the UK could spike to 18% for the first time in nearly half a century due to surging energy costs in the upcoming winter season.

Benjamin Nabarro, the chief UK economist at Citi, told clients Monday that it expects CPI inflation to hit a mindboggling 18.6% in January due to soaring natural gas and power costs.

Nabarro predicted the retail energy price cap would be increased to £4,567 in January and then £5,816 in April, compared with £1,971 in August. Here's what he told clients:

Our latest estimate, updated for the further 25% and 7% rally in UK gas and electricity prices last week, points to a further upside shift in UK inflation.

Accounting for these developments, as well as updating our own weights for CPI/ RPI and honing our own accounting for curve backwardation, we now expect CPI inflation to peak at over 18% in January. RPI inflation, we think, will peak at over 20%.

The last time CPI printed above 18% was during the stagflationary years of the mid-1970s (more precisely 1976) after an oil supply shock led to soaring energy prices worldwide.

Currently, the CPI stands at 10.1% in July for the first time in four decades, primarily driven by skyrocketing food and fuel prices as households crumble under the weight of the cost of living crisis.

Meanwhile, high inflation pushed the UK Misery Index, an economic indicator to gauge how the average person is doing, to three-decade highs, a sign discontent is emerging.

The last time CPI printed above 18% was during the stagflationary years of the mid-1970s (more precisely 1976) after an oil supply shock led to soaring energy prices worldwide.

Currently, the CPI stands at 10.1% in July for the first time in four decades, primarily driven by skyrocketing food and fuel prices as households crumble under the weight of the cost of living crisis.

Meanwhile, high inflation pushed the UK Misery Index, an economic indicator to gauge how the average person is doing, to three-decade highs, a sign discontent is emerging.

Meanwhile, Germany's inflation rate could surge above 10% this fall the highest in seven decades due to the energy squeeze, the country's central bank chief Joachim Nagel told the Rheinische Post.

"The issue of inflation will not go away in 2023," Nagel said, according to an official transcript from the German central bank. "Supply bottlenecks and geopolitical tensions are likely to continue."

He said the German central bank predicted in a June forecast that 2023 inflation would reach 4.5%, though he now believes the rate would be steady above 6%.

"As the energy crisis deepens, a recession appears likely next winter," Nagel warned.

Europe is on the cusp of a dark winter of high inflation, energy shortages, and stagflation, a toxic cocktail that could send some EU member countries into recession while their respective central banks continue to hike rates to quell inflation – this in itself is policy error.

https://www.zerohedge.com/markets/winter-coming-uk

Winter Is Coming For The UK

"Tell them the North remembers. Tell them Winter is Coming.”

The outlook for the UK looks increasingly grim. There are few reasons to hope a new government can reverse the mounting consumer fears, stagflation and the growing sense of decline.

Yesterday was cold, wet and grey. The sudden end of the glorious summer highlights how dark and bleak the mood in the UK has become. UK Consumer confidence has collapsed to levels not seen since the 1970s. London has ground to a halt with tube and rail strikes. Its not just the cost of living crisis – which, to be blunt, has only just begun and will get much, much worse as winter deepens– but folk are losing confidence in the broken mechanics of the economy, the absence of leadership and a growing sense things won’t get any better.

The country feels like its sinking into a treacle of energy-sucking, suffocating despond. Everything in Britain feels broken: the NHS is too crowded to treat patients, excess death rates show untreated cancers, heart-disease and stokes from lockdown now far outnumber Covid deaths, the police are so overloaded they have stopped even bothering to investigate crime, while airports are blocked, trains don’t work, and it really doesn’t matter because you can’t get a passport or driving licence renewed. As the rains come down, we’re under threat of dire authoritarian punishment if we dare use a garden hose – although to be fair, who is going to arrest you?

Thank heaven we’re about to get a new prime minister – SARCASM ALERT.

Do you really expect a bright Sun of Economic Hope to suddenly come up on Sept 5th? If so, go see a shrink – if you can get an appointment.

Liz Truss – nailed on as the winner and next Prime Minister- will be taking office early next month, and the expectations could not be lower. She’s being painted as lacklustre at best – and I fear that’s a severe overestimate, but please surprise me! I still have little idea what she stands for – but the folk backing her, and setting her narrative might. I have no clue what her secret sauce to reanimate the UK is. Thus far, all the noise of has been about playing to the 160,000 wealthy, elderly white Tory men who have the vote in the leadership contest, rather than the 60 million Brits she will notionally represent.

Her announced policies, like merging banking regulator, the PRA, into the FCA, are pointless tinkering at best. But it makes a point – her overriding concern in office will be ensuring others carry the can for the crisis, so first up against the wall will likely be Andrew Bailey, Governor of the Bank of England, and the Bank’s notional independence.

If what we remember about the great recession of 2022-2025 is it was Bailey’s fault – then the history books will need rewritten.

What the nation needs as we sink into the deepest recession in living memory is a Government of Talents – not a bunch of middling political hacks, or a fourth somewhat pointless Prime Minister in a row.

Maybe Liz Truss will surprise us – but it feels unlikely. Still, we live in hope. UK Politics will remain in thrall to Brexit (the dark, malign canker festering at the heart of the UK), which will continue to dominate the agenda and eat away the nation’s trade and export position – to engage with Europe to find a mutually beneficial compromise is utterly unacceptable to the TRG Taliban. Expect lots of union bashing for their temerity asking for pay rises as inflation remains stubbornly strong. Little will be done to reinvent, innovate and rebuild the broken institutions of State.

The core goals of the new government will be short-term survival and looking a little bit better than the opposition Labour party – because all that matters is winning the next election in just a few years time.

The next two years will not be a time of economic innovation. In Germany, the government recently slashed the price of rail travel, and it had an enormous positive effect in terms of long distance travel with multiplier effects from domestic tourism and work. In Germany a monthly railpass anywhere costs 9 Euros. In the UK it costs me nearly £100 every time I go to London.

I said it was bleak.

pt1

>>17429486

A fund manager asked me for my views on UK Bonds yesterday – my answer was relatively less bad than the outlook for UK stocks. At least with Gilts you are likely to get your money back – albeit Sterling will probably be much, much lower. As for UK mid-caps and SMEs, which have been on a run, it’s likely the coming recession will see them suffer. Time to go defensive in UK stocks. The UK’s Virtuous Sovereign Trinity may be tested – the mechanism whereby the political stability and effectiveness of a nation, its bond market and currency form a strong tripod. If any leg breaks – then it spells deep, deep trouble.

But, not for me the misery of UK politics… last night I snuck off to Salcombe, the jewel of the Devon Riviera where I inadvertently came close to triggering a civil war. The greatest divide in UK society is the Cream Tea. Does the Jam go on top or the Clotted Cream, or the other way round? Cornwall and Devon have been in state of cold war over this critical distinction for decades. I did the Cornish thing – Cream on top of the Jam. It makes perfect sense. Devon folk were horrified. Jam goes on top of the crème in Devon. I had to pay a considerable forfeit, hence this morning I am struggling with a H2O/C2H5OH electrolyte imbalance. Ouch. If anyone ever offers you Devon Rum – run.

However, I did find myself sitting with some very interesting people. To dine with one economist could be considered a misfortune. To sit with two looks downright careless, but to sit with three – well that’s asking for confusion.

3 economists – and at least 5 contradictory perspectives on where the UK economy is likely going, with myself throwing in some random distractions.

Surprisingly, the most right-wing inclined member of our informal brains trust was of the opinion the correct UK policy now is no intertest rate hikes at all – they are the wrong response to the wrong signals – but a massive economic stimulus to avoid a devastating and deep recession. “Ride inflation, because you can’t control it”, he said. Inflation has been triggered by an exogenous energy shock, but to try to cool the economy by inflicting monetary pain to stem demand will simply exacerbate real inflation in the form of wage demands and perceived shortages driving up prices – he also sagely noted how the big supermarkets have quietly withdrawn their cheapest economy brands, taking advantage of inflation to boost their margins.

The second economist took a very different view: speed is of the essence, the BOE has moved too slowly, policy mistakes make things worse, and now we need immediate austerity, tax neutrality, and interest hikes to swiftly re-balance the economy and impose control. Inflation must be brought down swiftly, or it will become entrenched, and have massive long-term consequences. Wages must be constrained – frankly the best way to calm inflation is an old-fashioned scare-the-bejesus out of workers sense of job security to undermine wage demands. She balanced her draconian measures with serious tax hikes on the uber-wealthy, proposing new property taxes on anyone with second homes or leaving the country to escape punitive taxation.

The third economist was looking at the long-term decline in UK productivity and wondering what policies are possible now to put the UK back on track for a prosperous economic future – but concluded we will remain in fight/flight mode with short-term fire-fighting on recession, wage inflation, consumer crisis and election cycles, means it’s all going to be about satisficing and short-term policies with damaging long-term consequences.

In short.. its messy out there..

Out of time, and have a great weekend..

2 of 2

https://www.theburningplatform.com/2022/08/22/an-autumn-of-epic-asset-collapses-higher-inflation-means-poverty-social-unrest/comment-page-1/

An Autumn Of Epic Asset Collapses & Higher Inflation… Means Poverty & Social Unrest

The world economy and especially the political and economic situation today consists of a potpourri of lethal ingredients which will have dire consequences…

Let’s look at what this deadly potion consists of:

Debts at levels that can never be repaid – sovereign, corporate & private

Epic global bubbles in stocks, bonds & property – all about to collapse

Major geopolitical conflicts with no desire for peace – major wars likely

Energy imbalances and shortages, most self-inflicted

Food shortages leading to major famine and civil unrest

Inflation, leading to hyperinflation & global poverty

Political and economic corruption in US, Europe and most countries

No country will afford social security, medical or pension payments

So what are governments around the world doing to solve these problems?

Nothing of course.

The only thing they know is to print more money. They have never understood that a debt problem cannot be solved with more debt. All they can try to achieve is to pass the baton to the next leader so it will be his problem.

This means that all the political, economic and financial mismanagement of the past 50 years will result in a global collapse never seen before in history.

The consequences will be both dire and unpredictable since the world has no experience of this magnitude and complexity of problems.

So what are global leaders doing?

What is clear is that Western leaders will not assume any responsibility for the coming calamities.

Covid will obviously be blamed although there is a lot of evidence that it was manmade and could have been controlled with simple and cheap existing medicines. And all the lockdowns and restrictions have certainly had a bigger impact than the disease itself. Sweden for example virtually had no lockdowns or mask requirements and did not suffer more deaths than countries in total lockdown.

Special interests like Big Pharma clearly had the politicians in their hands. They had trillions of dollars to gain and nothing to lose since they are immune against any prosecution.

Anyway, it has happened and we can’t go back. The future will tell us if, as many scientists believe, the people’s immune system will have been severely weakened by the vaccines.

Secondly, the Russians will be blamed for the current global economic problems of inflation, energy shortages and decline of global trade. The fact that these problems started well before the Russian invasion of Ukraine is quickly forgotten.

WILL THE WAR DRUMS BECOME LOUDER?

Since 3600BC, governments have fought 14,000 wars against each other. As far as I am aware, there is no period in history without an important war.

At the end of the 30-year war, European nations tried to put a stop to unprovoked wars with the 1648 Treaty of Westphalia. The peace conference in Muenster involved 194 states. The start of the war in 1618 was the Protestant Bohemians rising against the Catholic Holy Roman Empire. The major opponents to the Roman Catholics were the Habsburgs supported by Sweden and the Netherlands. Spain and France were also involved in the war together with many other nations.

pt1

>>17429496

Interestingly, my two home countries benefitted from the peace. Sweden by virtue of being a major military power at that time gained substantial territories around the Baltic and Switzerland gained formal independence from Austria.

But the major result of the Westphalian peace treaty in 1648 was:

National self-determination

Precedent for ending wars through diplomatic congresses

Peaceful coexistence among sovereign nations

Acceptance of the principle of non-interference in the affairs of other nations if there was not a clear present danger to the aggressor.

Almost all wars in history have been between neighbouring countries. But in the 20th century the US changed that.

Without provocation and far from its borders, the US invaded Vietnam, Serbia, Iraq, Libya and Syria. So the 300 year old Westphalian principle of non-interference was properly buried by the US on multiple occasions. But not only did the US break this principle but also failed in each single one of the aforementioned conflicts.

One could of course argue that Japan broke the treaty first with the Pearl Harbour attack. But like all aggressors they claimed self defence against potential US interference in Japan’s ambitions in the Pacific.

The Russians will of course argue that they haven’t broken the Westphalian treaty since Ukraine historically has been part of Russia. In the Maidan revolution in 2014, a US inspired coup ousted the Soviet friendly Ukrainian leader and replaced him by a Western friendly leader. Since then Russia has always warned the West that it cannot accept being surrounded by an increasing number of NATO countries just like the Russian missiles on Cuba in 1962 directed against the US.

What we do know is that sadly wars are an integral part of history and as long as there are people on earth, there will be wars

The risk is that what now seems a local conflict in eastern Ukraine will become a major international conflict.

This is not a war between a small innocent country and a superpower. No this is a major conflict between the US and Russia. And since China has declared it is supporting Russia, this is a conflict between the three major super powers in the world.

And since the US has coerced the EU to join against Russia with weapons, money and sanctions, this is a conflict of major proportions.

GERMANY BITING OFF THE HAND THAT FEEDS THEM

The lack of statesmen and strong leadership in the US and EU has created an absurd situation with the EU not just biting the hand that feeds them but actually biting it off totally.

pt2

>>17429506

With many European countries being dependent on Russian gas, oil, cereal and fertilisers, EU’s left hand doesn’t know what the right one is doing. Not only is this a human and economic catastrophe of major proportions but one which will have major implications for Europe for a long time. Germany used to be the economic and financial engine of Europe but is now on the way to becoming a basket case. But sadly they haven’t discovered it yet.

Scholz inherited ludicrous Marxist policies from Merkel. For example to close down both nuclear energy and coal was always a recipe for disaster with no medium term viable alternatives. And her immigration policy will not only be economically ruinous for Germany but also lead to major social unrest.

The demographics of Germany is also another irreparable problem. With the lowest fertility rate in Europe combined with the highest life expectancy, Germany is entering a long term cycle of economic contraction.

Add to this that Germany has financed a major part of the Mediterranean EU countries’ woes through the Target2 transfer payment system.

As the Target2 graph shows below, the transfer payments to Italy of €596 billion, Spain €526b, to the ECB €358b, Greece €107b and Portugal €69b have been mainly financed by Germany to the extent of €1.2 trillion.

Add to that the balance sheet of the ECB which has grown more than 8X since 2004 to €8.7 trillion GRAPH and we can confidently state that the whole European Economic Community -ECB- has now become -EDC- or the Economic Debt Community.

pt 3

>>17429510

It is clear that the old basket cases of Greece, Italy and Spain which were forced by Brussels to change leadership and to take on more debt are the immediate danger to the EU and the Eurozone.

If we just take Italy, their debt has doubled since 2000 to €2.7 trillion which at 150% of GDP means that the country is on the verge of bankruptcy.

But it is not only Italy’s debt that has surged, but even worse, the cost of financing it. Since September 2021, 10 year Italian bond yields have gone up 6X from 0.5% to 3.4%.

This is obviously more than Italy can afford!

GREECE AND ITALY SHOULD LEAVE THE EU NOW

The head of the Bundesbank Joachim Nagel has made it clear that it would be fatal for the ECB to hold borrowing costs down for ill-disciplined Eurozone states. He declared that such action would be “treacherous waters”. So Italy and Greece can no longer expect subsidised rates from the EU.

Italy needs to roll over €300 billion of debt annually plus finance its annual deficit of €100 billion, a real Sisyphean task. When Germany was the rich uncle of the EU, these debt levels were tolerated just to keep this dinosaur from falling apart. But with the coming severe German economic downturn combined with insoluble debt and structural problems in all EU countries, the inevitable collapse of the European dream is now reality as I have predicted for over 20 years.

Politicians always learn too late that political dreams and economic reality are as far apart as heaven and hell. If these politicians ever studied history, they would have learnt that all these illusions of grandeur always end not just in tears but in total collapse.

If I were in charge of Greece and Italy I would quickly default on the debt and create new Drachmas and Liras. That would give these countries a short term relative advantage rather than to sink in the general quagmire of the EU at a later stage. If they stay in the EU, Brussels will force Greece and Italy to take on more debt and impose unacceptable conditions. No country will ever repay their debt anyway or be in a position to finance it so better to run for the exit now rather than to wait for the EU’s total collapse.

So with Germany, Greece, Italy and Spain all having their problems, so does Macron in France. Having lost a working majority, he can no longer afford to be arrogant and will find it hard to reduce the French budget deficits, a condition to get German agreement for joint debt issuance.

So the EU and the Euro is now entering a final chapter. Like all political monstrosities, the fall will take a number of years. Brussels and government leaders in especially Germany and France will remain on the barricades for a long time although everything around them will fall apart. The only thing that could precipitate the fall is a debt default by the ECB when investors instead of buying the worthless debt paper will use it for fuel as they have run out of energy sources.

The only problem is of course that the debt is electronic and therefore unsuitable for burning- Hmmm.

US & GLOBAL INFLATION

Going across the pond, the US elite has never hated someone more than Trump. They tried all they could during his reign and now he is the first ex-president who is being raided by the FBI.

The US regime shot themselves in the foot with the sanctions against Russia. The Russians are still selling their energy to Germany, China, India etc and instead the suffering parties are the US, Europe and the rest of the world with high inflation and energy shortages.

With already high support for the Republicans and Trump, this raid is likely to have the opposite effect of the one desired by the regime. How many times can you shoot yourself in the foot before it really hurts?

pt4

>>17429515

UN AGENDA 2030 – THE (UN-)SUSTAINABLE DEVELOPMENT GOALS

This UN programme, supported by Schwab and the WEF (World Economic Forum) was always going to fail.

Starting in 2016, bureaucrats with no understanding of the real economy created this programme signed by 194 nations. There are 17 admirable but unrealistic goals like No Poverty, Zero Hunger, Good Health, Clean Energy, Climate Action etc.

Today almost half way into the programme, every single goal is hopelessly behind schedule with no chance of achieving the target.

How could anyone believe that 194 nations could jointly achieve these 17 goals when not even one single country can do it?

More about Agenda 2030 and Schwab’s attempt to take over the UN in a later article.

MARKETS

As generally is the case before major turns in markets, optimism is still high. But this autumn is likely to change all that as the realities outlined at the beginning of this article finally hit the world.

Stock markets are now extremely near finishing the correction and to resume the downtrend in earnest. It is possible that the real falls in markets will wait until September but the risk is here now and very dangerous.

What we know with certainty is that the world is facing a wealth destruction and wealth transfer of major proportions.

Most paper assets will die a relatively quick death and that includes paper money.

This will obviously include stocks, bonds, property and all derivatives. Falls of 75-95% in the next few years will not be uncommon.

As currencies finish their journey to ZERO (they are already down 97-99% since 1971) no use betting on the horse that comes last to the bottom whether it is the Dollar or the Euro.

They will all get there!

Instead, the only money which has survived in history is gold and silver and these metals will continue to maintain their purchasing power or even enhance it as all fiat money is killed off by governments and central banks by the creation of an unlimited supply.

It is so simple really but still only 0.5% of financial assets are in physical gold in spite of the metal’s golden 5,000 year record. That percentage is about to change drastically.

5 of 5

https://twitter.com/francis_scarr/status/1561761879285981184

Francis Scarr

@francis_scarr

Russian state TV's latest threat to the UK:

Igor Korotchenko says that if the UK sends any troops to Ukraine, Russia should launch hypersonic Kinzhal missiles at the MoD in Whitehall as well as British army bases and other "decision-making centres in London"

>>17429521