Global Realpolitik & Austerity

[Protheroe]

Now we're in the midst of an actual crisis, an existential one potentially I thought I'd further depress you with some thoughts I've had coalescing about where this is going and what it might mean for our pockets. I don't want to rake over old ground, but if you thought the "austerity" of the Tory / Lib Dem coalition was bad - just you wait.

Why? Well now we're in the midst of an actual crisis we're all going to have to accept that Putin's actions, and the consequences of those actions are going to make us poorer. You can't simply disappear the supply of Russian / Ukrainian gas, oil, wheat, titanium, neon and palladium (amongst other commodities) and not expect prices to be higher. Much higher.

We will, at some point have to start replacing this stuff. If the UK & Europe start fracking (I know, I know) there will be plenty of gas, and if we build more nuclear plants or wind turbines there'll be plenty of electricity. You can forget net zero for a generation - as to even contemplate going green we'll have to invest in the carbon intensive industries to allow us to do so - no more exporting emissions in return for cheap steel. If we allow our world-leading gene editing sector to thrive we can boost farm yields - this is currently a huge benefit to being outside the EU, but expect the EU to perform a screeching u-turn similar to Olaf Scholz's instant disposal of the Merkel doctrine when reality bites on food prices as well as energy.

None of this will happen quickly. We will have to consume less, paying higher prices for what we consume.

And what does it mean for the wider economy? Well we spent tens of billions bailing out failed institutions in 2008, 5 or 10 times as much coping with Covid and are now faced with renewed demands for the government to rescue the consumer economy. Our debt levels have already soared from less than 50% of GDP to close to 100% now and are set to rise higher. The NHS now consumes £150bn a year - our defence spending has reduced pretty much every year for the last two decades in real terms, and rather than spending 2% of GDP on defence it's likely we'll revert to our Cold War average of 5%. If we keep borrowing more and more money with no plan for ever paying it back the accumulated debt will eventually crush us - so how on Earth will we pay for it? 

Expectations? The poorest must be bailed out by the welfare system, but for the rest of us - no more caps and price controls, no more bailouts and probably much more tax - we will have to tighten our belts and adjust. It's not going to be pleasant at all. It really doesn't matter who we elect either. 

Two other points:

1. Angela Merkel will go down in history as the worst chancellor in German history - well, nearly the worst 
2. There's a clear contrarian play on markets - if you believe the world is headed for a nuclear exchange I'd invest all your spare cash in a big economy FTSE or S&P ETF. Why? Well if you're right it doesn't matter what happens to that investment - if you're wrong there could be fortunes to be made. "Buy on the sound of cannons"...

[Ossian]

There is a common thread underpinning all of the problems outlined in your 2nd and 3rd paragraphs - an apparent aversion on the part of the west towards long-term, strategic thinking. This underpins our ongoing reliance for food and energy supplies to be provided at the whim of a state hostile to our aspirations and way of life. 

The history of energy policy - and nowhere more so than in the UK - has been one where dismantling and decommissioning has outstripped innovation and investment; admittedly not helped by a supposedly green lobby who will give a pavlovian thumbs up to the questionable environmental credentials of onshore wind but dismiss out of hand any suggestion that nuclear should be part of the mix. I've yet to hear a convincing argument as to how our baseload requirements can be secured without the need for either fossil fuels or nuclear.

So what we need is the emergence of a political class with the vision, will and clarity of purpose to change the habits of almost a lifetime. Finding them should be a piece of piss.

[Protheroe]

I don't disagree with most of that, though you could criticise Merkel's insane dumping of baseload nuclear in favour of Russian Gas as much if not more than the UK's short termist approach to energy.

I sense a central theme is the West's arrogance that it somehow "won" the Cold War and "won" the commercialisation of China. The West still sees liberal democracy as the summit of human attainment - not considering that it's an alien concept to Russia which has largely lived under the yoke of despots for a thousand years.

[Shabby Russian]

Thought provoking thread. 

The united western response to the Russian invasion of Ukraine has, on the whole, been heartening. A moral stance appears to have been taken against unprovoked state aggression and despotism.

Which makes today's news that Johnson is flying to Saudi Arabia in an attempt to get them to increase oil production so as to stop continued oil price increases.

Saudi Arabia has a Govt that in recent times, engaged in a war that has been waged against the civilian Houthi population of Yemen, has executed political prisoners and is accused of murdering a journalist critical of the Saudi Govt. 

Where is the moral consistency? 

And it is a good question about the Government's commitment to their net zero policy. This current situation will indeed be a test.

It really is a time for people to make up their mind on this issue. 

You either believe that climate change is a genuine threat to the future living standards and possibly even the existence of humanity or you don't. 

And if you are in the camp of the former, you need to be consistent in your policies designed to combat the threat. Not take detours from the policy every time you come across a short term problem.

[Borin' Baggie]

Net zero cannot be put to the wayside by the West, it's a means of ensuring energy independence and energy security on top of the fact that without the world drastically cutting carbon emissions then things are going to get exponentially worse in terms of global conflict as people fight over scarcer resources.

Fracking is a dead horse, it's going to take way too much time to set up, it's exposed to global market fluctuations with it being gas and without illiberal market controls it's not going to save anyone money. France and the UK need to go hard on nuclear with a 21st century Messmer Plan and the UK needs to work with its European partners to build more interconnectors, on top of develop better renewables (expansion of offshore wind, developing tidal, building solar farms in Spain) and better energy storage (pumped, chemical and gas). I'd also suggest in the short term to form a European internal market for natural gas and integrate the UK and Norway, as well as non-European allies, to guarantee gas security while everything is scaled up over the next 30 years.

[Protheroe]

Net zero cannot be put to the wayside by the West

I'm not suggesting that it'll be put to the wayside, just that it will take much much longer - and we'll have to honest about the security implications of exporting our emissions for steel production, for example. In the light of the last 3 weeks I suspect the great majority of people will see the opportunity benefit of reshoring at least some strategic industries even if that does come at the environmental cost some have chosen to ignore.

[Tom Joad]

Am I alone in worrying that going down the nuclear power route may mean problems with security? Terrorism, war, storing up problems for the future etc?

[Birdman1811]

Am I alone in worrying that going down the nuclear power route may mean problems with security? Terrorism, war, storing up problems for the future etc?

No, but they aren't as big an issue as people think.

Modern reactors create very little waste. And locking down a nuclear power plant shouldn't be too hard security wise, it will just need adequate security.

There simply isn't a better option.

[Protheroe]

Am I alone in worrying that going down the nuclear power route may mean problems with security? Terrorism, war, storing up problems for the future etc?

Nuclear technology has moved on an awful lot in terms of safety, security and waste. I wouldn't have a problem with one of the small Rolls Royce reactors next door.

[ChamonixBaggie]

No, but they aren't as big an issue as people think.

Modern reactors create very little waste. And licking down a nuclear power plant shouldn't be too hard security wise, it will just need adequate security.

There simply isn't a better option.

speak for yourself!