Tuesday, April 24, 2018

Interesting point about the UK and the "London Financial Sector"

There is a weary sense of realization going around that the UK economy is surviving because its financial sector is still somehow functioning despite the "Brexit" vote.

This gets into the details of how the UK economy actually functions these days and how that plays into the "Brexit" saga.

So to start at the beginning - the UK like most countries is filled with a vast number of idiots who can't be bothered to read or learn a damn thing about the world. This core of human stupidity and non-productivity exists in every country but in the UK this vast mass of people is old and completely reliant on their National Health System to care for them. The result of this is that HMG has to constantly keep pouring money into the NHS to keep these people in even the most minimal state of productivity. *

Naturally in such a setup - productivity is low. This is not a terribly new state of affairs, this is kind of how its been since the WWII period when the UK had to trade off its empire for homeland security. Without the empire to feed its industries with raw materials, the productivity of the UK homeland collapsed. Things were held aloft for a while on American loans but the real reason that the UK didn't collapse 50 years ago is that oil was discovered in the North Sea.

Using North Sea oil, the UK was able to build wealth (of sorts) in its society and keep its economy functioning. However as the median age of the population rose, the NHS became more & more expensive and a way had to be found to bridge the cash flow gap. The UK wasn't generating enough wealth to cover the costs of its diminishing productivity.

Becoming part of the EU allowed the UK to increase the volume of trade and sell its debts to others, but fundamentally there was no vast increase in productivity. There was however a significant reduction in unproductivity - as British goods and services were able to find markets in the EU. Business boomed after the collapse of the USSR. It was all good. The interaction with the EU market came with accepting EU norms and there was a cash loop (as there is with all trade patterns).

A lucrative sideline that developed in that period was flow of "conflict capital" or shady money into London's financial district. There had been a financial center in London from the days of the empire, it had reinvented itself as debt trafficking center in the aftermath of WWII. These guys stepped into the gray finance trade - helping xKGB and other FSU oligarchs move their money to "safe" banks in London.

At this time, North Sea oil has reached a point of diminishing return on investment. The trade with EU has plateaued in terms of profitability as the cost of adjusting to EU norms is rising and the NHS bills just keep rising. I suspect that HMG is constantly running into financial eclipse periods (i.e. periods where the HM Treasury can't match cash inflows to cash outflows).

Literally the only thing left standing in the UK (financially speaking) is the "London Financial Sector". Without money coming in from these debt trafficking operations, there would be no wealth generation in the UK. And given this backdrop - I would not be surprised if HMG has found itself in hock to some people with weird ideas of debt servicing.

This "London Financial Sector" crowd is one of the big backers of the Brexit. I suspect this is largely because of two factors

1) The EU financial trafficking norm push back against the desire to stuff every shady ruble that floats across the channel into ones' pocket and

2) The US led sanctions put on Putin's guys make it a criminal offense to touch his money or give him his due.

So you can see where this is going and why UK alignment with the US goals in the region is so troublesome.

PS. to be very clear - what Trump owes Putin is between Trump and Putin. There is no reason why US national security policy has to be raped to service Trump's misguided debts or Putin's non-performing loans. 

* I am not advocating against the NHS or what HMG is doing by supporting the NHS. I actually fully support it, I can't think of a better use for money than to care for the sick and elderly - I am just stating the facts as they stand on the notion of productivity. I fear the notion of productivity (as defined from industrial revolution period) is not sustainable in the present age and we may have to revise it. Unfortunately this comes at a very peculiar cost in the carbon energy driven world of today, and that cost may not be acceptable to that very segment of the UK population that lives off the NHS. There is no such thing as a free lunch - I am going to leave it at that even though it is a bit vague. 

1 Comments:

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