What did I tell you? I fucking told you so!

Jesus H. Christ.  When my economic forecasting power eclipses all others then we can safely say we're all doomed.

Me being right isn't unusual, in fact I'd go as far as to say that I am always (and I mean always) right; and today, once again, I was proved right yet again.  Back at the beginning of December I called bullshit on the "retailers are struggling" line that was being played in the media; predicting that:

At this rate December's figures will actually be up on 2007.

I based this on two observations: that retail spending had shown no signs of slowing down, and those retailers who had gone bust had suffered largely at their own hands (irrelevant business models/speculative expansion/etc.).  It was all a big trick designed to get a few freebies thrown in their general direction (like the VAT cut).

And today: Retail Sales Rise 1.6 in December, and that's just month-on-month, the annual rise is 4%!

This is really the problem, the false bleating from the retailers have tricked the government/media/commentators/etc. into demanding more and more drastic action; action that will almost certainly end in complete and total ruin for everybody.

The game was lost on Monday, when the government promised an unlimited guarentee for banks; which is bad enough, I'll come back to that later.  The really worrying sign was the other parts of the deal, the £100bn to "stimulate the mortgage market"; and the £50bn to "buy assets from companies".

...WHAT?

First of all, this crisis is too serious for political shenanigans, when we have only a slim change of getting through the crisis in one piece we don't have spare hundred billion for things like this.  The question I'm trying to ask is this: what is the point in stimulating mortgages?  A house isn't a productive asset, it does no work, if it's book value goes up or down it doesn't make any difference to the wider economy, except in one way; the only affect it has is it's use as collateral for loans.  So the government is going to guarantee loans to inflate assets to allow more loans... isn't this the same ponzi scheme that's just burst?  The only way that would work would be if the government increased it's guarantee each and every year, and what happens when the money supply gets out of hand?  Inflation of course.  You can't cheat the system forever, inflating assets does not count as economic growth.

The purchasing of assets directly from companies (a glorified way of say the Bank of England will "loan" money to certain companies) is even more evil, in a way.  Nothing has been said on who is getting the money, this means it will almost certainly be a political decision, large inefficient companies which employ large numbers of people in marginal constituencies - therefore you can expect a government bail-out of Land Rover after all.  And, knowing our bunch of idiots, they will force certain levels of micromanagement too, as part of the deal.  Again this won't grow the economy at all, but will only serve to make out-of-date companies even more lazy and pointless.

But, the final kick in the teeth, the final straw on this particularly knackered camel's back, is the first part of the deal: the guarentees for the banks.  Just taking one bank, Royal Bank of Scotland, it's entire exposure (if the worst came to the worst) is more than the government could ever hope to pay; and, not only that, it's bigger than the entire U.K. GDP.  Add this to the fact that much of that exposure is measured in Euros or U.S. dollars, and you have a recipe for hyperinflation.  The more money the government prints to honour the guarentee, the weaker the pound gets; and the weaker the pound gets the more of them need to be created to honour the dollar guarentees.  There is no amount of sterling large enough to honour that guarentee.

To summarise: this is the end, people.  This is the end.  The inflationary effects will be undenyable soon, although I expect them to first be manifested in an unusual way, I'm expecting a suckers rally in property prices (and by rally I mean at least one money above zero).  This will be followed by drastic increases in retail prices.  The cycle will be self-serving and unstoppable; there will be no political will for higher interest rates until it's too late.  The only thing to lag behind inflation: wages; with unemployment so high, and lack of investment, there will be no labour shortage to speak of at all (with possibly one or two exceptions, I'll save those to a future post).

In the future wealth won't be measured in houses or bank balances, but by your stock-pile of tinned food and your ability to defend it.