Comments by "TJ Marx" (@tjmarx) on "Food failure: why is UK facing shortages and high prices?" video.
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@Shan I enjoyed that you said the question is not about why the energy prices are high, it's about why you imagine the energy prices are high. I also enjoyed that when someone disagreed with your honestly quite ignorant comment, you just called them a shill to dismiss the challenge to your stance. That's incredibly intellectually dishonest and lazy.
Here's a little dose of reality for you. The EU is not a sovereign entity, it's 27 separate sovereign countries each experiencing inflation differently depending on their domestic conditions. Your claim is even more absurd than that, you're talking about Europe as a whole. So let's talk Europe.
The UK CPI inflation is 8.9%
As of 10 May the same is
50.4% in Turkey <--- The actual worst in Europe
17.2% in Latvia
15.5 in Serbia
12.2% in Romania
If we move your goal post and stick to just the EU it's
25.6% in Hungry
15.6% in Estonia
15.2% in Poland
9.2% in Austria
You might not have done math in high school so you may not realise that when you average Europe to get lower numbers, but exclude the UK which is a part of Europe that's bad math designed to get a dishonest outcome. Even Germany at 7.8% inflation does worse than the European average because of financial capitals like Switzerland and Luxembourg whom remain inside their <3% inflation target.
The energy profits are made offshore, they aren't made by the companies you're getting a bill from. Your energy bills would have been the same regardless of whether the UK was inside or outside the EU because that's not the cause of energy pricing.
The UK does worse on energy than markets like France and Germany because those countries;
1. Have a higher proportion of essential manufacturing and heating in sources alternative to gas, particularly they are further down the electrification road. Where as 89% of the UK are reliant on gas for heating and 80% reliant on the same for key manufacturing.
2. Both have diverse energy mixes, although Germany is decommissioning much of theirs which is driving up domestic energy prices.
3. Both countries maintain large gas reserves, which negate market price volatility and give generators/distributors greater certainty on prices. In contract the UK doesn't even hold 1% of supply in reserves which exposes it directly to market pricing including large spikes and troughs.
4. Both France and Germany continue to buy discounted 2/3rd of externally sourced gas from Russia through Algeria as an intermediary. The UK in contrast ceased buying from Russia and has become almost entirely reliant on the far more expensive US shale gas.
That's where most of those profits you're talking about are going, straight into yankville who leveraged a war they created to extort Europe.
This isn't brexit, this is 4 decades of bipartisan inaction on energy security in the UK. The UK is so unimaginative that even in talking about the big renewables conversion, things like green hydrogen which could be produced on shore are being negotiated right now with the UAE to provide as imports.
The ideas you're pushing here are wrong, they're dishonest and they're based in misinformation.
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@SicAltusIsVulnero First and foremost, inflation is a product of too much cash in the economy compared to productivity, so spending less is the goal to bring it down. That's the entire point of the bank of England raising rates 13 consecutive times. To pinch your wallet and slow down spending.
Secondly, you clearly have no clue what the term "real wages" means. You've obviously only recently heard it as a result of this inflationary event and don't really understand it. So let me help you out.
Actual wages go up. People have more money in their pockets. Inflation is the devaluation of the pound, so when a pound is worth 0.7% less this month than last, the buying power of that power in turn reduces. Or in other words, when inflation goes up, the real value of your wages as expressed in buying power reduces.
The ONLY way to solve that issue is to bring down inflation sharply such that it leads to a brief period of deflation as a market correction.
There's no single factor driving high inflation, it's a complicated mix of foreign and domestic factors. When the politicians and media talk about the war in Ukraine being a factor what they really mean is the self imposed sanctions on Russia. It wasn't a coincidence that the high inflationary event has hit every country imposing sanctions on Russia all at the same time, immediately following those sanctions, but has not impacted countries like Switzerland which have remained neutral and imposed no sanctions. Those sanctions are undoubtedly the largest contributing factor. Meanwhile, the Russian economy even now more than a year later continues to strengthen. We're only hurting ourselves.
In terms of how big a factor they are on high inflation, the sanctions are closely followed by the manufacturing and exports delays from China as a residual of their pandemic measures, and global shipping backlogs.
The energy price shocks are caused by a shift from cheap Russian gas to incredibly expensive shale gas from yankville which originally wasn't even able to meet demand because no one in the market has wanted it. Not only is it 5 times as expensive, but 20x less energy can be converted from it, so more of it has to be purchased. Prices have come down because yankville have scaled up production, but this is as lose as gas supply costs are going to get, it's all up from here unless the UK electrifies or moves back to cheaper on continent gas supplies, such as from Russia.
There are domestic issues here too. The union strikes are a massive one. Higher wages only increase inflation. But it's more insidious than that. NHS and rail strikes drop overall productivity across the economy substantially. As previously mentioned, lower productivity spikes inflation. The UK has had abysmal productivity figures since 1997 which left the UK exposed, but now productivity figures are down even further the economy is on the tilt of collapse. See the market run from the Liz Truss budget.
The biggest domestic factors however are the 23 year growing budget deficit driven by ever dwelling tax revenues. The UK budget is just shy of half a trillion pounds in deficit. That means, EVERY YEAR the UK has to BORROW that amount just to provide basic services included in the budget. That's things like the NHS and rail, paid for with loans. It's even worst than that though, since high inflation the UK has been borrowing even more money just to pay the interest on it's existing loans. The UK is bankrupt. It means the UK lacks the ability to take loans for large infrastructure or growth projects which would stimulate productivity. The government does not have those options, because of a deficit started under Tony Blair and made worse by every subsequent government regardless of party. It's driven by parties promising tax cuts to win elections. It's terrible fiscal management.
The base tax rate is just 20%. That's far lower than any comparable market, and is the source of the problem. The treasury say the base tax rate should be 37% and sooner rather than later (like after the next election) a government is going to have to reconcile that tax shortfall.
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