Is recession looming?

[Nimrod103]

There is a limit to the amount of debt which countries can build up, and many western countries including the USA are now approaching it. It will be interesting and not a little nerve wracking to see how much more debt we can take on.

Without recourse to further debt, governments can only bribe the electorate by paying Peter (their supporters) by taxing Paul (their ideological enemies).

Debt as a % of GDP - USA 110%, Japan 214%, so USA nowhere near any limit.

If you want the main influences on GDP growth - then they are, in my opinion low birthrate/increasing longevity, climate change and inequality.

Low birthrate can be fixed by increasing immigration - as Japan are finding out

Climate change will need public investment, particularly in renewables, which improve energy self-sufficiency. Food security will become a problem and UK is in a poor position.

Inequality can be fixed by progressive taxation policies - call it socialism if you like. Too much wealth in the hands of the few will lead to civil strife and does nothing to promote growth. Trickle down has never worked.

FD

The debt limit for a country depends on who holds that debt. Japan gets away with its high debt because it is held domestically, with a culture that encourages domestic savings. The USA probably has headroom because it issues the World's dominant currency, and is the World's most productive economy. How much more borrowing can the UK do? We may soon find out.

GDP growth depends a lot on the cost of energy. The UK has electricity costs 75% higher than the USA, combined with an anti-investment culture. No wonder it is cheaper to import immigrants instead of increasing automation. Wind power may give us electricity self sufficiency (when the wind blows), but don't let us fool ourselves that it is cheap.

Food security is not an issue while we can still import avocados. But should the need arise, I am sure we can change our diet to one of turnips and potatoes. The main issue is just the sheer number of unproductive mouths we have to feed here.

Too much wealth in the hands of a few leads to greater investment and greater productivity. That is what happened in the Industrial Revolution. Spreading the money around just leads to more people who prefer and can eat avocados when they should be eating potatoes.

[Mike4]

GDP growth depends a lot on the cost of energy. The UK has electricity costs 75% higher than the USA,

THIS needs unpacking and examining.

As I understand it, the price of electricity in the UK is unconnected with the cost of production, but pegged to the price of gas. There may be good historical reasons for this but as we slowly switch to renewables and nuclear, it needs reconsidering and I see no sign of that happening.

[servodude]

GDP growth depends a lot on the cost of energy. The UK has electricity costs 75% higher than the USA,

THIS needs unpacking and examining.

As I understand it, the price of electricity in the UK is unconnected with the cost of production, but pegged to the price of gas. There may be good historical reasons for this but as we slowly switch to renewables and nuclear, it needs reconsidering and I see no sign of that happening.

Bingo.
The prices to the consumer (including industry) here are helluva artificial and designed to pluck the goose more as the actual costs of production are falling drastically.
Unless you have your own hypothecated supply from renewables you are not getting the benefit from the decades of advancement in technology - and are being exploited to shore up retrograde and legacy companies and market models

[Oggy]

Renewables are of course a scam. Not only are they heavily subsidised by the taxpayer, the promised benefits in terms of lower prices have not materialized. The old chestnut trotted out by energy companies that the price of electricity is based on gas is total BS considering most electricity is now generated by wind - up to 70% of it these last few weeks.

Rip off Britain strikes again and HMG does nothing.

[funduffer]

Renewables are of course a scam. Not only are they heavily subsidised by the taxpayer, the promised benefits in terms of lower prices have not materialized. The old chestnut trotted out by energy companies that the price of electricity is based on gas is total BS considering most electricity is now generated by wind - up to 70% of it these last few weeks.

Rip off Britain strikes again and HMG does nothing.

I am afraid you need to better understand how electricity is priced, as you are far away from reality. Try this simple explanation:

https://www.sustainabilitybynumbers.com ... ty-pricing

FD

[Oggy]

The price is still broadly related to the price of gas - as others have pointed out. The pricing philosophy outlined in your link is also deliberately opaque and needs to reflect the lower prices we were all promised and is made possible as a result of generating electricity by renewables.

We are not seeing the cost benefits. All of us are being ripped off....again.

[Nimrod103]

Try this simple explanation:

https://www.sustainabilitybynumbers.com ... ty-pricing

FD

Quite interesting summary, but worth also reading the two comments afterwards for how the renewable industry costs are inflated. I'm also not clear as to whether gas and coal generating costs are forced up by the need to buy carbon credits.

[TheMotorcycleBoy]

Renewables are of course a scam. Not only are they heavily subsidised by the taxpayer, the promised benefits in terms of lower prices have not materialized. The old chestnut trotted out by energy companies that the price of electricity is based on gas is total BS considering most electricity is now generated by wind - up to 70% of it these last few weeks.

Rip off Britain strikes again and HMG does nothing.

I am afraid you need to better understand how electricity is priced, as you are far away from reality. Try this simple explanation:

https://www.sustainabilitybynumbers.com ... ty-pricing

FD

Thanks for sharing. It's horrendous, and utterly corrupt. There are (IMHO) far more "fair" ways of calculating energy costs.

For fox's sake, we've got computers and stuff, that could easily average out the real costs, presumably on a daily basis.

Matt

[scrumpyjack]

Renewables are of course a scam. Not only are they heavily subsidised by the taxpayer, the promised benefits in terms of lower prices have not materialized. The old chestnut trotted out by energy companies that the price of electricity is based on gas is total BS considering most electricity is now generated by wind - up to 70% of it these last few weeks.

Rip off Britain strikes again and HMG does nothing.

Much of the subsidy comes not from the taxpayer but from the standing charge on consumers electricity bills. That's where my feed in tariff payment comes from. Rather silly that the loading is on the electricity standing charge, not the gas one as it should be to encourage any switch from gas to leccy

[MuddyBoots]

Renewables are of course a scam. Not only are they heavily subsidised by the taxpayer, the promised benefits in terms of lower prices have not materialized. The old chestnut trotted out by energy companies that the price of electricity is based on gas is total BS considering most electricity is now generated by wind - up to 70% of it these last few weeks.

Rip off Britain strikes again and HMG does nothing.

I am afraid you need to better understand how electricity is priced, as you are far away from reality. Try this simple explanation:

https://www.sustainabilitybynumbers.com ... ty-pricing

FD

Thanks for the link. It says
"It costs very little to produce solar and wind, whereas coal or natural gas can be expensive because you have to buy the fuel to keep the plant running."
Unfortunately there's no scales on the graph to help us compare £ per MWh but as a rough visual guess I'd say that gas is about 10x more expensive to produce than renewables. And if the renewables firms are being paid the same price for their electricity as the gas firms, that represents a huge subsidy already so why do we need green levies added to our bills as well?
Presumably the cost of production per unit includes absorbed depreciation of the generating plant, so they're earning back the capital costs of construction, which I think is what we were told the levies were for. So it sounds like someone could be making a large profit margin out of renewables.

[Gilgongo]

We're probably way off topic now but...

So it sounds like someone could be making a large profit margin out of renewables.

Well yes, but not for the reasons people seem to think. The way prices are determined (in the UK and most other countries) for things like energy and many other "uniform goods" is a product of free market capitalism working in the way Margaret Thatcher et. al. intended: to promote efficiency and lower prices (eventually!) without government help.

A simple example: Two wheat farmers, one very modern and automated with low production costs of £2 a tonne, one traditional with loads of expensive manual labour setting costs at £10. Both farms produce the same quality. Both are required to supply demand.

• The more expensive farm will not sell below £10 or it would make a loss.
• The more efficient farm can sell at £10, because that’s what consumers (currently) pay.

So there's a uniform price because the good is uniform, and that price will be determined by the cost of the marginal producer. Same thing for electricity.

If you want it any other way, you'd need to artificially lower the price to put the inefficient firms out of businesses faster. But in doing so, you'd also be removing some incentive from the efficient firms to get more efficient and do it that way. Or at least that's the theory.

If you think that what's happening is that renewables are being given undeserved subsidies, then that's a different matter. But the idea there is to kick start the market because you may have noticed there's a war on called "climate crisis".

[vand]

If we want to get back on topic, the last NFP out of the US was pretty weak - below consensus on all 3 key area of new jobs, wage growth and hours worked. Add to that the weak 1.6% Q1 GDP number that almost got buried last week and it is obvious that the US is cooling off pretty fast since that mega 5% Q3-23 print.
Of course 1.6% is not recession, but the momentum is heading that way if they are not careful and continue with the higher for longer rates narrative.