In circulation in name only
People have been hoarding mountains of cash; or at least, that is what the media told us back in July. The story was superficially plausible. Pandemic restrictions had prevented people from spending. And those businesses which dealt in cash could not access a bank branch to pay-in their takings. This fed into the expectation that we would go on an inflationary spending spree as soon as the lockdown came to an end. To some extent we did – people queued for haircuts, bought some -mostly larger – new clothes, and enjoyed a drink down the pub and some food at a café. But once those initial needs had been catered to, spending began to drop once more.
When it comes to cash, at least, one reason we didn’t see the expected inflationary splurge was simply that the figures were wrong… or rather, they were right for the wrong reason. While there might be an apparent £10bn growth – to £80bn – in notes in circulation, only around £0.2bn of this growth can actually be spent. As David Fagleman at Finextra explains:
“Common sense suggests that this can’t be all that it seems; especially when one considers that the amount in circulation today is double the amount in 2008, while over the same time period not only have cash transactions fallen, there has also been a 13% reduction in the total number of ATMs and the total number of bank and building society branches has fallen by over 28%, significantly reducing the amount of cash needed in the supply chain for people to access it. We also know from the Bank’s own data that card payments nosedived in 2020 due to a lack of economic activity, a direct response to the lockdown measures, and LINK’s data shows that ATM withdrawals fell by 30%. Throw in a pandemic that accelerated the move away from cash as method payment and we begin to understand why the disparity between cash use and cash in circulation is known as the ‘cash conundrum’…
“If the £80bn includes banknotes that are no longer accepted, and notes are held overseas, then they can’t really be included in the figure used to determine demand for cash. Further, if we look at the Bank’s data we can see that whilst the underlying notes in circulation continues to grow, the rate it grows at has been steadily falling for several years from 148% in 2013 to 114% in 2020. This effectively acknowledges the growth in card payments and the decline in cash infrastructure (less ATMs and less branches). Also, the average value of banknotes in circulation has been falling for the past three years from 19 in 2018 to 17.62 in 2021…
“If we look at the number of banknotes destroyed vs new notes entering the wholesale market (that being the first step to a note entering circulation) we see a very different picture. Over the past seven years the Bank of England has destroyed more £5 (£-0.7bn) and £20 (£-0.4bn) notes than it’s issued but the reverse is true for £10 (£1.4bn) and £50 (£7.5bn) notes. Considering that the average person never sees a £50 note, never mind uses them for day-to-day spending, if we remove them from the equation then as a nation we have been destroying more banknotes than we are printing since 2013/2014… Using this methodology leads to the conclusion that the underlying net growth in transactional cash over the past seven years is around £0.2bn.”
While we might all have the odd fiver or tenner behind the back of the sofa or in the pocket of a jacket we no longer wear, the odds are it will be of the paper version that has been replaced by the new polymer notes. And whatever else may be going to happen with that cash, it is not going to be used to fund a spending spree.
There is nothing quite like someone fiddling at our expense to mobilise public approbation. Indeed, it is a device long-used by the establishment media to demonise the poor, the sick and the disabled; who are all too often portrayed as feckless scroungers. Which is one reason why MPs who often give voice to these assaults on the poor, get such a public drubbing when they are caught fiddling their own books.
So it is that a large part of the British public has found an issue they can unite upon – a rare thing in this day and age. The appallingly fumbled attempt by the Prime Minister to strong-arm MPs into tearing up the rules to protect former minister and badger-slayer in chief Owen Paterson, has backfired. And far from diverting attention away from sleaze – including by the Prime Minister himself – it has given rise to a media feeding frenzy.
The various media reports of MPs and former ministers hawking their knowledge of parliamentary procedures around the corporate lobby groups has also given the opposition Labour Party an issue that they can campaign on which doesn’t involve anything so sordid as having to have a policy prescription. In the most recent polling, Labour have pulled ahead of the Tories for the first time since 2019, and for some at least, Kier Starmer doesn’t seem such a bad leader after all.
We should though, inject a degree of realism here. Successive sleaze scandals – usually after a party has been in office for several terms – produce a great deal of noise but little in the way of electoral fortunes. In the case of John Major in 1997 and Gordon Brown in 2010, their fate had been sealed years earlier by, respectively, Black Wednesday in 1992 and the financial crash in 2008. Cash for questions and the MPs expenses scandal merely confirmed the general view that politicians are like nappies, and should be changed regularly… for much the same reason. On both occasions, the incumbent prime minister faced a popular and competent opposition leader. As Matthew Goodwin at UnHerd reminds us:
“Blair had a net approval rating of +22. David Cameron had one of +32. Keir Starmer is currently on -25 (read that again, minus 25).”
As with Major and Brown, the things that are most likely to bring down the Johnson government will be bread and butter issues like the rising cost of living, a growing crisis in health, and a serious collapse of small and medium sized businesses. Even then, probably the best that Kier Starmer’s Labour Party can expect is to emerge as the largest party in a hung parliament… although, whether Messrs Johnson and Starmer even get to lead their respective parties into the next election is moot at this point.
Among the factors underpinning the 2015 Paris Agreement was, ironically, the hike in oil production from US fracking. After a prolonged period of high prices following the 2008 crash, the Brent crude price had fallen from $115 per barrel in June 2014 to $47 per barrel by January 2015. And after a brief rally, the price fell to $42 in August, and ended the year at $28. After years of austerity, this price drop would eventually allow a small degree of anaemic non-financial growth in the developed economies. But its real impact on the climate change debate is that it took “peak oil” off the table.
For climate activists, this meant that the need to halt fossil fuel use was even more pressing. We couldn’t any longer depend upon Mother Nature to put an end to our fossil carbon burning; we would have to do it ourselves. For the ruling elites on the other hand, it meant that the time and resources would be available to create a hi-tech Brave New World (or “green new deal” as their PR people insist they call it). A series of new, “clean” energy sources could be developed, while new technologies would allow us to suck the excess greenhouse gases from the atmosphere. In the meantime, billions of people would switch from “the economy of things” to a new metaverse in which we used digital currencies to pay for digital services. We would, it seemed, own nothing and be happy!
This was nonsense, of course. You cannot feed nearly eight billion humans with digital food. And you can’t do it without diesel-powered agricultural machinery or gas and oil-based fertilisers, herbicides, and pesticides. Nor can you get the real food from where it is grown to where it is eaten without ships and planes and trucks. And nobody knows how to make a battery light enough to allow ships, planes and trucks to run on anything other than petroleum. Indeed, even the energy technologies that were supposed to wean us off our addiction to fossil carbon turned out to require fossil carbon at every stage in their manufacture, transportation, deployment and maintenance. The sad truth is that just about everything that billions of humans now depend upon for life support turns out to be either made from or transported using fossil carbon. And despite the optimism of the Paris COP21, that wasn’t about to change.
It could though, be glossed over by talking about “peak oil demand.” It was only a matter of time, they promised, before new green technologies would dramatically lower our collective demand for fossil carbon. But the promised technologies failed to materialise. Countries like the UK, which ingested a bit too much of the hopium being pedalled by the greenwash lobby, discovered that wind power was anything but too cheap to meter. Furthermore, as the proportion of intermittents in the system grew, it became increasingly difficult to prevent the lights from going out.
Fast forward to 2021, and the potential difficulties have grown enormously. The gas which the UK had used to phase out its coal power stations, is no longer readily available. The North Sea fields are depleting, Russia is keen to replenish its own stocks before selling additional supplies to Europe, while compressed LNG from further afield is too expensive to be anything more than an emergency stop-gap. Coming on the back of a media-inspired fuel crisis which, while false did serve to remind us how dependent we are on petroleum despite years of supposed green policy measures, the gas crisis served to emphasise one key aspect of environmental policy… it isn’t going to be cheap!
The UK wasn’t the only place to notice this. While Biden and Kerry produced syrupy green words for the cameras at COP26 in Glasgow, Democrat Senate Majority Leader Chuck Schumer was repeating Biden’s earlier call for OPEC+Russia to increase oil production to prevent Americans having to pay European prices for their petrol. The China-India-Iran-Russia-Saudi Arabia bloc which eventually pulled the rug out from under any serious COP26 agreement, was more mercenary – their economies are based around fossil carbon. And unless and until someone can come up with a realistic alternative – something that China often leads the world in – they are not about to leave their populations shivering in the dark.
The one thing COP26 proved beyond doubt was Pielke’s iron law of climate policy:
“The ‘iron law’ simply states that while people are often willing to pay some price for achieving environmental objectives, that willingness has its limits. Such limits may fall at different thresholds for different places at at different times. The iron law seems so common sense that I am always surprised when I hear objections to it.”
As the cost of responding to climate change spirals upward, and as technological solutions fail to deliver, perhaps the best thing that COP organisers could do for the fight against climate change – especially given their own carbon footprint – is to cancel any further conferences.
Don’t forget climate mitigation
Having failed to do anything to arrest the growth of greenhouse gases entering the atmosphere in the three decades since the Kyoto Protocol was signed, we are now witnessing the early stages of climate change in the form of global weirding. Hurricanes no longer follow their historic track, but can now sweep upward to wreak havoc in New England or across the Atlantic in Europe. California is drying out. The usually warm state of Texas can suddenly be plunged into a ferocious blizzard followed by a big freeze. Cities across Britain are regularly inundated by massive rainfall from unusually slow-moving clouds. Wales posts record night-time temperatures in mid-September while Tasmania shivers in the snow just a month before mid-summer. Droughts, wildfires and extreme flooding are becoming ever more common threats to human life across the planet. And there is, seemingly, nothing we can do about it other than sit back and wait for clever people somewhere else to find a technological solution.
A small number of hardy folk have already opted out, of course. But attempting to feed and clothe a population using sustainable farming techniques without importing some of the trappings of a fossil carbon economy is all but impossible. And for the majority of the nearly eight billion humans currently residing on planet Earth, opting out is simply not an option – we are bound into globalised supply chains without which, necessities like food and clean drinking water quickly disappear.
Unfortunately, the shifting climate – along with resource depletion, rising energy costs and growing economic woes – is already beginning to undermine these life-support systems anyway. Which is why the demand for compensation from the global south states at COP26 was perhaps the most pragmatic of all… if the global elite isn’t going to do anything to halt the floods, droughts and wildfires, then at least they can stump up the cash to pay for sea walls, irrigation and firebreaks.
In truth, it is unlikely that the developed states will be honouring this promise any more than they did previously. Not least because the developed states are themselves facing a massive bill for climate mitigation measures of their own. In the UK, for example, one in six buildings are on a floodplain or a saltmarsh. And while a few of these – such as those in Fairbourne in North Wales – will simply be abandoned to the sea, the majority will be treated as assets which have to be saved. This is especially so when it comes to defending critical infrastructure such as fuel pipelines, electricity grid installations, railways, major roads, port facilities and airports. Which means the UK government having to somehow find billions of additional pounds to build defences, raise floor levels and divert rivers and tides.
The key point being that, having failed to spend on carbon reduction decades ago when lowering consumption would have been much easier, states will be less able to do so going forward because of the inevitable increase in the cost of mitigating the effects of a changing climate. Not least because while any fool can create new currency, nobody can prevent resource shortages from raising the real price of everything we might want to do.
As you made it to the end…
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