What caught my eye this week.
I have always loved the end of things. A closing down sale. A silent office over Christmas when everyone else is away. The last days of school. The siesta of working through your notice period, when however conscientiously you try to keep at it, the pressure has all gone.
Perhaps Rishi Sunak and Jeremy Hunt feel the same way. They certainly seemed to enjoy themselves with Wednesday’s Autumn Statement. The Prime Minister chortling, and Hunt showing unexpected comic timing as he shared his purported 110 supply-side reforms to unlock economic growth.
This is the Brain’s Trust of the Tory party by modern standards. Sunak and Hunt both know the odds of them being in their jobs after the next election are remote.
Hence I was pleased to see what was mostly a technocratic budget.
Without much room to play with and very little chance of enjoying the spoils, Hunt delivered a suite of pinches, tickles, and tweaks that he hopes will add up to an invigorating pick-me-up for Britain PLC.
I wouldn’t say it amounted to a grand Growth Plan. But it does at least look like planning for growth.
A welcome change after nearly a decade of throwing grit into the wheels at every turn.
When 2p goes quite a long way
Under the last two incumbents of Number Ten, this Autumn Statement would surely have been heavy with last-days-in-the-bunker vibes.
Crazy populist policies that heaped more of Britain’s long-term potential on the bonfire, Denethor-style or – presuming she had time to get them typed up – short mad missives addressed to generals and armies long since taken off the table.
There’s still the Spring Budget for that I suppose. Maybe we’ll then see the unnecessary – and at the least ill-timed – scrapping of inheritance tax, or the pantomime horse of a British ISA that doesn’t know its arse from its elbow. Or big income tax cuts that would certainly be welcome but can hardly be afforded.
But Hunt’s more modest moves were impressively sane.
Sure, cutting employee National Insurance by 2% is at bit like giving someone a stool to stand on while the floodwaters of fiscal drag are rising and the tax take inexorably drowns the land.
However it’s better than nothing, rewards work, and helps those towards the average end of the spectrum more than the rich, which is appropriate in a cost-of-living crisis and a world where disparities of outcomes are widening. Ditto the simplification of NI for the self-employed.
Unlike a general income tax cut, trimming NI also doesn’t give anything extra to pensioners, which is a good thing. I’ve nothing against old people – I hope to be one someday – but pensioners have had it relatively better for years now. And the too-costly triple-lock remains in place.
Kicking off a consultation to look into Aussie-style pension pots that move with you when you change jobs was welcome, as were the steps towards ISA simplification rather than proliferation.
And common sense seems to have prevailed when it comes to allowing fractional shares in an ISA.
We’ll have to wait for the small print on all of these – and I’d say there’s zero chance of ‘pension pots for life’ before the next election – but it’s sensible stuff.
Paying the price
The bigger picture hardly looks pretty, of course.
After the rush of reporting on the Autumn Statement goodies was over, experts lined up to explain British workers are still very much under the cosh of fiscal drag thanks to frozen tax thresholds.
In fact this Tory government will exit leaving Britain at its most heavily-taxed since the days of Churchill.
Not entirely its fault of course, with a global pandemic in the mix. We can argue about specific Covid policy responses – and I’d cut all governments a lot of slack, fiscally-speaking, given all the uncertainty – but evasive action was costly everywhere.
On the hand, the economically-witless Brexit was mostly the Tories’ fault. Who knows exactly how much it’s hammering us, but the independent Bloomberg’s third annual estimate puts it at £100bn a year.
Slap a 40% tax take on that and that’s £40bn more a year that Hunt could have had to play with.
For a sense of what that’s worth, the OBR estimates this week’s NI cut will cost £10bn a year. So we could have had four of those, say. Or an inflation-adjusted personal allowance. Or more spending on services that instead are being whittled away.
Not so much 40 new hospitals from Brexit as 40 weeks to wait to get into one. Or 40 minutes late on the train to get there.
The economic drag from our innumerate Brexit has been going on for years now. Soon enough we’ll be half a trillion quid in the hole. This was always going to be a costly whimper, not a big bang. And this is not even to count the waste of time of five years arguing about how best to shoot ourselves in the foot, versus a counter-factual where we had decent leaders who focused on things that actually mattered.
Never forget when Britain properly gets growing again that we generally tend to grow. Brexit won’t have given us that growth. It has just slowed us down in the meantime.
Oh, and I’m not much impressed by retorts that we’re growing slightly faster than Germany or doing a little better than Italy or whatnot.
For one thing, I expect that the same statistical revisions – which we’ve applied first – will boost rear-view Eurozone growth in time, too.
More pertinently, it just means we’d be growing even faster than those countries if we hadn’t the burden of Brexit.
We did fine for decades in the EU – and we were growing faster than them then, too.
Now though, we’re trundling along with a slightly flat tire – and that’s with immigration at a record high.
Immigration boosts economic growth. So we’d be growing even slower if Brexiteers had actually been able to cut numbers to the level most of them voted for.
Incompetence saved us on that score.
Poor show
The pandemic, Brexit, inflation, and Britain’s endemic productivity problem – it has all helped to squash real income growth.
According to the Resolution Foundation, by the end of this Parliament (which started with a bluster in 2019) average household income will have fallen by 3.1%. That’s £1,900 less in spending money.
It’s unprecedented in modern times:
Source: Financial Times
Still, you might imagine that with the government taking in the greatest share of economic output since World War 2 the squeeze on public services might be over, at least?
Alas not. The Institute of Fiscal Studies estimates that Government departments will need to find another £20bn of spending cuts next year.
I suppose they might yet try a pre-election borrowing binge to fund their way out of that hole. But given how the soaring cost of paying our current debt is another reason why the public finances are so strained, this would hardly be something to cheer.
The morning after the night before
I said on Twitter this sensible Autumn Statement suggested the Tory party had turned a corner – at least for now.
I hope so. Britain desperately needs better leadership. We can debate the right policy levers to pull, but we can ill-afford any more grand delusions.
The numbers make that plain.
Have a great weekend!
Autumn Statement roundups
What the Autumn Statement means for your money – Which
Another spin on the same – Be Clever With Your Cash
FT has a solid take on The Autumn Statement [Search result] – FT
Here’s a perspective from the lefties… – Guardian and its calculator
…and the same with a calculator more from the right – This Is Money
And commentary
What is national insurance, and who will benefit from its cut? – Guardian
Britain’s tax burden to be highest since WW2 despite NI trim – This Is Money
Will fiscal drag wipe out your national insurance gains? – This Is Money
How to fix Britain’s flashy economic announcements [Search result] – FT
Hunt delivers a budget designed to destroy a future chancellor – Guardian
It alleviates the worst pain, but it won’t fix Britain’s underlying problems – Prospect
The collated #autumnstatement tweets of Martin Lewis – Independent
From Monevator
Accumulation units: tax on reinvested dividends – Monevator
The rich person’s guide to pension contributions – Monevator
From the archive-ator: Fat cats of the land – Monevator
News
Note: Some links are Google search results – in PC/desktop view click through to read the article. Try privacy/incognito mode to avoid cookies. Consider subscribing to sites you visit a lot.
Chancellor to close £29,000 ISA loophole – Yahoo Finance
Famed short-seller Jim Chanos is throwing in the towel – CNBC
Millennials say they need $525,000 a year to be happy – Business Insider
Cognitive ability mattered in vote for Brexit, study shows – University of Bath
WHO asks China for more information about rise in illnesses and pneumonia clusters – NPR
WTF! Extremely high-energy particles detected falling to earth – Guardian
The unprecedentedly top-heavy S&P 500 is a challenge for index fund investors – Cullen Roche
Products and services
Nationwide brings back sub-4.5% mortgage fixes for first time since June – This Is Money
Energy price cap to rise 5% to £1,928 from January – Which
Metro Bank tops easy access and one-year savings tables. Is it safe? – This Is Money
Get £50 free trading credit when you open an account with Interactive Investor. Terms apply – Interactive Investor
New mortgage lender Perenna offers up to 40-year fixes at six-times income – This Is Money
Open an account with low-cost platform InvestEngine via our link and get up to £50 when you invest at least £100 (T&Cs apply. Capital at risk) – InvestEngine
Why is it so expensive to insure an electric car? – Which
Review of the Cheddar cashback app – Be Clever With Your Cash
Homes for sale near beauty spots, in pictures – Guardian
Comment and opinion
The downsides of diversification – Of Dollars and Data
“I want to get out”: two landlords on the ‘broken’ rental market – Guardian
Cash’s big blind spot – eToro
The network scam – Seth Godin
What traits make for a super-saver? – CNBC
The downsizer’s dilemma [Search result] – FT
Don’t retire. Ever! – The Walrus
The best time to diversify – Creative Planning
Saving-for-retirement ratios [US but interesting] – Humble Dollar
More ‘supernerds’ rail against Dave Ramsey’s ‘8% rule’… – Think Advisor
…and even try to find a way to make his reckless rate work – Morningstar
Late bloomers – Humble Dollar
The debt reaper – Bond Vigilantes
New data suggests stock returns are lower over the very long run [Nerdy] – F.A.J.
Longevity risk mini-special
Longevity risk [PDF, US and nerdy but relevant] – Centre for Retirement Research
Seven reasons why people avoid annuities [Slideshow] – Think Advisor
Naughty corner: Active antics
What makes a multibagger? [PDF] – Stockopedia
Hard work pays off. Maybe. – Klement on Investing
Hedge fund herding is worse than ever [Search result] – FT
Moats and capital allocation – Investment Talk
Is HSBC a good choice for dividend investors? – UK Dividend Stocks
Private equity resorts to buying back companies after IPO flops [Search result] – FT
Kindle book bargains
Rogue Trader by Nick Leeson – £0.99 on Kindle
I Will Teach You To Be Rich by Ramit Sethi – £0.99 on Kindle
The New, New Thing by Michael Lewis – £0.99 on Kindle
The Epic Rise and Fall of WeWork by Reeves Wiedeman – £0.99 on Kindle
Environmental factors
How Norway brought heat pumps in from the cold – Guardian
All the fish we cannot see – Hakai
Blue whales return to ‘safe’ tropical haven – BBC
Regenerative cattle ranching [Fancy visuals] – AP News
30 new species seen in Bath due to climate change – Guardian
Robot overlord midwives in crisis roundup
Sam Altman to return to run OpenAI – BBC
Board warned of AI breakthrough before Altman’s ouster – Reuters
OpenAI’s misalignment and Microsoft’s gain – Stratechery
Will AI render programming obsolete? – MIT Press
A reminder why this all matters [Video] – Twitch founder Emmett Sheer, via X
Off our beat
Middle-class shoplifting at the self-service till – Guardian
The gun industry chose mass murder – Rolling Stone
Would you want to be comforted by a ‘ghostbot’? – Vox
The full reset – Morgan Housel
Naomi Klein on wellness culture’s embrace of far-right tropes – Guardian
How fossils are shaped by people – Undark [h/t Abnormal Returns]
Can Disney rediscover the magic? [Search result] – FT
Six ways to make your life easier and more peaceful with Stoic principles – Guardian
And finally…
“On balance, the financial system subtracts value from society.”
– John Bogle, Enough
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I’m kinda surprised this is called a “sensible budget” above
It was £20bn of tax cuts paid for by not increasing government spending forecasts in line with inflation
Whatever party wins the next election taxes will go back up to match spending inexorably rising on an aging population
Just another short term fix by people talking out of the side of their mouths about “tough long term decisions”
Amazing isn’t it, Brexit has cost us the equivalent of 8pc on NI. It’s a wonder that all the years we were in the EU no one thought to reduce NI by 8pc. Guess it wouldn’t have won any votes…if that all adds up it’s Remainernomics – a mixture of literal genius and common sense.
Great to see a link (see F.A.J above) to the Edward F. McQuarrie paper: Stocks for the Long Run? Sometimes Yes, Sometimes No
IMO this is a timely – and admittedly rather long – reminder that there is absolutely no physical (or otherwise) law that states equities must grow!
I am slightly astonished by your restraint on the return of David Cameron – the prathead who got us into the Brexit situation in the first place. I now have to avoid the news even more as the appearance of his gormless self satisfied face raises my blood pressure too much. And don’t get me started on the other grifter in “I’m a Celebrity”! He’s the true fraudster – not the poor disabled and sick people who “have to work for the good of the country” – work for more profit for people like him they mean. Maybe they should consider why work is so shit for many people?
As to the NI cut – very quickly followed by a 5% rise in energy costs plus an increase in my required pension contributions – I am so much better off – NOT.
Plus even more cuts to already failing public services to pay for it all – I despair, I really do.
A sensible budget when measured relative to recent budgets by the Tories. Nothing totally silly like the rumoured cut to IHT. I’ve always wanted income tax and NI merged (raise income tax but set NI to zero) since having both makes no sense and favours retiring over working. This perhaps shows a way to do that. Take with one hand by implicity raise income tax via fiscal drag, whilst giving back with another via cutting NI.
Fundamentally though a “meh” budget. They have limited to maneuver but need to get some headline tax cuts in now just in case they go in May rather than Oct.
@Al Cam #3: you heard it here first 😉 comment #58: https://monevator.com/equities-highest-return/
On the ‘mad riddle’ (to quote Danny Dyer) that is the economics of Brexit Britain, a 4% loss of GDP sounds benign, until it’s spelt out as £100 bn each and every year. Kinda liked ZX’s earlier idea that the £40 bn p.a. tax shortfall should be made up with a £2,300 annual charge on each of the 17.4 mn leave voters. It’s a bargain for them really, as no one’s asking them to also cover the 60 bn p.a. black hole in private sector income.
But, in rare some good news for Brexiters, the OBR now calculates that their flagship Indo-Pacific trade deal will ultimately add 0.04% to GDP, and that the trade deals with Australia and New Zealand will contribute 0.1% to GDP by 2035.
https://www.theguardian.com/politics/2023/nov/25/uks-flagship-post-brexit-trade-deal-worth-even-less-than-previously-thought-obr-says
So, we only need trade deals with 28 times the combined effect of those 3 now to get back to square one.
I remember reading that George Osborne wanted to eliminate NI but was told it was too difficult at the time.
I think it’s employer NI that annoys me the most. Largely because it is so deceitful. It’s pushed as a tax on employers but the reality is it will affect your earnings so it really is a burden for employees.
Genuine question: Don’t we already have pension pots for life in the form of the NEST scheme? It being portable between employers and the national scheme of choice was certainly how it was sold to my company …what’s different about the new set-up?
@Rich
The issue is that currently employers get to pick which provider they want (NEST being one option) and don’t have to agree to pay contributions anywhere else. So people who change jobs can end up with lots of different pots with different providers.
As I understand the outlined proposals (which are pretty vague and will be consulted on) they mean that a new employer would have to pay into the employee’s chosen plan instead of the employer default- and presumably make that clear in their comms. Most employees probably won’t care enough to make the choice. Most employers won’t be happy to have to offer this as it makes payroll admin and record keeping more complicated.
Some years ago there was a “pot follows member” proposal that would have meant that new pension providers would have to encourage and facilitate transfers in from previous providers. It didn’t get very far either.
“Immigration boosts economic growth”. Hmm. Yes, on an aggregate basis, but on a per capita basis, which is the one that counts, the evidence isn’t there.
@Neverland — Until you’re made PM, we strivers will have to struggle on as best we can. Focusing on business policy and targeting what tax breaks were delivered towards working people/growth, however modest, seems to me sensible versus the many alternatives this generation of Conservatives has been delivering in recent years. Moreover as I’ve written many times before (and repeat at length here) we’re in a hole (in part of the Tory government / electorate’s making, but there you go). That doesn’t mean it’s my ideal budget by a long shot. Whether based on where we are or where we should be (still in the EU and much richer, though still recovering from the pandemic issues obviously).
@BBlimp — I know you’re not that slow so I’ll assume you’re being wilfully obtuse.
But if you prefer, the £40bn more that the State would very likely be bringing in without Brexit could wipe out fiscal drag, which is on track to bring in c.£45bn by 28/29. (Source: https://www.cnbc.com/2023/11/23/why-the-uk-governments-tax-cuts-still-leave-workers-worse-off.html)
So there you go — no straw-man counterfactual required. Without your Brexit, which has delivered more or less no meaningful benefits that anybody can point to and a lot of hassle and ball-ache, all our personal allowances and tax band thresholds — including yours — could have risen in line with inflation.
We’d all be better off.
But what would that be worth if we couldn’t clink our crown-stamped pint glasses together, eh?
@Al Cam — No physical law but I think there’s solid economic reasons to think equities in aggregate will grow over the long-term (in the absence of State confiscation / revolution / nuclear war / whatnot). Long-term here means multiple decades. If they don’t, why not buy bonds etc? Perhaps in a no-growth world where nothing delivers, including the aggregate economy, but that would also be a special case. The record does seem far patchier and petulant than we thought though.
@Sarah — Yes, the Cameron situation is farce returned as tragedy but I’m trying to stick to the economics most of the time. As for the NI cut, yes as I say it’s small fry compared to the bigger picture, but the bigger picture was bleak anyway. So small mercies.
Agreed nobody should fall for the old line of “we’ve done the hard part now we’re cutting taxes” which is problematic at the best of times and this time isn’t even true.
Hopefully (inveterate optimist @BBlimp aside) the electorate will recover its memories.
@ZXSpectrum48K — Agreed. And sadly it seems sleight-of-hand is about the best we can hope for if we want sensible outcomes, given how voters have been plumping for innumerate fantasy for the past 7-8 years.
@TLI — Reason to celebrate indeed! I had a friend over today with their five-year old. That five-year old’s own children can’t wait to unlock the opportunities of lucrative trading with the Solomon Islands and dang the power-crazed Germans and the stinky old money French! Nobody should be judging Brexit on a timescale of fewer than 100 years.
@Ducknald Don — Osborne was pretty underrated. (IIRC he urged Cameron not to call a Referendum, too). Yes he overdid austerity in hindsight but I’m not sure I would have made a different decision given how things looked then. Unifying NI and Income Tax would have been a decent legacy. If I was dictator for a decade I’d scrap all of it — including all the tax bands except the personal allowance — and do a flat rate for everyone, putting some of the admin money saved into serious anti-avoidance policing. Maybe in the next life/simulation.
@Rich @Nebilon — Yes, in theory the advantage would be that customers could choose. There will be a lot of bleating from financial services about people picking cheap funds and thus missing out on expensive expertise, when we all know they’d nearly all do better in a cheap global tracking Lifestrategy style fund, over-funding it and otherwise leaving it be. With that said, there is a knowledge gap for sure that will be hard to bridge in the absence of a well-known (State-sponsored perhaps) solution.
I wasn’t much persuaded by recent arguments on the superiority of the Aussie ‘super’ from a returns POV or for the differing asset mix, but it’s hard to argue with the way it has engaged Australians about their pensions. So a well-constructed pot-for-life could perhaps engage the imagination as the biggest win?
@Vic Mackey — You write: “Immigration boosts economic growth”. Hmm. Yes, on an aggregate basis, but on a per capita basis, which is the one that counts, the evidence isn’t there.
Certainly much more nuanced and uneven, but here I was specifically talking about UK GDP post-Brexit on an aggregate basis. Without (record) immigration, UK GDP on would be lower right now (very markedly lower perhaps, if it really had gotten down to ‘tens of thousands’ per year, given the strain from the labour disruption we saw just with substitution from non-EU sources, but who knows).
An extremely small win but at least Brexit has taught a significant number of people that solving problems isn’t as simple as some grifters said it would be.
Agree the budget was a return to normalcy, v welcome, albeit it’s just a return to managed decline isn’t it? At least Corbyn, Truss were swinging. The good news, it’s not massive good news, is a slight growing realisation that growth is the only way out of this hole. The British economy need a radical redesign, which would take a couple of decades to implement but can be done!
Amen to the immigration comment. GDP per capita is a better measure. Here’s a fairly trivial anecdote that gives an insight. I’ve just relet one of my flats in my small portfolio. The previous tenant, earning just shy of £35k can’t afford to live there any more – the rent was still 20% below market price, sad but I couldn’t really justify lowering the rent further. Agent re-advertised at 5% below market price and did an open day (amusing as the flat is hardly the most luxurious). It had 13 viewings in a day, 4 offers and the person who it’s gone to (it’s like a star prize….), was a recent immigrant and has paid the whole year up front. Some of the offers had written personal references attached. The whole thing has gone totally bonkers and call me old fashioned but when the population goes up 1.5x the size of leeds in a year but the number of homes built is 0.3x then there’s only one outcome!
@TI (#11):
Re: “No physical law …”
Possibly, but (extracted from the linked version (Nov ’23) of the document):
“The post-1926 period in the US emerges as highly distinct within a broader historical view, with outcomes that do not generalize to other times and places.”
That is, the future is unknown and unknowable in advance. If you do wish to assume that the future will be like the past then be careful about the sample of history you select.
…. “… I’ve nothing against old people – I hope to be one someday – but pensioners have had it relatively better for years now. And the too-costly triple-lock remains in place….”.
As I understand it, a certain Margaret Thatcher removed the inflation linked element of the State Pension. Even though that was much later restored, the State Pension has never really caught up. No one is ever going to live the life of Riley on a state pension, so not sure how maintaining it is somehow deemed unaffordable. Unless of course, one subscribes to the race to the bottom of what is or isn’t affordable. To say the absolute least, the current flavour of UK government is not to my taste. I do though absolutely agree with their stated position that elderly people cannot just throw themselves into, say, a third job to keep the wolves from the door in the way that younger people can.
As a slight aside, whenever I read about… the problem is managed decline, low growth etc.., I tend to think, well, what kind of country should this country be. The UK is a post colonial outfit, that struggles to let go of the idea that it is a great power. A transition to a society with more similarity to Nordic countries is, for me, a way forward.
I’m personally ok with the retention of NI as it’s the only tax that has a modicum of contributions linkage. Most European social democracies retain this link and access to welfare systems is largely contributions based. The UK has developed an strange inverse relationship with the more you pay in, the less you have access to. The loose NI contributions link to pensions is morally worth keeping.
@ trufflehunt 14.
It’s fair challenge, I for one, have no illusions of grandeur, which I suspect was a reason why a slice of the brexiters (think elderly, middle class, detached home owners) voted in this regard.
With respect to the type of country we want to be, to me it would simply be one which had the ability to pay it’s way, wasn’t having to borrow from our children’s taxation to pay for today’s current expenditure , didn’t have crumbling public services, didn’t have large sections of the population living in poorer conditions relative to much of europe (albeit not the world) and some vague idea about what to do over the next couple of decades.
All of that, sort of costs cash and a country can either cut spending to balance the books or grow. See BoE governor comment today https://www.bbc.co.uk/news/articles/cjrpzxpv90eo
The only solution any government has had since the financial crisis to this is to substantially encourage immigration by engaging in classic distraction policies (e.g. witness the ‘stop the boat’s campaign whilst encouraging hundreds of thousands of overseas students to study at the university). If this is coming across as a small minded anti-immigration rant – then that is most definitely not me!
Whilst I appreciate the current govt is getting a bad rap, in it’s current form, it’s pretty different from the BoJo days and I suspect in aggregate spend and taxation it won’t be much different from Kier Starmer’s incarnation if he wins next year. Managed decline to continue!
@Trufflehunt. The problem with the state pension isn’t that it’s linked to something. The problem is the “best of” option. By being linked to the highest of three measures, inflation, earnings, and 2.5% on an annual basis, its value will always grow faster than the rest of the labour market. It’s totally unaffordable and unfair on the rest of us.
Imagine I gave your portfolio a best of option on the annual return on equities, bond and cash how would that look? The returns would be amazing. Equities up 20%, bonds down 10%, cash up 2.5% in year one. Take the 20% please. Next year equities down 20%, bonds up 10%, cash up 2.5%. Take the 10% from bonds please. Year after, equities flat, bonds flat, cash 2.5%. Oh I’ll take the cash return please. After three years, equities down 4%, bonds down 1%, cash up 7.6%. Your portfolio …. up 35%. Does that seem reasonable or fair? That’s what the triple lock is. Utter bollocks.
The fair approach is just to link to earnings. As wages rise, pensions rise. If wages fall, pensions fall. The ability to pay for state pensions comes heavily from wages so this link makes it more sustainable. It also maintains a parity between workers and the retired.
@Al Cam #13, @TI #11: you have to make some pretty heroic assumptions to believe that global equities can repeat (and then keep repeating) their stellar past 100 year performance of 5% p.a. total real returns.
They might well manage it for a good few decades yet, but even if the past is prelude and the future repeats the performance of 1926 to date; it’s then worth noting (IIRC) that the 1 standard deviation range on the past century’s average annual 5% real total return to global equities has been ~ +/- 3% p.a. (with, from memory, around a 2% p.a. standard error).
That means that, even if conditions did repeat, then (statistically speaking) we’re looking at a ~95% (i.e. 2 StDvs) chance (ignoring standard error) over the next century of anything from an abysmal annualised -1% real-terms contraction (dividends reinvested!) to a ridiculous (but fabulous) 11% p.a. real-terms total return. The actual chances of each of the extremities of return outcomes given by that 2 StDvs range are surely significantly overstated by a Gaussian distribution (so, probably, a thin tails situation).
More likely, IMO, is that the past provides much less guidance to future asset class returns than is generally given credit for.
If we were to end up in a benign, aligned, ASI/AGI driven, paradigm-generating, accelerating, omni-transformation (the much fabled technological singularity); then, presumably, pretty much anything could happen. Frankly, however, I give extremely low credence to that dream outcome (much less than the odds of winning the Euromillions jackpot with a single ticket). Then again, there are plenty of interesting and clever folk out there who take this rosy scenario seriously:
https://www.lesswrong.com/posts/yhCkaocWYkdX3i9AG/the-most-important-century-the-animation
IMO the very much more likely outcome is that we’re going to be into shrinking and aging populations with stagnating per capita output leading, eventually, to a reducing Gross World Product, albeit by that time we’d be into the 22nd century, and hopefully seeing only a slight rate of shrinkage.
Basically, I ultimately think that we’re going to all go Japanese. Assuming that this scenario is deflationist, then – in the very long term – I’d expect average annual: <1% inflation, <1% interest rates, 0.5-1% contraction in population in work, a <1% earnings’ yield and global CAPE hitting 100 (against ATH US CAPE in 2000 of 44). After that, I'd guess your looking at 0-1% p.a. real total return from equities and nowt or negative from bonds. I think we're still a good few decades off this even starting, but looking to and beyond 2100 it would become my base case.
@Trufflehunt @ZXSpectrum48k
We have two arguments , the state pension fell behind and it’s not a lot vs The triple lock is too generous, unaffordable.
There is truth in the former argument, the pension fell behind and in the long run the triple lock is unsustainable and must stop.
Shouldn’t we define the state pension as a proportion of the median wage ?
When we reach that stage I’d suggest an earnings link.
“Not entirely its fault of course, with a global pandemic in the mix.”
Too soft – the problem wasn’t the pandemic but the reckless lame-brained response of the government (and most governments) to it.
Boris’s instincts were largely sound but he lacked the backbone to impose them. Flabby-faced coward.
@TLI (#18):
And some of the press seem to think Andrew Bailey is too pessimistic!
On the effects of populism on a country’s economic performance (spoiler – it’s bad, long lasting and worse for right wing populist governments, manifesting in new barriers to trade etc) Joachim Klement’s covering this today at:
https://klementoninvesting.substack.com/p/the-economic-impact-of-populists