John Boxall, who is a regular commentator on this blog, asked yesterday in response to my video on the risk of bank collapse as a result of the uninsurability of assets:
Richard, in addition to this issue you have also pointed out the likely impact of a falling population on the Stock Exchange. Now given that some of (allegedly) the nation's greatest minds have missed this – or been so scared they just freeze or ignore it – what else is out there?
That is a good question, because it highlights two important things.
The first is that the issues that threaten the very stability of the financial system are not obscure. They are not hidden. They are not difficult to see. They are in plain sight.
The second is that these issues are systematically ignored by those who should be addressing them: the politicians who regulate markets, the economists who claim to interpret them, and the financiers who profit from them. Ignorance is not the problem here. Denial is.
So, what else is being ignored, to answer John's question? The answer is, quite a lot in addition to the two issues already noted.
The first is regulation. The banking crisis of 2008 revealed how badly flawed our system of financial supervision was. That crisis was, of course, the inevitable result of three decades of neoliberal policy which deliberately dismantled the capacity of regulators to act in the public interest. “Light touch” became the mantra, as if financial markets could be trusted to manage themselves. What followed was the capture of regulators by those they were meant to oversee. The City of London effectively wrote its own rulebook. Auditors were reduced to box-ticking. Rating agencies took fees from the companies they rated. And governments looked the other way. The result was a financial system that actively encouraged fraud, speculation, and systemic risk. The absence of robust regulation was not a technical failing: it was a political choice.
And that choice is still being made every day. Rachel Reeves is at this moment trying to dismantle regulation in the City of London, claiming this is a pathway to growth. The same is happening in the States. The risks from light-touch regulation are returning in force.
Second, there is the rise of authoritarianism, which we might as well call what it is: it is fascism. It is no longer lurking on the fringes. It is shaping governments, not only in obvious places like Hungary or Trump's United States, but also here in the UK. And fascism corrodes the foundations of markets. It attacks independent courts, undermines regulators, silences dissent, and treats transparency as an enemy. Finance depends on trust, and trust depends on institutions that are seen to act fairly. Undermine those institutions and you undermine markets themselves. This is happening in plain sight, most especially in the USA, but we always follow what happens there.
Third comes artificial intelligence. It is being sold as the technology that will deliver productivity miracles. In practice, it risks concentrating economic power in the hands of a handful of companies, at most, whilst potentially stripping millions of people of their jobs and livelihoods. Demand could be hollowed out unless action is taken. Inequality will almost certainly rise, given current political indifference to the issue. And because AI also has the capacity to manipulate opinion, distort markets, and launch attacks on financial infrastructure, it could potentially destabilise confidence overnight, and it is confidence that keeps the financial system afloat.
Fourth, climate change and the failing biodiversity of our planet pose another layer of risk. The fact that homes in flood zones or fire-prone regions are becoming uninsurable is just the first crack in the dam (if you will excuse the metaphor). Behind it lies a cascade of threats. Food systems are already under pressure from droughts and floods. Energy transitions are being endlessly delayed by political cowardice and outright attacks from far-right politicians who are claiming they are not needed, and who are spreading falsehoods about them. Supply chains are already brittle and could easily disrupted by climate shocks. A financial system built on the assumption of stability is now facing a world defined by climate instability, and so far, it is doing almost nothing to address the issue.
Fifth, and to reiterate a point implicit in John's question, demography is shifting in ways that markets are ill-equipped to handle. Populations in many developed countries are ageing. Working-age populations are shrinking, and this has profound consequences. Slower growth, lower profits, and collapsing asset prices are all possible outcomes. Pension systems, already precarious, face existential threats as fewer workers support more retirees. Housing markets built on the expectation of ever-increasing demand could face reversal. None of this is mysterious. It is arithmetic. But it is rarely discussed honestly, with the resulting need for inward migration to stabilise markets, populations and economies being acknowledged.
Sixth, overlaying all this is the fragmentation of the global order. The age of globalisation appears to be over. We are moving towards a world of deliberately created rival trade blocs backed by tariffs, whilst political tensions are increasing the risks of sanctions. Supply chains are being shortened, not lengthened. Finance is increasingly divided into competing spheres of influence. The dollar still dominates, but its authority is definitely waning, without there being an obvious replacement as a reserve currency in sight. This is not the stable, integrated world that financial capitalism depended on. It is one with instability built in.
And seventh, and finally, there is the problem of inequality. The wealthy have grown richer than ever, but that wealth is not being invested productively. It is being hoarded or channelled into speculative assets that add nothing of value to society. Markets do not thrive on hoards; they thrive on circulation. When wealth is concentrated at the top, demand is squeezed from the majority. Growth falters. Confidence fails. Economies do not collapse from scarcity as a result: they do instead fail because of the refusal of the wealthy to share the abundance they enjoy.
So, what else is out there? In summary:
- Banks might collapse because of the uninsurability of assets, which is where this narrative began.
- Regulation that has been gutted.
- Authoritarianism is undermining trust.
- AI looks as if it might destabilise demand and confidence.
- Climate change is turning stability into instability.
- Demographic change is making it clear that endless growth is impossible.
- Geopolitics is fragmenting what once seemed seamless.
- Inequality is strangling the opportunity for wealth to circulate.
Every one of these risks is in plain sight. None is obscure. They are all knowable. And yet the “great minds” of our age, whether in government, in economics, or in finance, are remaining silent. Why is that? Might it be because their careers, their wealth, and their reputations depend upon that silence? It is not ignorance that drives this. It is complicity. Or, to put it the way Upton Sinclair did:
It is difficult to get a man to understand something, when his salary depends on his not understanding it.
In 2008, the financial system blew up, and governments scrambled to patch it together. They then pretended that normality had returned, but it never has.
This time, the risks are greater for all the reasons noted above, and they are colliding. We cannot return to “normal” because whatever normal was it no longer exists.
The only way forward is clear:
- We must reform banks to build in resilience
- We must rebuild regulation.
- We must confront authoritarianism.
- We must tame AI and direct it towards human needs, not corporate monopolies.
- We must invest in resilience against climate shocks.
- We must face up to demographic realities.
- We must embrace cooperation, not fragmentation.
- We must use regulation and tax to redistribute wealth to ensure it can be used by those who need it.
Above all, we must embrace a politics of care – because pretending that these risks do not exist is no longer just cowardice; it is to collude in collapse.
Taking further action
If you want to write a letter to your MP on the issues raised in this blog post, there is a ChatGPT prompt to assist you in doing so, with full instructions, here.
One word of warning, though: please ensure you have the correct MP. ChatGPT can get it wrong.
Comments
When commenting, please take note of this blog's comment policy, which is available here. Contravening this policy will result in comments being deleted before or after initial publication at the editor's sole discretion and without explanation being required or offered.
Thanks for reading this post.
You can share this post on social media of your choice by clicking these icons:
There are links to this blog's glossary in the above post that explain technical terms used in it. Follow them for more explanations.
You can subscribe to this blog's daily email here.
And if you would like to support this blog you can, here:
Buy me a coffee!
Richard
Thank you
Its worse than I thought…………….
Quite a ‘to do’ list. One only action from the state can tackle effectively. That’s going to require a rebalancing of power back to the public sector.
Isn’t the as yet unspoken aspect of ‘rebalancing of power back to the public sector’, in fact, the nationalisation, or at least mutualisation, of banks and indeed other aspects of the financial system ?
Many scientists believe not only that climate-ecological breakdown will impact growth, but that we must start mitigating total breakdown urgently through ‘degrowth’. How can private banks be viable at all in an environment of sustained negative economic growth ?
This is one of the key things I’m wondering about.
If most money is created as debt, then there must be growth in the money supply to pay the interest on that debt (correct me if I’m wrong – I’m an engineer not an economist).
So the current system assumes infinite growth. If there is no growth then the system fails. One result of this seems to be the requirement to get immigration into this country at all costs to boost the population to increase GDP as the per-capita GDP is falling.
Assuming infinite growth seems like a risky strategy on a finite world. It worked for a couple of hundred years but there is no reason to expect it to continue for ever, particularly with a falling population, the impacts of the transition to net zero and the impacts of climate change.
I’m not sure what a system without interest payments on debt would look like. Maybe there was a good reason this was banned in historical times when there wasn’t much growth.
Sorry – but not true.
Money is created by loans – the BoE to the government; a commercial bank to a custonmer.
But interest is a transfer payment out of income – so it transfers the ownership of money, and does not require its creation – except by the government, which pays nothing out of income.
Interest is a rent extraction.
Stop using Chat GPT for Christ’s sake.
You flirt with the Devil and he owns you.
What would you like me to do? Use a quill?
And what do you think I am using Chat GPT for?
ChatGPPT Hell is now full of Heavenly ideas about the work of the Almighty Money Creator who doth create money by the power of the word of government.
In the beginning was the sovereign government, and it said, “Fiat argentum!”
And there was was money. And without taxes, was money made, and the Treasury wist not whence it came. And Satan was greatly vexed, and did wax wrathful, even unto many OBR forecasts, and Morgan Macsweeney was sore afraid and did tremble for he wist his doom approached, when he would be cast into the outer darkness of GB News.
Keep programming ChatGPT with truth, Richard. It needs you.
🙂
Leaving aside those whose main hope is that they will be dead before all this kicks off, and so just want a temporary haven (the White House) to enjoy their temporary wealth…
and leaving aside the swivel-eyed-ketamine-deluded billionaire tech loons who think that extra-terrestrial colonisation, wonderdrugs, cyborg surgery, virtual reality and cryogenics offer them material immortality somewhere else, whether on Mars or in The Matrix (Red Pill anyone?)…
leaving them aside,
and just considering the significant and very powerful minority of the wealthy middle aged or younger elites, say, the top 10% of the wealthy, & their families, whom we shall assume to be sane and of at least moderate intelligence…
what is the future THEY are putting their hope in for generational survival?
– for the world of finance?
– for food and biosecurity?
– for the planet?
– for the servicing of their unavoidable material needs regarding food, health, transport and security?
– for the avoidance of global conflict?
Hollywood provides many dystopian possibilities, Judge Dredd, Mad Max, Waterworld, etc. but what does our average rich 10%er think lies ahead, if they continue to ski downhill, clutching their wealth portfolios with their eyes tight shut?
What are THEY hoping for?
Do they even think about such things? I do.
Or have they already taken their Red Pill?
As an older person with religious faith, I am constantly having to rebuke myself for taking refuge in the two red pills available to me – “I’ll be dead before it gets really bad” – and – “Oh well, God will sort it all out one day”.
I hope I’ve avoided both those wicked excuses, but what do the wealthy top 10% think, (Musk and King Trump excluded)?
I don’t meet many of these people down here in S Bristol, so can anyone help me out?
According to a Guardian article last week the Super rich are investing in luxurious mobile homes worth £2million. Go Figure. They are perhaps as afraid of Climate change as the rest of us, but have not cottoned on to the idea that investment in their community might make them safer.
Hmm
Mobile homes usually need fuel – diesel.
Perhaps they should buy a filling station or tanker too to keep it mobile; and a refinery + oil well….
Richard’s list of what’s going wrong could be combined with and/or supplemented by the existence of a global network intent on replacing sovereign countries by a post -democratic regime of sovereign corporations. Its being done in plain sight by the Peter Theil – linked tech Bros – the Amazons , the Metas, the X’s etc.. The ability of sovereign countries to tax or to have an effective public law is being eroded from within by freeports, special zones run by corporations.
It doesn’t look good and Richard’s ‘to do’ list makes daunting reading.
I just hope that the last 14 years in the UK of eroding the public realm has reached its limit – so that doctors, nurses ,teachers will stand and resist further erosion of their incomes/conditions and that resistance will spread.
Don’t forget Michael Lewis’ ” fifth risk”- the undermining of the state’s capacity to cope with a threat because the public servants who would have dealt with that threat have been underfunded or sacked. This is clearly happening now in the US.
So far this month, Richard, 8 clients have decided to either “pensionize” their personal pensions by either taking the 25% tax free lump sum and buying an annuity or by taking just the lump sum and deferring a further set of decisions. That’s another £3.75m gone from ‘capital markets’. Permanently.
I’m one of the 8. I have decided to finally clear my mortgage, which is a common factor driving this choice (and hysteria in certain media about the Budget) as is, interestingly, gifting to the kids.
Fascinating…
Just a small observation on the mortgage markets verses insurance.
My friend is visiting Texas just now.
Local car finance company has gone into liquidation, causeappears to be
Sub Prime lending, the recovered vehicles are not selling in the depressed car market.
As you have pointed out reclaimed houses to cover non payment might just have the same problem.
When will they learn?
It seems they won’t.
I hate to say ‘I told you so’. But I did.
It’s a very difficult scenario to watch unfold! . Our overseas investments have paid dividends. Banks , investment s and yet we have raped since the 1800’s all we could and some time before!
My personal belief is that we acknowledge a lot more of our ways and we come together as one.
Lose the free market and enjoy harmony whilst respecting the environment.
We are a million miles from that and it seems we are parasitic.
I’m not sure how that changes before it becomes a divine garden for those that can afford.?
I think the given thumb is that we will be exploited.
Unless we take the environment and it’s longevity more seriously.
Personally I don’t care for musk and Mars. Let him be!
The only game in town in UK seems to be immigration. We are only seeing the tip of a great iceberg which is the exodus of whole populations from overheated and flooded lands. I think you touched on this with climate change. This tide of suffering humanity cannot be held back and there are no solutions except slowing down climate change across the whole planet.
We, in the West are in denial and pretending it will all be ok. We don’t know that.
Agreed
England at present is suffering a significant water shortage. The short-term assumption is that rain over the winter will solve the problem. What if there is no rain?