Prediction 2 – The World's Biggest Ever Financial Crisis Occurs
Well, again wrong, but looking at the arguments used as the basis of the prediction, it can be seen why. As I said last year, these predictions are not really predictions at all, but descriptions of existing material conditions, and the processes that flow from the development of them. The arguments themselves remain valid. As with Prediction 1, it is the fact that governments imposed further lockouts and lockdowns that modified the process. Towards the end of last year, when I was writing the predictions for this year, there had been a period when the initial lockdowns were being relaxed, replaced with tiers and so on. From July, economies, even with these restrictions, began to open up strongly, with labour shortages appearing, and inflation already starting to rise. Government bond yields also started to rise sharply.
Then, as that began to create the conditions, described in the prediction, in which that could lead to asset prices crashing, governments again were put under pressure to reintroduce lockdowns over Christmas. The basis of those demands, then, as now, was rising numbers of infections. At a time prior to vaccinations, there was at least some logic to such demands, though, the real logic should have been to introduce focused protection, not blanket lockdowns. The logic should have been to protect the elderly and otherwise vulnerable, not close down large sections of the economy once more. In doing so, of course, the process that was leading to higher wages and interest rates, which would cause asset prices to crash, was halted.
But, again, the potential for such restrictions to continue was limited. After a year of the virus being at large, even with its spread being restrained by the implementation of lockdowns, there had inevitably arisen a sizeable degree of natural herd immunity, due to large numbers of asymptomatic infections. That even before vaccinations began to be rolled out. Then, as now, the increase in COVID related deaths being shouted about by the media was, in reality, simply the normal increase in deaths of older and more vulnerable people that occurs every Winter. Once, that seasonal variation was over, it was inevitable that deaths would fall again, as, indeed, they did. With vaccines being rolled out that made it even harder to justify further restrictions, as not only deaths, but also hospitalisations, fell to a fraction of what they had been in the early days of the pandemic.
As demands for a continuation and intensification of restrictions continued, however, the new justification in the Summer and Autumn of 2021 became the spread of the Delta variant. In fact, Delta never took off as a justification for further restrictions in the way the first variants had. It tended to be concentrated in particular geographic areas, and, in Britain, where widespread vaccination now added to the effects of natural immunity, it became obvious that, not only had hospitalisation levels fallen massively, but also those being hospitalised, and those dying, were almost exclusively, now, those that had refused to get jabbed.
The logical basis for continued restrictions had been removed, because society was now essentially being held to ransom by a small minority of the population that refused to get jabbed, and so who became the only ones really at risk from the virus, a risk that was being used, again, as the excuse to impose restrictions on economic activity and workers' liberty. The potential to continue justifying those restrictions, was now becoming increasingly unsustainable, but it was enough to slow the rampant economic growth that leapt forward in the Summer as soon as restrictions were relaxed.
The anticipated crash did not occur, because, once again, the rampant economic growth of the economy was artificially constrained by lockdowns. But, just as the use of QE to devalue currencies, and inflate asset prices, created its own set of contradictions that would inevitably explode in a financial crisis, such as 2008, so the use of physical restraint on economies via lockdowns creates its own additional contradictions that are now added to those created by repeated liquidity injections and the repeated inflation of asset price bubbles. But, each time such methods are used to defer the inevitable crash, the more those contradictions are heightened further, and the narrower the base upon which the house of cards rests. The worst financial crash in history has not been averted, but merely deferred, again.
Once bitten, twice shy, and so, as approaching Christmas, with yet another variant now being used as justification for further physical constraint upon the economy with the wall of propaganda reaching screaming pitch from all sides of the state apparatus, and with an almost wartime level of Bonapartism being utilised to close down any dissenting voices to the creation of a Covid paranoia, it would be brave to make the same call again for the coming year. Almost any level of duplicity seems possible in the claims being made about the threat posed by the Omicron variant, even as the facts show, not only that it is a much milder strain than its predecessors, but that the level of hospitalisations and deaths from it, even amongst the unvaccinated, are very low.
Yet, the additional contradictions are already to be seen, as the levels of inflation across the globe begin to soar in a way that means they could easily spiral out of control. So, far, we are only at the start of that process, yet, inflation even on the basis of the fiddled official figures has gone from sub 1% to over 6%, in a matter of months, and continues to move higher as each month goes by, with much more in the pipeline for coming months, and that is before the second round effects from rising wages, and higher inputs costs begin to feed through. With or without the constraining effect on the economy of lockdowns, central banks have now had to start curtailing QE, and even raising their policy rates.
Governments are being pressed to tighten constraints on the economy even further, and even the depressing effect of the level of paranoia and moral panic will inevitably again restrict some aspects of consumer spending. But, increasingly, people can see that all of the catastrophic predictions of the last two years failed to materialise, and the current level of hysteria from the media is completely out of alignment with the reality that people witness with their own eyes. The media cannot focus on the relevant facts, because those facts, in terms of hospitalisations and deaths contradict their catastrophist narrative, which is another reason they focus on their tittle-tattle stories about Christmas parties and so on. The same was true in relation to their coverage of the loss of the Shropshire North election, and complete avoidance of the real political issues such as the effects of Brexit etc.
On a balance of probability, I would say that the chance of Omicron being capable of sustaining the argument for further restrictions is slight. Not only are hospitalisations from it very low, but the proportion of hospitalisations for all strains are already falling amongst the vulnerable, as vaccinations continue to be rolled out. Unfortunately, all of the scientists that jumped on the bandwagon of catastrophism, by design or fear of being separated from the crowd, will have discredited themselves, and, thereby, given fuel to all of the cranks that want to deny things like climate change, the anti-vaxxers and so on.
When all of the claims about impending doom from COVID vaporise in the new year, the underlying growth in the economy will assert itself even more vigorously. The Bank of England is likely to have to raise its policy rates in quick succession, in coming months, as well as engaging in quantitative tightening. The Fed is also likely to have to speed up QT, and its forecast three rate rises, will be brought forward. Unless, of course, some new excuse for physically restraining the growth of economies can be found.
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