Welcome back to Garys Economics.

Today

we are going to cover everything

you've missed on the economy.

Okay.

So to do this video,

I went back and had a look at my video from last year,

bringing you up to speed with the economy.

And

that video last year,

I was saying that inflation

would come back to pretty much target.

Interest rates would start to fall.

We would see an enormous increase in stock prices,

an enormous increase in the gold price,

and we would see house prices start to go

as interest rates started to fall.

But despite all of that,

we would continue to see living standards and poverty

continue to decline.

And this is basically everything we've

seen in the last year.

I also said that Labour would win the election,

probably by a decent margin, because the Conservatives

were failing on the economy and were super unpopular,

but that Labour would very quickly become unpopular

on coming into power.

So if you've been keeping up to speed of what

we've been doing,

you won't be p***ed off that I was away for six months

because you already knew

exactly what was going to happen.

So what are we going to cover now?

Okay, so this year we're going to cover

a few of the things which happened while I was away,

which I've not been able to talk about yet.

And their economic impact.

In particular, Labour’s

budget in the autumn and the Trump election.

We're going to talk about how this year

and the coming year will be different from last year.

We're going to talk about,

a little bit

about what's going to happen in the economy

and what's going to happen in financial markets.

So I want to start with how this year is different

from last year,

because when I went and watched last year video,

I was quite struck by basically how much was the same.

So I had to look at financial markets

before I shot this video and basically

everything is at an all time high.

Most major stock markets are at or near

their all time highs in terms of price.

The gold price is at or near its all time high.

House prices are shooting up to new all time highs.

We're starting to see them start to really go.

And, it's kind of deja vu all over again.

So it's quite shocking, I think.

I think that really underlines

basically how aggressive these increases in asset

prices have been.

And I think it's important to talk about that

because I think what we see on the news

and what most of us understand about the economy,

is that living standards

have really failed to recover,

and they continue to slide,

and that gives the impression of a very weak economy.

And I do think we have a very weak economy.

But what is often not spoken about

is this fact that if you're looking at the economy

from the perspective of the asset holders,

which is basically from the perspective of the rich,

things are really, really, really, really good.

Everything is at massive all time highs.

So you're going to see the rich people

seeing continued increase in their wealth.

They're basically doing the best they've ever done.

And I think this basically kind of underlines

the point

which I've been making for a long time,

which is this is not an economic crisis for everyone.

This is an economic crisis for you.

While the rich do really...

While the rich do really well,

which I think kind of underlines

that this is a crisis of inequality.

But I think what is probably most interesting

that is

different about the economy now compared to last year,

is I did my video last year,

inflation was still just above 4% in this country,

and there was still this kind of perception

that we were living in a very weak economy

because we were still in the kind of economic

aftermath of Covid,

and there was still this kind of perception

that, well,

we're screwed at the moment

because Covid was really bad

because of the Russia-Ukraine war,

but we're going to come through

that and things to be better.

And yet here we are

a year later and we’ve started to see

pretty much everything normalise.

Inflation is pretty much back down to around target

in most countries.

Commodity prices,

which went up in the war in Ukraine,

most of those are back down to the same levels

they were before the war in Ukraine.

Interest rates are starting to come back down again.

Unemployment is at normal levels.

GDP is back higher than it was before Covid.

And yet,

despite the fact that everything

has kind of normalised,

living standards for ordinary people

are still significantly worse.

There's two things about this.

The first one is that

I think this firstly underlines

that the thing I've been saying for a long time,

which is what we are seeing economically,

the reason for the fall in living conditions

is not

about

supply chain problems during Covid,

or about the aftermath of the Ukraine war.

What we are seeing

is a permanent decrease in living standards

because we had a permanent increase in inequality.

I think the first thing is

it's becoming harder

to spin what you are seeing as temporary,

because it's becoming more increasingly permanent.

The second thing about that

is it creates

this kind of interesting situation in politics,

which is

basically every country that

had an election,

the political party

that was in power significantly lost their election.

They got basically smashed.

And this is because people are seeing, well,

the economy is permanently

broken and people want change.

And yet no political party

has really sort of got a pitch.

So as the center has failed

and there's been a loss of faith,

a loss of faith in this idea

that what's happening is temporary.

An increasing demand in you need to fix it.

You need to change what's happening.

The center has collapsed

and you're seeing basically

a complete political reformation.

What you have is

political parties

need to change their messaging on the economy.

They need to say,

we're going to do something dramatically different,

and you're starting to see

those new kind of messages take shape.

So I think when you talk about the

US election,

you can kind of see, and also the UK election really,

you can kind of see what the new message is

from the right of politics,

which is the problem is migration,

the problem is foreigners.

And if you want to fix the problem,

we need to be tough on migration.

We need to be tough on foreigners.

You can see that in Trump's rhetoric.

You can see that in Nigel Farage’s rhetoric over here.

You can see that in basically

all of the politics of Europe.

That is basically a new message being put together.

And that is a smart message.

And the...

That is a message

which has been very popular throughout history.

You know, we saw this in the early 20th century

from the political right.

The reason that is smart is because when these

anti-immigration, anti-foreigner

political parties get into power

and they increasingly will get into power,

we’re seeing it across Europe,

we're seeing in the States

as these guys get into power,

they will fail to fix the economy.

And the reason they will fail to fix

the economy is because they are not dealing

with the fundamental problem,

which is growing wealth inequality.

But you've kind of got your excuse already built in,

which is we tried our best

to hit the foreigners, to hit the immigrants.

The left didn't let us go far enough.

You need to let us go further.

And you know, this is the kind of slide

which we saw in the early 20th century,

which led eventually to people

like Hitler and Mussolini getting into power.

And I want to be clear,

I'm not saying that Trump is Hitler.

I'm not saying that Farage is Hitler,

these guys will win power,

they will fail to fix the economy

and the obvious political move

then, will be to go further right.

And whilst these guys themselves are not Hitler,

the only path

that they will be able to go as they fail,

because they can't deal with inequality,

because they're not dealing with the inequality,

they will simply be forced further

and further right over time,

and you will see more and more

increasingly far right politicians getting into power.

Basically. And that's the new space on the right.

So what's the new space on the left?

And I think that is where we start

talking about the Labour budget and the election.

So Labour won the election,

on an extremely small number of votes.

They actually got,

I think, 5% less votes than they got in 2019

where they got absolutely smashed.

So the actual number of votes went down

and they won simply because of complete collapse

in popularity of the Conservative Party.

So they didn't really need

to have much of an economic message

because they won simply sort of

by default of not being the Conservatives.

And then what did they want to do

when they're in power?

I think if you were to pull

an average man or a woman

to the side in the street and say,

what do you think is Labour’s economic plan?

What do you think is Keir Starmer's economic plan?

I think most people would not know what it was.

I don't think they have a clearly

communicated economic plan.

And if you were to ask me what it was,

it's kind of a just a, let's just be really sensible.

It's kind of a new, sensible-ism,

this kind of belief that if you just do the status quo

hard enough, if you're just

sensible enough, things will get better.

It's pretty weak. It will fail.

And I think it's interesting to look at

what happened in the budget,

which it was a relatively modest budget.

They raised taxes a very small amount.

They raised spending a very small amount.

They raised borrowing by a very small amount.

And yet people weren't happy with it.

And the financial markets

almost refused the budget really.

You saw government borrowing costs go up a little bit.

I think what it shows basically, is that Labour

and the left are basically clinging

to a failed economic orthodoxy.

Increasingly, what is clear is

we live in an economy where more and more

and more is being owned by the rich.

So you are left with basically a choice.

Either you tax the rich more

or you just accept that you are poor now.

And the government is sort of

trying to tow this middle ground.

We're going to borrow a bit more.

We're going to spend a bit more,

it's not going to work.

It's going to fail. And,

we're not going to see economic improvement.

Okay. So what does that mean?

We are still living in an economy

which is dominated by the growth in inequality

that happened over Covid.

We are seeing the consequences,

which you would imagine you would see

if you significantly increased economic inequality,

which is a significant increase

in living standards for the rich

and a significant decrease

in living standards for the rest.

Once you increase inequality...

Well, first thing I would say is

we are not going to see the kind of rapid declines

we saw during Covid unless there is another

economic disaster, because

that rapid speed of

increase in inequality was a one off.

But that leaves us now at a high level of inequality.

And if inequality is higher,

that means ordinary

people are paying more interest to the rich.

The government is paying more interest to the rich.

Ordinary people are paying more rents to the rich,

and the rich are receiving

more interest and more rents.

So high levels of inequality

lead to higher levels

of increasing inequality,

because it leads to high levels of payments

from the poor and from governments to the rich.

So that means we're on basically

a steeper

gradient of permanent decline now,

and you're going to just see this continued

immiseration.

Living standards will continue to fall.

And at the same time,

because the rich getting richer, asset

prices will continue to increase.

I should probably be clearer

in my predictions about asset prices,

because in the past I predicted very, very aggressive

rises in asset prices that have happened.

This time last year,

I had the massive long position on gold,

and I've really cut it back a lot

because of the unbelievable speed of the increase.

Gold prices and stock price have gone up

unbelievably hugely in the last few years.

I think that's justified

because of the massive increase

of the wealth of the richest.

But I couldn't

tell you with confidence

they'll be higher in a year's time

just because when things go up that quickly,

they do tend to come back down a little bit.

The one thing which I think will really go

this year is house prices.

Interest rates have started to fall.

They will probably continue to fall a little bit more.

We'll probably see another sort of 0.75%, 1% come off

Bank of England

and Federal Reserve US

base rates in the next year or so.

Once those interest rates go,

house prices will really start to go.

House prices have been kind of left behind

in this really aggressive asset price rally,

and that is because it's much harder

for rich people to directly buy a ton of housing.

So when rich people make an enormous amount of money

like they did in Covid,

it's super easy to go into financial markets,

buy stocks, buy gold.

And that's why you’ve seen

this massive increase in stock prices and gold prices.

It's much more complicated for a rich person

to go out and buy and manage, you know, 100 properties.

The way that rich people buy properties.

And I think I'll probably do a video on this

at some point, is kind of through the banking system

and through the mortgage system.

They put the money in the bank,

and the banks lend you the money to buy a mortgage.

And because interest rates have been so high,

it has made it difficult, basically for ordinary people

to pass those eligibility checks.

And it's kind of blocking rich people

from buying housing.

What they want to do is lend you money

so you can buy a house,

and they kind of indirectly

own your house through your mortgage,

but because of very high interest rates, they’re

not being able to do that.

As soon as rates come down,

you're really going to start seeing house prices go up.

With regards to interest rates and inflation.

These will both come down.

For a long time

I've had kind of a slightly ambiguous view on this,

which is

because the middle class

is being really smashed and ordinary people's

spending power is being really smashed.

This should have the effect

of really bringing prices down

and bringing inflation down,

which should bring interest rates down.

But it also has this secondary effect

of just really massively increasing poverty,

which then kind of forces

governments to spend a lot more money

because people have like desperate need.

And the government kind of has an obligation

to help the people,

which is why you've seen much higher levels

of spending and government

deficits, sustained high government deficits

and those high government deficits

will tend to end up with the rich

and will tend to push prices up again.

So there's a kind of a balanced view

on whether inflation rates come down.

I think they will.

But how quickly

and how far kind of depends on how much money

governments spend.

I think you're kind of getting

to a point here

where basically

nothing governments do works,

and that is because there's this kind of absurd,

really stubborn unwillingness of governments

on either left or right

to accept that inequality might be the problem.

What you're seeing is kind of

you've got an economy that is dying of cancer

and a political system

that does not believe cancer exists.

So they keep trying to do a lot of sensible

seeming fixes, like more investment.

And, you know,

let's just, you know, be more efficient

and let's try and search for growth.

You can't grow your way out of a cancer.

You know, there's a gaping hole

in the bottom of the ship that needs to be fixed.

Neither right nor left has any real understanding.

So I think the only hope we have

if we want to prevent more economic worsening

is to really force this idea

into the political mainstream,

that inequality is the problem.

Until then,

we will see continued economic worsening

and that will be combined

with continuing rises in asset prices,

which means the rich get richer and richer.

It's another very pessimistic economic picture,

but the only chance we have to prevent

this is to really drive

inequality as the cause of the economic worsening

into the public narrative,

into the public consciousness,

and into the minds of the politicians.

Labour are going to fail on the economy,

and they'll be very unpopular in 2 or 3 years.

The only thing I can do, and I would hope

for any of your support,

is try and make this channel big enough

that in 3 or 4 years time,

when the next elections coming around

and Labour are in desperate need of a rebrand,

that we are the best alternative,

that's a big ambition, but I

think it's our only chance.

Inequality is worsening. It will keep getting worse.

The economy will keep getting worse.

We can fix it.

We can reduce inequality.

It's about taxing you less and taxing the rich more.

We will be campaigning for it all year long.

As long as I can keep it up.

And we're grateful for your support. Thank you.