Money Magpie’s reality cheque for the City

[Jasmine Birtles of Money Magpie fame is a close friend of Fortune & Freedom. Recently, she was invited to give a speech in the City. And let’s just say she didn’t pull any punches when she got there. She kindly allowed us to reprint her transcript here…]

… Or is it?

Well done for getting here so bright and early. Some say it’s unfair to set a keynote talk at 9 o’clock in the morning because it disrupts delegates’ sleep patterns… but it’s not true – I find people manage to sleep through my talks just fine.

It’s great to be part of your 20th anniversary celebrations… 20 years eh? Some of you don’t look old enough to remember 2003… but a few of you might remember that in 2003 we were still reeling from 9/11, expecting another terrorist attack at any time, having our nail clippers taken off us at the airport… nail clippers for goodness’ sake… frankly anyone who can hijack a plane with a pair of nail clippers probably deserves a movie script it.

Also in 2003 a 6.4 Mw earthquake killed 177 people in Turkey, JK Rowling was the darling of the media, and Britain and the US invaded Iraq because our leaders told us that Saddam Hussein had “Weapons of Mass Destruction”. That turned out well, didn’t it?

We thought things were tough then, we were afraid, somewhat put off travelling and wondering what would happen to our money next.

We thought the world was dark then. Ha, we didn’t know we were born! Since then, we had the 2008 Financial Crash and years of recession followed by three years of lockdowns, doom-laden headlines, being told we couldn’t breathe for fear of killing granny, killing granny in care homes, destroying small businesses and blighting the lives of children. And it looks like we will be dealing with the fall-out from those Covid years for a decade or more to come.

Looking at the situation of the world and the state of its economy right now, there’s so much to talk about it’s hard to know how to fit it all into 30 minutes. I could talk to you about stock market statistics, the bond market, inflation, interest rates, the digital economy, lockdowns, recessions, Ukraine and net zero just for starters.

But let’s be honest, you already know a lot about all of these subjects. I am fully aware that I’m speaking to room full of some of the top minds in the industry. You spend your days studying charts, commentaries and reports on all aspects of finance and economics. And I’m guessing you’ve read the main points of the FT, the Economist and Bloomberg, before you’ve had your first cup of coffee.

You know what’s going on… but is that the full picture?

Are we really getting genuine, on-the-ground information from the media we read and watch? Or are there huge swathes of facts and figures that don’t fit in to the established narrative – that we’re not seeing at all?

I’ve been a journalist for over 20 years and, up until three years ago, I thought I had my finger on the pulse. But then, in 2020, everything changed and over the next three years I saw a side of public life and mainstream media that I hadn’t seen before, and it’s opened my eyes to a whole lot of other things going on. It has made me question everything, and it has made me listen to voices that before I pretty much brushed aside.

I have a weekly column in the Daily Mail (yes, I know, don’t hate me), I have a monthly column in a women’s magazine and I run the national personal finance website MoneyMagpie.com. I’m also on daytime TV and night-time TV programmes and because of all this I get emails every day from readers and viewers asking me questions or making comments about the economy… or about me sometimes.

And one thing that is becoming clearer and clearer to me is that these people’s lived experience is generally nothing like what the charts and the stats and the reports are telling us. In fact it’s often quite different from what is being modelled… to a point where I’m seeing mounting frustration and anger among ordinary people about the disconnect between what the “establishment” (and that includes you and me) is telling them and what they’re actually experiencing in their day to day life.

I’m talking about your ultimate clients, your end-users, the people who need your products… they are increasingly distrustful of what anyone in government, the financial establishment or the mainstream media are saying… because it really isn’t matching up with their lived experience.

Let’s start with inflation.

As we know, from reading the newspapers and listening to what our central bankers have to say, inflation has been high, but that was just a reaction to coming out of lockdown, supply chain problems, and the effects of the Ukraine war. But now inflation is starting to come down and we should be back to normal in the UK, in Europe and in America fairly shortly, maybe by next year.

Or is it?

Talk to anyone here in the UK, or in the States, or in pretty much any European country and you’ll hear a different story. One viewer who heard me on TV recently saying that inflation is coming down emailed me saying “inflation’s not going down… I’m in Starbucks and the prices have just gone up again. Tomatoes are double their usual price in the supermarket and the train fares are going up again in March. No way is inflation coming down.”

Another one said, “I don’t believe the inflation figures – it’s like China… the rates are always announced to lower than what I can clearly see in the shops.” I’m sure you could add your own examples to his list of things going up in your area too.

It doesn’t help the general trust that the population has in the financial sector that our central bankers keep getting it wrong too. Here in the UK, for example, back in 2021, first of all we were told there would be no inflation… then we were told that yes there is inflation but it’s just a blip, a short-term thing and it’ll come down soon… then we were told yes it’s a bit more of a problem than we thought but it’s coming down… and each time the opposite has happened.

Personally, I think we will see inflation going up again. In the US, inflation data is still declining, but the stats are starting to surprise economists by coming in higher than expected. Recent German, Spanish and French inflation data is showing an outright rise in inflation. Food prices are of particular concern. Again, I’m hearing on the ground that food is more expensive in France and Italy and even America than it is in the UK – and that’s post-Brexit. That wasn’t supposed to happen.

What isn’t talked about – deliberately I think – is the fact that the hidden force behind inflation is quantitative easing. All the major central banks have been over-printing since 2008, but the last three years has been on steroids. In America, 40% of all dollars produced by the Fed were printed in the last two and a half years. Now that is inflation.

I think that inflation here in the UK, and probably in Europe and certainly in America will go back up and remain stubbornly high because our central banks are addicted to printing money. It’s not about supply chains, Ukraine or cold winters it’s about money printing, whatever the head of the Bank of England (who doesn’t understand economics) says – last year he said that inflation was nothing to do with printing money – yes it is!

The fact that central banks are needing to be bailed-out (as we had in the UK last year and it looks like it’s coming up in Europe now thanks to the European banks’ addiction to printing money) all makes it look like central bankers don’t know what they’re doing.

European central banks are going to need the, already hard-pressed, taxpayer, to bail them out after a wild decade of QE – particularly the last three years. How much do you think taxpayers around the West are going to put up with this, particularly as they struggle with the rising cost of living? How long before they say “enough is enough”? I think we’re closer to it than governments and media realise.

Now for you, high inflation and high interest rates are a bit of a bonus of course, so you’ll probably be hoping that I’m right on this one. However, my viewers and readers won’t be, particularly as they see their taxes rising at the same time and their nest-eggs shrinking. Not to mention the fact that inflation makes the governments’ loans cheaper so there’s a general suspicion among the more sophisticated investors that governments won’t really want to fix it.

Liz Truss was roundly criticized, and the Bond market nearly broke, when she went for a high-growth, low-taxation plan last year. But Jeremy Hunt’s plan to tax us till we squeal is already adding more worries and uncertainty to hard-pressed consumers.

They’re looking at savings rates and seeing that they can’t get anything better than 4% – and that’s if they tie their money up for years – and those that are savvy see that even this best savings rate is miles below inflation – even the pretend inflation figures we’re being fed.

My inbox tends to be at least half full of emails from people on a fixed income – retirees – who are also concerned about the government moving the goal posts on what they have to pay tax on, and about how their investments are performing (mostly bad recently) and where they can invest to get a regular, safe income. There is a sense from everyone that “the system” is working against them and they’re looking for alternatives.

Now the Fed has announced that it will bring down interest rates. In the UK and Europe we tend to follow the Fed where possible… there are certainly a few on the BoE monetary policy committee who want to bring rates down… markets are pricing in an interest rate peak of 4.6%, so maybe borrowers in the West will be having a happier year this year than last.

Or will they?

I suspect that interest rates will stay high for a good while longer. Rates have now broken a 5,000-year down trend. The trend of lower rates that goes back to the 80s broke in 2020, so what has worked since the 80s – with lower rates, lower inflation – you can’t count on happening any longer. We’ve broken a trend and that’s a big deal.

I don’t think interest rates are going to drop down again for some time – no matter what the economists are saying. And if I’m right, that has implications for the future price behaviour of all financial assets. The benign financial trends that were fostered by a culture of cheap money over the last 40 years can’t carry on in a higher interest rate environment.

For example, let’s look at the bond market.

Of course, last year was a torrid time for government bonds – the worst year for a century. The consensus now, though, is that inflation will revert to its low levels, and that bonds will bounce back. Pretty much all the articles I see in the mainstream press continue to recommend them as a “safe” place for individuals, and institutions, to put their money. The old 60/40 rule for individual investors is still the drum they’re banging. And, of course, institutional investors are pretty much forced to invest in bonds “for the good of their customers”. After all, as we all know, bonds are a safe haven.

Or are they?

UK government bonds had a massive bust last year, as we know. US bonds had their worst year in 230 years. Real inflation rates are much higher than government bond yields and, in my view, people shouldn’t be buying government bonds now, but as I say, it’s still pretty much forced on pension funds. Why is this being allowed? It doesn’t make sense to me.

If we compare where we’re at now with the 1970s and the start of the stagflation years (and that’s where I think we are… just at the start of it)… it’s worth remembering that back then bond investors in 1973 had to wait for 12 years until they saw a positive real return from their investments. How long will today’s investors have to wait… and will they have the patience?

Stagflation would be particularly tough for millennials who have known nothing but low interest, mainly high growth, but are already feeling disaffected as they’ve seen the price of property speed out of their reach.

Bring in 1970s-style stagflation and they will be finding it even harder to have even the rental lifestyle they were enjoying. Already in many parts of the West, we have high employment because many people are doing two or three jobs. We have a growing populace of exhausted workers – what they call the precariat. Stagflation means increasing the precariats, particularly among the young and hopefuls.

Then there’s the stock market

After some serious bloodletting in the stock market last year, particularly for high-growth technology stocks that took a major battering, the consensus now is that growth stocks will grow again. And this year certainly started well for the FTSE which broke through the 8,000 mark so things look on the up for stocks and shares again. It looks like last year was just a blip.

Or was it?

The financial headlines in the mainstream press are definitely bullish, but then they are geared to being perpetually bullish and really can’t cope with a possible change in trend to a bear market.

But for many individual investors, the bullish tone rings rather hollow. In real terms the FTSE has only just beaten its year 2000 high, so adjusted for inflation it’s actually down even now.

But at all the retail conferences people are asking if it’s time to get into Facebook, Netflix and Tesla again. The expectation is that things are quickly going to go back to the way they were when money was cheap. But if you think, as I do, that we’re in a real-world, high-inflation, high-interest-rate environment for a few years to come, then growth stocks are not likely to do really well again for a while. Many of them don’t bear proper investigation right now.

While retail investors have been fixated by the potential rebound of growth stocks, very few have been asking about gold and commodities, which is a surprise to me as it feels to me that we are just at the start of a boom in commodities.

What we are hearing about though is the desperate need to get to net zero and everything is about ESG, ESG, ESG, which I know you’ll be discussing tomorrow.

ESG is THE buzzword in the mainstream press. I’ve written a few articles myself about ESG investing for the Mail on Sunday and for MoneyMagpie… everyone seems to want a piece of it.

… or do they… really? Honestly?

Go into any bar, any dinner party pretty much anywhere now and ask people about ESG, and particularly about net zero, and you’ll get a very mixed response. Some still buy into it but many are rolling their eyes – and not just because of wealthy stop-oil protestors gluing themselves to the M1. It’s also because more and more facts are coming out that question the very foundations of ESG.

In fact, the backlash is gathering pace. As I’m sure you know, there are already some Republican states in America that are actually banning ESG funds. Part of that will be because they’re oil-producing states, but part of it genuinely is a reaction against what is seen as the hypocrisy and falsity that govern this whole movement.

The problem with net zero is the word “net” – you can game it by just buying carbon offsets… that’s why the ordinary consumer doesn’t like to see billionaires flying around on private jets and then just buy carbon offsets to get to “net”. Bill Gates wonders why he’s so unpopular. Well, here’s one reason.

What the billionaire climate zealots fail to notice is that ordinary people see the environment as something more than just the climate. What we see is a lot of pollution that has nothing to with carbon emissions which is not being cleaned up. We have chemicals flowing through all organisms that are not being addressed so you can understand why they’re suspicious climate claims.

Concentrating purely on climate enables the powerful to stop the ordinary person travelling… down the road… while local rivers are polluted by factories – or by train wrecks as in East Palestine in Ohio recently – and no one bats an eyelid about it. This is the hypocrisy that ordinary investors are now noticing.

And it’s not just the E of ESG that’s suspect, The S and the G are equally open to interpretation, misuse and actual reversal in order to get that green tick. It’s all too easy for clever people to game the system.

Also, more and more climate scientists around the world are saying, quite loudly, that we don’t have a climate crisis. Now, they might all be wrong, but it’s worth at least listening to what they have to say. Sadly, mainstream media doesn’t seem to want to do that… apart from a few of the more right-wing outlets… which is yet another reason why more and more viewers are leaving mainstream media and seeking alternative media for their news.

But if it’s true what they say that, for example, there’s no way that there are the resources in this world to make net zero a possibility, that we will run out of rare earths before that happens, that there isn’t enough lithium to create the electric car batteries that are needed to go fully electric, that the world needs a lot more energy produced than the so-called “Green” methods can create at the moment… then we need to re-evaluate what we’re aiming at when looking for genuinely “moral” investments.

Remember, we all laughed at Trump a few years ago, when he said that Europe was mad to be reliant on Russia for its energy, but look at what has happened.

Many so-called “green” energy production methods are pretty questionable anyway. Bio-mass is one that I particularly dislike – it contributes to deforestation and can create serious air pollution. Solar production has replaced food-crops in many parts of the world and even Greta Thunberg has protested against wind power!

Not only that, but I’m hearing from my readers who are a bit more investing-savvy that they want pension and investment companies to concentrate on bringing in good returns first and foremost… that that is their prime, moral duty, they consider, and that hand-wringing about climate or social impact should be secondary.

It’s ironic, isn’t it, that coal, oil and energy stocks were the best-performing companies in 2022 and that it’s largely because of the oil stocks that the FTSE has done so well recently.

The issue of morality in investing is one we could spend a week discussing, of course, but my point is that, because the ESG “rules” are so fraught with contradictions, companies and funds can easily game the rules to make unclean practices look green, oppressive practices look friendly and immoral governance look entirely legal. So managers and investors need to put their end-users’ first and handle the ESG elements second… handling them with great care and frankly scepticism.

So what will save us?

Is it crypto? The digital future?

The digital evangelists say that fintech will bring more democracy to our daily financial transactions and that the blockchain will save us from economic tyranny.

Mind you, if you track the coverage of crypto in the mainstream media you would think that bitcoin etc are pretty much dead and gone, but actually bitcoin is already up 30% this year (after an admittedly horrible 2022) and there are more and more people with crypto wallets in the world. As a measure of success, the fact that there are more and more people actually using the systems says a lot more than what their perceived value currently is. In Australia, for example, 25% of the population has a crypto wallet… and that’s just one country. Venezuela has at least 10% of people actively using crypto for day-to-day transactions – because they have to.

The worldwide use of crypto can be seen as a progressive thing… people adopting a new technology that is cleaner and more convenient. Or, as in the case of Venezuela, it could point to an increasing distrust in sovereign systems with the populace searching around for an alternative that won’t let them down.

The future of money clearly is digital in some form, I think… the question is how and in what actual shape will it take.

The UK government, the USA and European countries are all gung-ho for a new, centralised digital currency or CBDC, taking all the clever aspects of crypto like programmable money, and funnelling it through a central authority to govern it. The advantages of a digital pound, dollar, euro etc are of course ease of use – it should make cross-border transactions quicker – and it would massively cut down on the grey economy as all earnings would be known and monitored by the central bank/government. It’s seen as the obvious and inevitable next step for the way we make transactions.

Or is it?

I don’t know if you’ve noticed but there is a growing number of people in Britain, the USA and in Europe who are insisting on using cash now. The more we are encouraged (pushed) into using digital only, the more people are pushing back, at least they are in the UK. Both the Post Office and Nationwide have reported a big increase in people withdrawing cash from ATMs. These are the people on the ground who are realising that our governments’ desire for CBDCs could be a major threat to their freedoms and to democracy itself.

I’m a fan of crypto but that’s partly because, in its purest form, it’s there to give power back to the people – it’s decentralised. With a centralised digital currency that is essentially controlled by the central bank or government, you have the potential for all kinds of unhelpful control and surveillance, if you happen to have the wrong people in charge – and if you don’t think that could happen look at Putin, look at Xi Jinping… look at Trump. Would you like any of those having control of your earning and spending?

Of course, China already has such a system and people who speak against the government suddenly find themselves unable to get a train ticket, unable to send their kids to a good school, unable to pay for a passport.

If we had a centralised digital currency it would mean that the central authority would be able to tax you at source and, as it would be programmable money, they would potentially be able to tell you what you can and can’t buy – only so much meat, no alcohol, can’t buy a car – and even how long you can have your money for. If the economy suddenly lurches into problems – however unlikely that is – we could suddenly be told that we have to spend all our savings before it is “disappeared”.

And what has spurred on a lot of ordinary people to re-embrace cash and refuse digital where possible is what happened in Canada, a year ago, where Justin Trudeau froze the bank accounts of protesting truckers and anyone supporting them financially. Now you might be against the truckers, you might be a big fan of Trudeau’s… but let’s imaging that those protestors were nurses and that the leader who froze their accounts was Trump. How would you feel then?

I don’t know if Rishi Sunak has it in him to freeze our accounts or if Ursula Von der Leyen is quite that controlling, but once you create the system, all you need is a few petty tyrants to take over and we the people lose our basic freedoms.

So when you are discussing our digital future this afternoon, keep in mind the need to temper our zeal to make full use of the exciting and clever developments in fintech, with the need to protect the human, to defend freedoms and to shield democracy.

And speaking of shielding democracy, one of the big imponderables that the financial sector has to factor into all projections this year and next, is what will happen with the Ukraine war.

All our governments and media are telling us that Russia is on the back foot, that Ukraine is winning and all it takes is “just one more push”, just another few billion pounds, dollars, euros more, just a few more visits from Sean Penn and Angelina Jolie to beat Putin and put him in his place.

… guess what I think?

Well the sanctions we put on Russia that were supposed to bring their economy to its knees haven’t worked… they’ve just harmed us really. The Russian economy’s doing fine actually, apparently inflation there has been going down for the last nine months and the rouble is pretty strong.

If the war does continue – and there seems to be no one on our side with any enthusiasm for a peaceful solution – this is likely to add to our inflation situation, keep interest rates high and also put pressure on Western countries to come up with their own energy solutions… which are unlikely to be green.

Actually support for the Ukraine war across the West is already waning, although you wouldn’t know that from our mainstream media again… including the outlets I work for… and complaints about the fact that money is being promised to Ukraine but can’t be found to help the most vulnerable at home, are getting louder across the West.

Now you might disagree with everything I’ve just said, and I wouldn’t blame you if you did, but do you see the pattern in what I’ve been saying here? There is a disconnect, a widening gap between what the establishment is saying (the government, the media, big corporations, the finance sector) and what the man and woman on the street is experiencing and thinking, and as this disconnect continues, discontent increases and is likely to overturn the current establishment systems… I don’t know how or when but it has to happen once “the many” are sick of being lied to by “the few”.

It’s been going on for some time, but it’s been the last three years when millions of ordinary people really started to question deeply what was going on.

“The Covid years”, as I’m now calling them, showed in living colour the absolute manipulation of the public by only allowing one side, one set of “facts”, to be published and utterly cancelling – and even vilifying – any opposing views.

It’s been almost laughable to see our supposedly free media in the West, simply parroting the establishment views, however obviously false, with a completely straight face.

As more of the counter arguments have been proven true, more and more people are starting to question not only the Covid narrative, but a whole lot of other “facts” we had believed before.

There was a particularly big protest in April 21 – about 100,000 people were there, I know because I was one of them – people of all ages, races, political views and incomes. Surprise, surprise the whole thing had ZERO coverage in the media. That in itself was suspicious and only turned people even more against the mainstream.

Not only did it turn them against the mainstream, but it made them actively seek out alternatives, set up new media outlets, organise and start to set up new political movements, new economic systems, new forms of money and healthcare. All of these movements and organisations are growing right now… they are grassroots movements that are getting stronger and more popular each day… and my message to you, today, is to start noticing them if you haven’t already. Keep an open mind.

Frankly, from what I’m hearing from my audiences, the best way for you to make money off the turbulence and uncertainty that we’re facing is to be contrarian, to listen to the alternative views and take notice. If you listen closely enough, you will hear what people are wanting and be able to create the products to match their needs.

If you’re going to read the New York Times, the FT, the Economist then counter their “news” by reading Glenn Greenwald, signing up to UnHerd.com, DailySceptic.org and even Russell Brand’s feed… really, it’s eye-opening. If you must watch BBC News, Sky News, CNN or any of those mainstreamers, take a look also at Rebel News and, in the UK, at GB News and Talk TV. Heck, watch Tucker Carlson on Fox (can’t believe I’m promoting Fox News but this is how weird the world has become).

Also, follow me – I’m on Twitter, or you can see my site MoneyMagpie.com….

There are seismic changes coming politically and socially across the West… I don’t yet know what they will look like, but they are coming and they’re going to turn our worlds upside down.

But there will certainly be ways for you to profit from them but don’t put yourself in a position where you’re going to be taken by surprise, as I was with Brexit and Trump. Get to know this movement and what is fuelling it.

Because this is a great opportunity for you guys – there are individuals all over the world who are looking desperately around themselves for products that will give them a solid, liveable income, that will protect their livelihoods… they are beginning to realise that the stock market won’t do it, the bond market is just a nonsense, but they still need stability and comfort… potentially structured retail products can do that.

It’s not too late for us all to turn all this around. If enough, credible people step up to the plate, break out of the mould and speak up based on facts, statistics and the real people who are in the majority, then credibility, respect and integrity can be restored.

[If you enjoyed Jasmine Birtles speech, you can sign up to her fortnightly newsletter here.]

Jasmine Birtles
Founder and Director, Money Magpie

PS Editor’s note: Here at Fortune & Freedom, you’ll have noticed we’ve been putting net zero under the microscope of late. In the next week or so, we’ll be exploring the topic of energy further – as well as getting some fresh perspectives on the future of the energy market and the potential for investors, including from our resident alternative energy expert, James Allen. Keep an eye out for that and more…