In today’s issue:

  • Austerity is back with a penance
  • How to pay off the national debt 18th century style
  • Prepare for the Moonstock Bubble

Who had austerity on their bingo card for 2024? Labour promised voters spending without tax hikes. Instead they’re cutting spending and raising taxes.

It’s time to ask what you can do for your government, not what your government can do for you. Unless you’re one of the subsidised few working in shallow waters somewhere off the coast of Scotland, of course.

But I guess they’ve got a big black hole to fill…

And how else are they going to fill it?

Austerity is one way. Although I think the country is too far gone for it to work.

The debt is too large relative to GDP.

Government spending is too much of that GDP.

And taxes are so high that they “don’t redistribute wealth; they redistribute people,” as Daniel Hannan said… in 2013.

Luckily, there are two more options for paying back impossible government debt loads…

Why tax when you can print money?

The second option is the strategy pursued by the Bank of England in 2021. The Bank engineered a large burst of inflation while keeping interest rates absurdly low.

This helped devalue the national debt in two ways. First by inflating away its value. The government may still owe £2.7 trillion in debt. But inflation cut the true burden of that debt by more than 20% in three years.

Of course the Bank of England claims to have no knowledge of its own plans. It even denies causing the inflation in the first place with its massive pandemic money printing programs.

The failure to raise rates until it was too late? That was just a whoopsie. Never mind how much the government benefitted financially from the Bank’s policy “error” by keeping the Treasury’s interest bill under control. That was just a coincidence.

Then again… we’ve found the document that is exposing the method to the Bank of England’s inflationary madness. It turns out that overindebted governments have used the combination of inflation and repressed interest rates to escape from dangerous debt levels many times in the past. It’s practically a tradition in the UK.

And they’re doing it again now. Are you ready for another wave of inflation and pitiful returns?

Back when I first exposed the Bank of England’s plan to inflate away the government’s debt, people thought I was mad. The idea that the inflationary crisis of 2022 was part of a deliberate policy playbook seemed like a conspiracy theory.

But, these days, it is gaining ever more attention.

Not that anyone else is predicting round two is imminent.

I first warned that governments would turn to inflation in 2020. Back then, inflation was the last thing on anyone’s mind.

Conveniently for The Fleet Street Letter readers of 2020, I don’t mind being laughed at. Heck, I used to perform a juggling show as an evil clown.

But writing about the third method for governments to pay off their debts is pushing it, even for me. It will trigger some proper belly laughs… at first.

And yet, I believe it’s only a matter of time before they launch…

The Moonstock Bubble

You’ve probably heard of the South Sea Bubble and the Mississippi Bubble. Possibly the first stock market manias that ended in tears. Well, they all end in tears. But these two were the first.

But did you know why those bubbles took off?

They were both government-initiated attempts to cut the national debt.

Back in the 18th century, the government was too honest to just print the money they needed like ours did in 2020. Let alone have the central bank suppress interest rates on government bonds.

In fact, it was the failure of the fairly new Bank of England to keep the government’s debt affordable that gave us the South Sea Bubble in the first place. The chancellor at the time wanted a better deal. And some innovative financial engineering of the sort that always goes wrong in the end was the solution his mates came up with. They called it the South Sea Company.

History books may say that the South Sea Company was set up to trade slaves to South America. But the real ploy was for it to buy up and consolidate the government’s debt.

At the time, managing the debt was a vast cost in and of itself. Few believed the government would ever pay up. And so the bonds were trading at a fraction of their repayment value.

Consolidating the debt by making the South Sea company buy it up would cut the cost of managing the payments. Cutting the interest rate paid on the debt would cut the overall interest expense.

Restoring confidence in the national debt would also create an immense opportunity. The insiders who set up the South Sea Scheme were able to buy up the bonds on the cheap before announcing that the South Sea Company would buy up the debt at a decent price.

But that’s beside the point for Sir Keir Starmer today. What he might want to focus his attention on is the idea of having a government create a legal monopoly on trade with some faraway place… and then sell it to a company listed on the stock market.

It’s a lucrative deal for the government. It claims ownership over a right to do business, and then sells it for a hefty sum.

Civil servants, academics and politicians have long been wishing they could discover a new South America to rerun the South Sea and Mississippi Bubble playbook.

The Norwegians found oil. The Australians iron ore. China reran slavery.

Conveniently, I think I’ve found something even more lucrative: the moon.

The real space race is about to begin

Currently, the moon and space are subject to some odd Cold War treaties that make a space economy challenging. But in the next few decades, space exploration could reach the stage that various business ventures become viable technologically.

Moon and asteroid mining, manufacturing in zero gravity and some rather odd sounding healthcare ventures are already on the drawing board.

While these remain pie in the sky, the rights to pursue them could already become concrete.

What I’m saying is that overindebted governments are so desperate for revenue to cut their debts that they’ll soon band together to rerun the South Sea Bubble scheme. They’ll begin auctioning off trade rights, mining rights and real estate in space. At a hefty price, of course.

The revenue will go to paying down dangerous debt loads.

Investors will be able to bid for shares in the companies that will one day host tourists in orbit and on the moon. Only those with government approved permits, of course. Very expensive lunar and orbit hotel permits.

Semiconductor companies that have figured out they need zero gravity environments to continue pushing Moore’s Law will consider it crucial to secure their rights to manufacture in orbit. Those rights will be purchased from governments.

Asteroid mining ventures will buy up their future resource reserves before they’ve figured out how to process them. After paying a hefty royalty fee.

It’ll be a stock market mania unlike anything we’ve ever seen before. And governments will take a vast cut to repay their national debts.

If you want to avoid the devastation of inflation or austerity, it’s our only hope.

By the way, if you think this idea is wild, you won’t want to see the upcoming issue of The Fleet Street Letter…

There is an even better idea much closer to home. Stay tuned for more.

Until next time,

Nick Hubble
Editor, Fortune & Freedom