My article “When soaring profits are a bad sign for stocks” triggered plenty of reader mail. I asked whether underinvestment in the future was leading to our economic problems, as well as soaring profits. And you answered…

Hello Nick,

Just read your article about capital and investment, and how that large profits are being generated by corporate companies as a result of failing to re-invest, thus adding to the problems of inflation.

It is my view that “Under Investment” is the root problem to vary many of our current economic woes.  We have failed to invest for years now adequate capital into:

1) Housing, hence we have a housing crisis which has now been with us a long time and is getting worse.

2) Energy, hence we have become far too reliant on outside sources and the current hyperinflation of Gas, Electric and Oil prices are at least in large part as a result of this.

3) Transport, including roads and rail etc, hence our current congested towns, cities and motorways, which by the way is adding to the cost of transportation, and therefore driving up the cost of most consumer products especially food.

4) Farming, hence we are importing far more food then we should, and making it dearer, which hits the poorest people hardest.

5) Education, and particularly in apprenticeships and training, hence we now have an NHS unable to recruit trained staff in our own country, a desperate shortage of manual trained workers in building and other industries…

I could go on, but it is my view that as a country we need to invest far more into our own future manufacturing/farming/service sectors etc, and become less reliant on imports. The current war by Russia is yet another example of what happens when we are over reliant on imports.


I agree.

But, on another note, why does everyone blame the war in Ukraine for the lack of energy? Surely it’s our own sanctions that have caused the problem?

We complain that Russia is only sending limited gas to Europe, but we have rejected the second pipeline that’d send more, sanctioned the ability to pay for the gas, delayed the infrastructure needed to keep the gas flowing and done many other things to reduce our own ability to buy gas from Russia…

Of course Russia’s invasion demands a response. But energy seppuku seems an odd way of going about it…

L.R. reminds us that inflation can have many causes and singling out some of them could be misleading:

Dear Nick,

Thank you for today’s F&F article and for all your thoughtful writing at Southbank.

While many subscribers may be small business owners, many if not most of us are not…so please don’t hesitate going back to basics!

With reference to your comment:

What policymakers are concerned about is triggering what I would call “true inflation”.

True inflation is when the value of money falls, rather than prices of stuff rising for other reasons, such as a pandemic and a war.

Distinguishing true inflation from rising prices because of supply and demand is an absolutely crucial skill if you want to navigate the next few years as an investor. Because, if you get the inflation call right, everything else should follow.

And your ending:

Years of supply-crunch inflation might only just be beginning. Are you ready for it?

The value of money is also falling…from years of ‘money printing/QE’. So we’ve got these very different sources of inflation with different timings for manifesting.

This increases the difficulty of ’navigating’ the next few years years as an investor.

I look forward to following and understanding your thinking on this and related matters.



Don’t just look forward to my thoughts. Nigel Farage just finished recording this video about how investors should deal with inflation now that its back with a vengeance.

J.B.’s email made me think about a long list of things…

Dear Nickolai,

I hope all’s well.

As always, thank you for your publications. I find them very interesting.

I’m running the risk of mixing drinks in this message as it covers wide topics. I preface that you’re welcome to publish/hack-up this e-mail if any of my illiterate ramblings are of use. I do not expect an urgent, direct-reply. If anything here can be naturally woven into your next publication, then you have my blessing. Unfortunately I’m not a business owner directly, so just a simple pleb when it comes to economics.

We are living in somewhat interesting times, certainly from a political perspective. The Labour Party appears to be supporting a low-tax and anti-union role, whereas our would-be conservative leaders are ripping each other apart about whether taxation should be reduced! Even their predecessor was not that ‘conservative’.

I was watching GB News last night, I believe it was the ‘Dan Wootton show’, circa 10 PM. Dan had the ex-Thatcher advisor Prof. Patrick Minford discussing the Conservative candidates’ taxation policies. 

I will be honest, I have become terribly confused about the situation we find ourselves in. Patrick took a more ‘contrarian’ view that we should be borrowing our way out of inflation, whereas most economists have suggested the converse. 

In my simple understanding, I presume Liz is betting on our present inflation being due to supply/demand shocks, borrowing money so she can build everyone a ladder. Whereas Rishi is betting on the devaluation of currency being the driving factors and hence reducing national debt to raise the value of the pound? 

I find myself feeling restless about the dichotomy of ‘expert’ opinions that surround these issues. And, linking to your other publications, it’s the hidden consequences of these decisions which will eventually come to cause serious damage. 

I can mostly understand that borrowing to invest and ‘grow’ an economy can lead to positive outcomes in the long-term. Where I see the UK at the moment however is up to its eyeballs in debt, so intuitively, I feel as if we should be reducing this. We are also painted into a corner regards how many tunes can be played with interest rates. 

I believe your colleague James Early showed a graph of US interest rates and arrows to historic financial crises. The graph has an ever falling downtrend, demonstrating the future point whereby pulling traditional levers will no longer work, or lead to catastrophic hidden consequences. 

Furthermore, some of the financial commentators are recommending a modern-monetary-theory policy (although they never go as far to call it that). I always have an immediate allergic reaction whenever I listen to those arguments, but perhaps that’s because I don’t understand macroeconomics. Regardless, it appears we are well and truly constricted with ever less breathing room to recover our situation. 

Would you be able to square this circle for me please Nick? I just can’t understand how this problem is actually solved with so many conflicting opinions around the subject – if you were our PM, what would you do?(and shoot yourself is not an option! 😉 ).

Thank you for your time.

All the best,


Taxes are a sideshow. It’s all about government spending. That is the measure of government involvement. It is crucial because such spending must be paid for somehow. Tax, money printing (inflation) or borrowing. It doesn’t matter which, they all have their problems. But they are only relevant because of government spending.

If the projects that the government is spending its money on made sense, then the private sector would do them already. Alas, resources are scarce – the very first lesson of economics – and so the economy is all about deciding which resources to use how. The private sector does this in a mediocre fashion, but it self-corrects through profit and loss. The government does it worse, by definition, because it diverts resources away from the private sector’s allocations.

Economists are like everyone else. They espouse the views that keep them in a job. Luckily, economics is convoluted enough to create a lot of jobs…

As prime minister, I wouldn’t shoot myself anymore – I have a family now. I would simply allow competition with the government on all things.

I would allow people to opt out of all government policies and programmes on the condition that they don’t seek to use them or the benefits they supposedly provide.

I believe that merely allowing competition with the government would provide superior goods and services, leaving the government irrelevant over time. This is why the government must make its policies compulsory – to prevent the private sector from outcompeting.

There are some good documentaries and studies about firms which tried to compete with the government on public transport, policing, lighthouses and other functions that people presume only the government can do. In short, when the government permits competition with its services, the private sector outcompetes.

That is also the difference between people who agree with my ideology and those who do not. I would never seek to impose my beliefs or “system” on anyone. They should live as they like to. Just let others choose freely whether they want to do things the government’s way or not.

Nick Hubble
Editor, Fortune & Freedom