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Client Update - 4th August 2023

UK interest rates rose as expected by 0.25% yesterday and Andrew Bailey explained that this is unlikely to be the last rate rise as the UK remains behind other developed markets in bringing inflation under control. This time the vote was carried 6-3 to take rates to a fifteen year high at 5.25%, although the committee noted that “it was too early to conclude that the economy was at or very close to a significant turning point”.

The political wrangling on the debt ceiling in the US earlier in the year claimed a delayed victim with ratings agency Fitch Ratings downgrading US debt from AAA to AA+, on the back of what it deemed a growing debt burden and an “erosion of governance” on fiscal matters. The news was seized upon by Republicans, desperate to deflect news away from former President Trump’s indictment, and quickly claimed that this showed the mishandling of American finances under President Biden.

Trump has found himself under significant pressure after being accused of obstructing the peaceful handover of power after the last US election. It is claimed that Trump’s comments at the time led to “an intense national atmosphere of mistrust and anger” aimed to erode faith in how the electoral process was run. The case sounds complicated as the indictment accepts that Trump had a First Amendment right to criticise the election, so it must be proved that his statements were both false and fraudulent.

Three principles fundamental to the workings of any successful democracy are at stake. First, that leaders are elected and that all sides will respect the outcome of an election. Second, that nobody — not even a President — is above the law. Third, that the truth can be established in a court of law and that the court’s verdict should command the respect of all politicians and of society at large. Trump’s re-election campaign seems to be based on gathering support for a trial by media in 2024 that will unfortunately distract the voters from crucial discussions on the economy and foreign policy.

This Wednesday saw Earth Overshoot Day, the day of the year when the human population have used more resources than ecosystems can generate for the whole year. From now until January 1st 2024, the global population will be using more natural resources than the planet can supply this year —including fish stocks, fibres and medicines provided by plants and the ability of forests to sequester carbon.

By consistently overspending its biological budget, humanity is reducing the biodiversity on which its survival depends. The overshoot date was originally in December when the data started being collected in 1971, and each year moves earlier, according to the Global Footprint Network, a think-tank using data collected by the UN.

Rich countries, unsurprisingly, are the most profligate. A study published in 2022 in Lancet Planetary Health, a journal, found that America and the EU were respectively responsible for 27% and 25% of the overuse of natural resources. The global south was responsible for just 8%. Humanity is evidently living beyond its means.

As I have mentioned before, I quite like a good breakfast on the weekend, so I was somewhat perturbed to hear that US wholesale prices for pork-belly, the cut of meat used for bacon, have nearly tripled since the start of June. A large part of this price surge is due to a Californian animal welfare law requiring pigs be given at least 24 square feet of outdoor pen space, a significant increase, yet still half the size of the average prison cell in the US – just in case former President Trump is interested.

Do have a good weekend.

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