HindeSight Letters #91 August 2022 - NEWSLETTER
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HINDESIGHT PORTFOLIO SELECTION
As the inhabitants of Western Europe went to their beds on the evening of 5th January 1709, they were totally unprepared for the drastic overnight climate change, with temperatures falling like a stone, and barely averaging -20°C for the next four months. Human and animal populations were decimated by the cold itself, with countless thousands more deaths through starvation as food shortages became widespread. We still don’t understand the reason for “The Great Frost”, or “Le Grand Hiver” as it was known at the time. Some believe the period referred to as “The Maunder Minimum” had some relevance, a period lasting 40 years, starting in the last few decades of the 17th Century. This unexplained period of much reduced solar activity, has historically become labelled, “The little ice age”.
If we look at the documented periods of recession in the UK, measured by real GDP, we can see that the largely agricultural economy of the day in 1709, saw GDP decline as much as 20%, and not recovering for 10 years. A huge decline, in comparison with recent recession periods of the 1990’s and 2008, although similar to the sharp three month Covid period in Q2 2020, but without the quick recovery.
Of course, climate change concerns today, focus on global warming as a result of our continued reliance on fossil fuels. Another scorching summer with droughts and hose pipe bans, does little to have us worry about cold climates. But, this coming winter, cold will be clearly as a result of the worsening energy crisis. At least, we have more notice than our 1709 ancestors. Every newspaper is screaming about the price of household electricity bills, with the Ofgem caps rising to slowly meet the market price, although businesses have little scaled protection.
Headlines that the average household energy bills will rise to £6000 a year, up five-fold, from last year, seem quite simply, unbelievable, but, while scaremongering sells newspapers, can it really be that bad? Surely, the reality is that, people will drastically be forced to reduce their consumption as the price rises, as is standard for the economics demand/ supply equation. The talk of the local pub, the last few Fridays, has been of firewood collection, which is obviously easier in the country than the cities but, the thought is already growing. Apparently, there was a foraging statute in the Magna Carta in 1215, that allowed the collection of deadwood by the common man, but in 2008, The Forestry Commission claiming “elf ‘n safety” have effectively made this illegal! So beware, foragers. The average room temperature in British households in 1970, was a mere 12°C, but, by 2020 had risen to 20°C. Our soft and entitled woke generation will have to learn some immediate lessons of past hardships, while the more stoic, elderly war generation that remains, will just say “Put another sweater on!” and get on with it.
Of course, it is our pensioners and the infirm that will bear the brunt of cold hardship, regardless of any government hasty plan. Outgoing Prime Minister Boris Johnson may well talk of withstanding the energy crisis as Ukraine are paying in blood, but, that might not wash so well, if Western Europe suffer mass winter coldrelated deaths. While we “sanction” Russia oil and make pensioners freeze this winter, the Saudis, (the largest exporter of oil) and the Indians are importing and refining Russian oil at a discount and exporting that oil to us at the fully inflated price, netting the difference, making us look a right bunch of “principled” muppets.
This Chart Shows The Price Of Electricity On The Wholesale Market In GB For Delivery The Next Season - Winter 2022
There is much debate now…..
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