Martin Vander Weyer

Where next for house prices? Clearly, they’re going down as mortgage rates go up – and my forecast in May that they would shed ‘recent froth’ and then stagnate rather than plunge, has been entirely overtaken by events, or at least by Kwasi Kwarteng’s calamitous ‘fiscal event’ last month. Reverberations from the Chancellor’s debut continue apace, with more emergency bond-buying by the Bank of England despite news that the OBR-assessed forecast missing from his September speech will now be unveiled on 31 October instead of on 23 November.

Headlines about ‘alarm over CreditSuisse’ might be read as a sign of normality in financial news, rather than the reverse. The second-ranked Swiss bank (behind UBS) has slipped on so many banana skins in recent years that, as I wrote in February: ‘I sometimes wonder how and why it survives.’ As a recognised basket-case, its difficulties are not usually seen as harbingers of systemic trouble. But in the Kwarteng-induced febrile mood of London’s markets, the question has to be asked. This is October, the devil’s favourite month for provoking crashes. Could Credit Suisse be the tornado on banking’s horizon? Amid rumours of critical balance-sheet weakness, Credit Suisse’s shares have fallen 60 per cent this year.

‘Fury at the City slickers betting against UK plc,’ shouted the Daily Mail on Tuesday, after Monday’s mayhem saw the pound hit an all-time low of $1.03. A more accurate corporate metaphor, though less punchy as headline material, would have been something like this… Activist mavericks seize boardroom control of giant sluggish utility. Novice finance director slashes prices, raises dividends for rich shareholders, shuns in-house forecasters and says he’ll borrow whatever it costs. To which markets reply: ‘Blimey, mate, that’s bonkers. So we’re dumping your shares and the cost of your debt just doubled.’ And that, I’m afraid, is an entirely rational response, not a wickedly speculative one.

Chancellor Kwasi Kwarteng – keen to sharpen the City’s competitive edge, we’re told – wants to remove the legislative cap, imported from Brussels in 2014, that limits bankers’ bonuses to 100 per cent of their base salary, or up to 200 per cent with shareholder approval. That raises interesting questions. Was the cap a good idea in the first place? If not, why wasn’t it binned as soon as we left the EU? Is now the ideal moment to do so? And are bankers still a breed of greedy bastards? The answer to the first question is certainly not. This column called the cap a ‘boneheaded’ measure that would merely provoke wily moneymen to find ways of gaming an unwelcome restraint on their wealth.

At His Majesty’s Treasury, it’s all looking a bit like Year Zero in revolutionary Cambodia. Kwasi Kwarteng’s first act was to sack the respected but ‘orthodox’ permanent secretary Sir Tom Scholar. Now the FT reports the Chancellor ordering underlings to focus ‘entirely on growth’, presumably at the expense of financial discipline. I’m picturing a locked basement of fearful officials labouring under Kwarteng’s lash to translate his forthcoming ‘fiscal event’ – tax cuts on top of massive spending to cap energy bills and unlimited borrowing to pay for it – into the sort of Whitehall language that might make it sound reasonable.

My predecessor Christopher Fildes looked at exchange rates through a cocktail glass: three negronis for the Italian lira equivalent of a tenner, good; a $2 martini for £1, even better. That latter ratio applied briefly 30 years ago when, he wrote, the favoured tipple ‘brushed against my lips like an angel’s kiss’. It recurred during the financial crisis of 2007-08, when no one was really able to enjoy it, and has never been seen since. On Monday, as Liz Truss was crowned, the pound dipped below $1.15, in sight of its 1985 all-time low of $1.05. ‘The prospect of …parity versus the dollar,’ said Bloomberg, ‘is becoming ever less outlandish.’ What cocktail of misfortunes brought us to this?

How outraged should we be that Saudi Aramco has reported a world-record quarterly profit of $48 billion, representing a giant bonus from the global oil price spike provoked by the war in Ukraine? Well, that’s how the cookie crumbles when you’re sitting on oil reserves so abundant and so easily accessible that your marginal cost of producing the next barrel is less than $10 when the market price has just doubled to $130 — as it did in March, before settling back to around $95 today. And you might think that this recent price retreat is likely to continue as oil demand begins to shrink with the onset of recession in developed economies – just as you worry that your own reserves will one day dwindle.

How outraged should we be that Saudi Aramco has reported a world-record quarterly profit of $48 billion, representing a giant bonus from the global oil price spike provoked by the war in Ukraine? Well, that’s how the cookie crumbles when you’re sitting on oil reserves so abundant and so easily accessible that your marginal cost of producing the next barrel is less than $10 when the market price has just doubled to $130 – as it did in March, before settling back to around $95 today. And you might think that this recent price retreat is likely to continue as oil demand begins to shrink with the onset of recession in developed economies – just as you worry that your own reserves will one day dwindle.

We’ll find out shortly whether official statistics agree with economists surveyed by Bloomberg who say UK GDP probably shrank by 0.2 per cent in the second quarter. But at an uncomfortable moment when we know things can only get worse, looking backwards doesn’t help and nor does holding out hope for a miraculous ‘emergency budget’ in September. As for forecasting beyond that, it’s almost too scary to contemplate. Better to shun economists and politicians and focus instead on facts that tell us what’s happening now – such as data from Barclaycard – and things we can do keep our own budgets in balance.

‘What’s worse, they’re paying the profits to shareholders,’ said a grey-haired woman ahead of me in the Co-op queue. ‘Bloody shareholders,’ her friend of similar age and class spat back. I guessed they were talking about Centrica, parent of British Gas, which at a time when domestic energy bills are rising 23 times faster than wages (as Frances O’Grady of the TUC puts it) has announced half-year operating profits of £1.3 billion, up from £262 million last year – and the restoration of a penny-per-share interim dividend after a three-year gap. Both ladies looked likely to be beneficiaries of pensions nourished by dividends from the likes of Centrica, Shell and BP.

The government’s ‘cost-of-living tsar’, Just Eat co-founder David Buttress, was appointed last month as a Canutian gesture against the inflation tide. He says his role is to encourage retailers and utilities to offer discount deals that might relieve short-term pain for consumers. But wouldn’t it be good if he also had powers to shame companies or sectors for profiteering by whacking their prices up far ahead of inflation? Any firm for which energy or scarce raw materials are major cost elements has possible reason for scorching price rises; many others do not.

‘Black swan’ theory, developed by the writer Nassim Nicholas Taleb, refers to unexpected events that have extreme consequences but are rationalised afterwards by pundits who say ‘That was always going to happen.’ Covid was a big one; Putin’s war on Ukraine another. It’s in the nature of global events that there’s always a dark-feathered disruptor lurking somewhere, waiting to make its presence felt. Right now, it just might be hidden in reports of protestors in Zhengzhou, capital of China’s Henan province, demanding their money back from four local banks that suspended withdrawals in April. Runs on small banks are not unknown in China; nor is embezzlement by corrupt managers.

Is anything anywhere getting noticeably better – economically speaking – or at least less bad? Are commodities and manufactured goods beginning to move more freely, for example, to ease the demand pressures that are stoking inflation? It’s good news that the number of container ships anchored off Los Angeles-Long Beach waiting to unload has fallen from more than 100 in January to around 20 at the latest count, but I note also that dockers there are demanding a 10 per cent pay rise. Drewry’s World Container Index – the handiest indicator of global shipping costs – has fallen 32 per cent from its peak last autumn, but remains five times higher than in the autumn of 2019.