Well, the OBVIOUS answer is that STUPID got into the White House and the economy got chucked straight out the window.
Normally, I do not worry about money, because my Daddies give me enough pocket money to buy all the DVDs that I want. But the price of sticky buns seems to be going up and up right now, so I am wondering it there isn't something big going on!
In fact, there seem to be FOUR big things going on in the world of MONEY at the moment: oil and wheat, mortgages and dollars.
Droughts in Australia and poor harvests in Canada have seen the supply of wheat cut dramatically, just at a time when China and India are increasing their consumption. The price of wheat on the commodities market has gone past $9 a bushel for the first time.
This isn't just affecting my sticky buns – and the average loaf of bread in the supermarket is APPRECIABLY dearer too – food giant Sara Lee has taken a hit to the profits because their cakes cost more to bake because their cakes cost more to bake, and Dominos saw their share value fall after warning of pricier pizzas.
Even the Christmas Turkeys are under threat and the people of Italy have been asked to go on Pasta Strike!
The biggest worry, though, is probably the effect on China. With the price of wheat, maize and rice up by 8.4% on the year to August, INFLATION is gripping the Middle Kingdom.
For the last ten years, Great Britain has had a stable and prosperous economy. Is this not down to Mr Frown, you ask? Well, no. Quite apart from the BIG IDEA of independence for the Bank of England being a LIBERAL DEMOCRAT idea, inflation has been kept LOW by the constant supply of economy-value consumer goods from CHINA.
If China is gripped by inflation, they will put up their prices… and WE will be gripped by inflation!
But that's not all.
China currently holds most of her foreign currency reserves – i.e. her piggy bank – in US Dollars. For years and years this has been the safest currency to keep because the US economy was so powerful that the Dollar held its value.
But not so much any more.
The Dollar is taking one heck of a nosedive at the moment – and when you have a big fluffy nose like mine, that is even WORSE than it sounds – this week reaching new depths against the Pound and the Euro.
In part, this is because the Monkey-in-Chief has been running the American government on the never-never and has run up one awfully big bill. But in the main, it is because the American banks were doing something that THEY thought was very, very clever and turns out to have been very,, very DUMB.
Essentially, they thought that they had a MAGIC FORMULA so that they could make some EXTRA interest from RISKY loans to people who probably couldn't pay it back – and then MAGICALLY get rid of the risk by doing swapsies with other banks.
So the front men were, instead of taking deposits and loaning that out, borrowing the money from other banks – at the so-called Interbank loan rate – and then loaning that out at a higher rate. They were getting money for nothing on the difference… so long as not too many people defaulted; and the banks could say that they were loaning the money to nice solvent people and not the highly risky "sub-prime" (and that very much means NOT Optimus Prime) mortgagees.
But that is the thing about riskier loans… they are the ones that ARE more likely to default! Particularly when the US economy has been sacking people at the low end of the payscale in order to ship their jobs off to – where else – China.
The level of defaulting doesn't matter, though, so long as you still have money coming in from your backers to hoik in yet more sub-prime victims who will keep paying the higher interest as long as they can and so you can keep making a return to the bank.
It's a sort of Ponzi Scheme. Investors at the front keep getting their money so long as new investors keep coming in the back.
At some point the banks suddenly realised this, That actually there was no more than a thin tissue of lies protecting them from the risk. So they did what banks always do – hoisted up their skirts and ran screaming back to mama in Threadneedle Street. In PRACTICAL terms they declared that they were all VIRGINS again and no, they were certainly NOT lending any money to strange men with sub-prime mortgages to be had, WHAT sort of girls did you think they WERE?!
No one is quite sure how far the risk goes – such is the web of loans and re-insurance and interdependence among the cartel of big banks – which is why rumours sweep the city faster than the one about Mother Superior and the Cardinal goes around the convent.
Last week it's the head of Citigroup for the chop; this week it's Barclays who are alleged to be over-exposed.
Shutting off the flow of cash going into the scheme was like cutting off the flow of lubricating oil and the whole lot suddenly fused into one giant economic meltdown.
Suddenly EVERYONE is losing their home – except the Money-in-Chief who gets to keep the big White one for yet another painful year! – and those repossessed houses, flogged off cheap by the banks to try and get SOMETHING back, drive down the price of houses even further AND stomp on the building industry – who needs new houses when there are cheap ones going begging – putting even more people out of work and leading to yet more repossessions…
To try and fix the housing crash, the Federal Reserve has had to lower interest rates… so investing in dollars doesn't get you as much money… so people sell their dollars and invest elsewhere… so the value of the dollar falls again.
As the value of the ol' greenback is driven down, the US economy looks more and more like a BASKET CASE and less and less like a safe BASKET to keep all of your EGGS IN.
Which means in turn that China – who are, naturally, the ones who've been LOANING all that money to the Monkey-in-Chief to pay for Son-of-star-Wars and a couple of Invasions here and there – suddenly have cold feet about the deal and are talking about DIVERSIFYING and maybe selling a load of dollars and buying Euros instead. And THAT doesn't help to steady ANYBODY'S nerves in the currency dealers' rooms and the dollar falls even lower.
Everybody piles OUT of currency and into COMMODITIES: wheat – again, and in short supply – and gold and OIL. So that drives up the wheat and gold and the oil PRICES.
Of course, everyone is TERRIFIED about the oil anyway, what with the Monkey-in-Chief looking likely to invade Iran sometime next Autumn (or, as the Americans call it "
So the oil price spirals up to $93 sorry $95 sorry $96 sorry $97 sorry $98 etc…
It's added $5 a barrel in a week – though because your actual pound buys you more dollars at the end of the week than it did at the start, that's only an increase to US of £1.70.
In fact, Great Britain has been CUSHIONED a lot for the last twenty to thirty years by having North Sea Oil. Which just goes to show how VERY IMPORTANT independence of energy supply is, and why we should be maximising farming of our own free wind rather than dependence on foreign gas or, worse, uranium!
And of course we've also been CUSHIONED by our closeness to Europe. The Euro is seen as a safe haven for currency speculators, they've dabbled a little in the pound as well, what with OUR interest rates being a good couple of percent higher than Europe's just to make pounds tempting enough. Which just goes to show how VERY IMPORTANT remaining a firm part of a strong European Union is.
What does it all add up to?
Well, first, we could REALLY do with a President in America who can ADD UP.
Second, we're in for a tougher time of it – credit will be more expensive and probably so will imports; and it's the cheapness of both of those that has been keeping the British economy moving. This will be the REAL test of Mr Frown – is he a FAIR WEATHER Chancellor or does he have some IRON in him for real?
And third, I could REALLY do with a sticky bun after all of this!