The Podcast of the Lotus Eaters - September 09, 2025


PREVIEW： Brokenomics ｜ Britain goes to the IMF？


Episode Stats


Length

13 minutes

Words per minute

138.3082

Word count

1,804

Sentence count

115

Harmful content

Misogyny

4

sentences flagged

Hate speech

9

sentences flagged


Summary

Summaries generated with gmurro/bart-large-finetuned-filtered-spotify-podcast-summ .

The IMF has run out of money and is in need of a bail-out, and there's a lot of speculation as to who's going to step up and replace Keir Starmer as Prime Minister. But is it Blair or Cameron? And what does this mean for the economy and the bond markets?

Transcript

Transcript generated with Whisper (turbo).
Misogyny classifications generated with MilaNLProc/bert-base-uncased-ear-misogyny .
Hate speech classifications generated with facebook/roberta-hate-speech-dynabench-r4-target .
00:00:00.000 Hello and welcome to Brokonomics.
00:00:29.260 Now, British politics is getting mildly interesting this week because there's lots of speculation
00:00:34.340 that we might be forced to go to the IMF, the International Monetary Fund, for a bailout
00:00:39.640 because our government has been so completely profligate that it has run out of money yet again.
00:00:45.580 They do have a tendency of doing this quite a lot.
00:00:49.760 There's also the Angela Rayner stuff going on.
00:00:53.240 So at the time of recording, Angela Rayner is our Deputy Prime Minister
00:00:58.240 and she's made statements throughout the years.
00:01:02.240 She's been quite strident about people who avoid taxation.
00:01:07.080 And she's also the Housing Minister. 0.97
00:01:09.380 And she appears to have avoided paying tax on her second house, which is not really a good look.
00:01:16.080 And this is getting pushed relentlessly in the media.
00:01:20.760 Interesting timing because she was kind of being lined up to be the replacement for Keir Starmer, 0.97
00:01:26.760 who has managed to achieve approval ratings of 11%, which is a new record for a British government to get down that low.
00:01:35.020 So there's some speculation as to who's sticking the knife in for Angela,
00:01:41.200 making sure that it stays at the top of the news cycle.
00:01:45.200 I mean, it could be Blair.
00:01:46.180 It's normally Blair.
00:01:47.120 But Blair is...
00:01:48.900 It was thought that Angela Rayner is one of Blair's creatures.
00:01:52.100 Now, I don't doubt that he has many, many turds in the bowl
00:01:56.840 and he's just waiting to see which of them float to the top, as it were,
00:02:00.960 when the time comes to replace Starmer.
00:02:05.440 But it's probably more likely Starmer himself is doing her in
00:02:09.820 because he obviously doesn't have any talent for being a politician or prime minister.
00:02:14.200 So maybe backstabbing is his skill that managed to see him rise to the top job in the country.
00:02:20.900 I mean, he's got to have something, hasn't he?
00:02:23.860 But no, I didn't want to talk about that.
00:02:25.880 I wanted to focus on the IMF stuff because, well, it's not good.
00:02:32.300 It's really not good.
00:02:33.220 I will acknowledge that the Labour was left with an absolutely awful financial inheritance from Tories
00:02:39.900 who ran up taxes to sort of record levels.
00:02:45.820 But Labour just keep piling in on that.
00:02:48.200 They keep giving pay awards to the public sector and, you know, finding more money for Ukraine
00:02:54.060 and just anything they can think of to spunk off an extra few billion.
00:02:58.580 They're doing that quite liberally.
00:03:01.420 And we got to the point where government revenue is about 40% of GDP,
00:03:07.340 which is a historic aberration.
00:03:10.760 I mean, outside periods of total war.
00:03:12.780 And as far as I can tell, we're not in a total war.
00:03:16.420 We're not in a life and death struggle, you know, with the Germany or the France or, you know, whoever else.
00:03:24.200 So if we're not in a total war, why have we got total war levels of spending?
00:03:29.200 You know, that's just not good, really, is it?
00:03:31.840 Indeed, the levels of taxation collection is the highest since peacetime records began, which they did in 1948.
00:03:43.500 That's not good.
00:03:44.600 Government spending, however, is even worse.
00:03:47.460 There's a gap between how much the government collects, which is eye-wateringly high,
00:03:52.380 and how much it actually spends.
00:03:53.820 Spending, I mean, actually achieved 53% of GDP during the COVID years.
00:04:00.780 And it's fallen back to 44%.
00:04:02.860 But nevertheless, that is a gap that needs to be funded with constant borrowing from the bond markets.
00:04:11.500 And the bond markets are starting to twig that they're not going to get their money back.
00:04:15.600 And so they're asking for ever higher rates.
00:04:18.860 You might remember the episode we did on bonds a little while back.
00:04:21.080 But the way it works is if for some mad, demented reason, most likely the fact that the regulators tell you you have to buy government gilts,
00:04:30.700 you submit your bid.
00:04:33.000 And basically, once they've accumulated enough bids, they start from the bottom, the one willing to accept the lowest yield.
00:04:41.400 They start there.
00:04:42.760 And they go through the book and they fill it up.
00:04:44.680 And when they get to the point where they filled whatever that issuance is, the last price offered is the price they all get.
00:04:55.260 And more and more, they're having to fill it with people who are further down the yield curve.
00:05:02.100 And as a result, the price of government debt is going up all the time.
00:05:05.880 So you might think, OK, well, that's jolly bad, isn't it?
00:05:11.520 But it does get considerably worse because according to the government's own projections, their own projections,
00:05:20.460 it would appear that we're already well past the peak of the Laffer curve.
00:05:25.980 So I'm sure you remember the Laffer curve or you know it anyway.
00:05:29.140 Basically, the Laffer curve says that if your tax rate is zero, you get no taxes.
00:05:37.840 And if your tax rate is 100%, you also get no taxes because who's going to do work where 100% of what you work for is going to be immediately taken from you?
00:05:48.420 And so the curve bows between those two points, which, of course, implies there is a top of the curve,
00:05:54.600 a tax rate where you extract the most revenue without hurting the incentive to work.
00:06:03.680 And there's a lot of debate about where that point on the Laffer curve is.
00:06:07.400 I suspect it's probably around 15% or something.
00:06:11.640 But we are considerably beyond that.
00:06:15.220 And so the government sort of knows that revenue, it just can't go up from here.
00:06:21.020 It's stuck. It's not going to go up.
00:06:23.160 But their spending commitments, well, they know they're going to go up because they've made spending commitments.
00:06:30.140 And by 2070, which is as far as the government projections go to,
00:06:38.220 spending is going to rise to 60% of GDP,
00:06:43.840 while revenues are going to be stuck at that 40%.
00:06:47.120 So an enormous 20% gap between what is collected in taxes and how much is spent.
00:06:58.340 Now, if you're interested, that 20% gap, where's the rise in that?
00:07:02.560 What's happening around it?
00:07:03.900 Well, about 8% of that is going to be interest payments.
00:07:07.020 Another 8% is health.
00:07:09.000 And 4% is pensions.
00:07:16.640 So basically about 12% of it is Boomer Gibbs.
00:07:21.640 And another 8% of it is paying for the Boomer Gibbs debt cost.
00:07:28.840 So, yes, it might be a tiny bit unfeasible.
00:07:33.120 And it's for this reason why I believe that cradle-to-grave welfare will be a Boomer-only experience. 0.74
00:07:41.320 I don't think even Gen X are going to get to that point.
00:07:44.940 Nor does it seem particularly feasible that the NHS can survive over the long term,
00:07:49.020 despite it being our national religion,
00:07:51.900 and every politician feels compelled to, you know,
00:07:57.020 abase himself, him or herself, in front of the NHS
00:08:01.780 and tell us how wonderful it is when, you know, clearly that's not the case.
00:08:07.560 So, going on just the government's own figures,
00:08:11.080 you get a national debt rising from a little over 100% like it is today.
00:08:19.720 Under their own projections, it gets 274% of GDP.
00:08:27.800 Which is vaguely possible, because, I mean, that's what Japan is at.
00:08:34.180 And interestingly, Japan, you know, I've talked about age demographics many times.
00:08:37.900 Japan is just 15, 20 years ahead of us with their baby boom. 1.00
00:08:44.740 They had a big generation, you know, like I said, 15 to 20 years ahead of the rest of us in the West.
00:08:52.840 And what happens is you build up all these, you know, welfare ideas
00:08:56.540 when you've got a big ratio of workers compared to retired people.
00:09:00.860 And unless the following generations continue to have children at the same rate as the big one,
00:09:10.380 where you decided to put all these welfare and pension provisions in place,
00:09:13.660 then it doesn't work anymore.
00:09:17.440 You know, effectively, abortion and contraception have nuked the Ponzi scheme.
00:09:26.300 You know, you can either have women in the workforce with complete control over their reproductive cycle, 1.00
00:09:36.300 or you could have a welfare system and a pension system over the long term.
00:09:40.640 It would appear that you can't have both.
00:09:43.320 And of course, I've been trying to solve this problem by immigrating as many people as possible, 1.00
00:09:48.740 because, you know, the natives aren't having enough children. 1.00
00:09:52.340 And then you discover the immigrants, they can't or don't work and quite like getting free houses and benefits. 1.00
00:10:02.860 And then you have to tax the natives, the young natives, even more. 0.72
00:10:07.980 So they can't afford themselves, let alone a family home.
00:10:12.060 And therefore, they definitely don't start a family.
00:10:14.080 And therefore, you import more immigrants. 0.96
00:10:16.320 And then they don't work either.
00:10:18.640 And then you have to tax the natives more.
00:10:21.480 And it is kind of a bit of a recipe for going extinct.
00:10:24.320 So anyway, yes.
00:10:26.140 So debt to GDP ratio by 2070 of 274% on the government's own baseline projections.
00:10:34.620 However, those baseline projections are bollocks,
00:10:38.520 because they assume a growth rate of 1.5% over the next, you know, whatever that is, years to get to get to 2070.
00:10:49.520 And I mean, we're not hitting 1.5%.
00:10:53.600 We're lucky to hit, you know, half a percent at the moment.
00:10:57.440 And so we're expecting that the growth rate will suddenly pick up and get us to a point where the debt is only hitting Japanese levels.
00:11:11.660 But that's not the growth that we're actually getting.
00:11:14.680 The growth that we're actually getting is 0.5%.
00:11:17.700 And the Office of Budget Responsibility, you know, wing of the government,
00:11:22.540 helpfully provides the data on what that would look like if, in fact, we got the 0.5% growth rate,
00:11:31.220 which actually is realistic, as opposed to the unrealistic 1.5%.
00:11:35.380 And debt to GDP at that point is 674%, which is, well, I mean, you wouldn't get there.
00:11:46.700 You'd probably have a financial collapse long before that point.
00:11:50.620 I mean, we know you can get to about 270% because Japan is there now. 1.00
00:11:55.180 The only difference with Japan is Japan does have absolutely vast foreign currency reserves,
00:12:00.400 because in the past they did stuff and they managed to build up quite a treasure chest.
00:12:06.860 Britain doesn't have anything like that.
00:12:09.340 So you have to wonder, what is the government's plan?
00:12:17.180 Because, again, these are not my numbers.
00:12:20.260 This is not me being a bit doomy.
00:12:23.140 This is the government's own projections.
00:12:24.920 This is the government's plan to cast it forward on the current growth rate.
00:12:31.040 So not some, you know, Hail Mary, some miracle pops out of the air
00:12:35.180 and the growth rate suddenly goes back to what it was in the early 2000s.
00:12:40.660 No, on current government's own projections and their own growth rate,
00:12:47.760 600% plus debt to GDP.
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