Hey guys, it's Sasha Junior Doctors in the UK have just announced more strikes because they want to get a second pay increase this year that is bigger than what the government has already offered them. The British Medical Association called the strike because the UK government only offered to give a 3% increase after the pay already went up 8.8% in September. Just 3 months ago, the pay increase in September was backdated to April and while Junior doctors got an 8.8% increase firste doctor salaries went up 10.3 % while Consultants got 6% According to the government, the average consultant doctor in the NHS will now earn 134,000 a year. That's after the 6% increase that just came in after the 4.5% increase that came in before that.

But since that 6% increase came in in September Consultants have already been on strike and are now voting on whether to accept another 5% increase in January. The BMA says they want junior doctors to get a 35% pay increase funded by the magic money, but given Consultants are voting on just 5% they'll probably settle for a lot less. But then wait, you know, another 3 months to start the next round of negotiations. Now I am a huge advocate of the National Health Service.

There is no problem there. I Believe doctors deserve to be paid very well for their work. They do an incredible job. They make very big sacrifices, but these wage increases are now a very clear indicator of all that's wrong with the UK economy.

We are now in a situation where public sector Workers are striking get a second pay increase this year, with total pay across those increases in NHS going well above 10% and significantly ahead of inflation in May. The UK government already negotiated a big pay deal with the NHS where other health workers accepted a 5% pay increase and a one-off bonus of at least 1,655 And you can see on this chart the impact that this had on the growth of average public sector wages. It's the blue line that spikes in the summer the spiking of that blue line has. The wages in the UK on average have been growing faster this year than at any point since this data started being collected 22 years ago.

At the same time as this is happening, the UK government has announced that from April the national living wage is going up from 10.42 to 1144. That's a 99.8% pay increase. for around 1.6 million people in the UK earning the minimum wage, that's around 5% of the total Workforce. And if you work full-time in the UK 8 hours a day on minimum wage, your annual salary is now almost 24,000 And at the same time as all of this is happening, the Chancellor has just announced a 2% drop in National Insurance from January.

Last month, the rate of inflation in the UK dropped to 4.7% because of a cut in the energy price cap by offg and rich is Sunak and Jeremy Hunt Were celebrating immediately as if this had anything at all to do with anything that they did. The very next day after the Autumn statement, Ofj announced that from January prices are going back up by over 5% Yesterday, the Office of National Statistics published the latest updates to the household Cost Index. This is a more detailed index focusing on costs like mortgage, interest, and energy and you can see that the gap between this index and inflation is widening as the energy price increases have come in and as the mortgage crisis is unfolding. While CPI was at 6.7% in September, the household cost index was at 8.2% significantly higher.

And if you break that down further, for those who have a mortgage, that inflation rate was actually 99.3% in September. Rent prices are not quite as bad yet, but they are catching up fast. Here is the rate of change in the private rent prices in London and in the UK to October 2023. the UK is blue and London is pink on this chart.

Now, rent prices are quite literally going off the chart right now and at the same time around 1.5 million households will be coming off their fixed home morgage deals in the next year. And when those deals were taken out, interest rates were set at 0% and a Tyal mortgage could be had at about 1.3% Now, the best rates that you can get are around 5.5 to 6% and if your mortgage has 20 years to go going from 1.3 to 6% is an increase of about 50% on your monthly payment. If you don't take out a new fix because you know you want to wait maybe for the race to start coming down next year, instead of fixing for five years at a high rate, your interest rate will be a lot higher. still.

so your mortgage payments might go up 70 or 80% So the inflation problem: the K is getting worse despite the headline numbers looking better and we're now in a situation where workers are demanding multiple pay increases per year, adding up to around 11 or 12% just to be able to pay their bills. Let that sink in. Rail: Workers Are striking demanding more pay. Utility companies are striking demanding more pay.

The NHS is striking demanding more pay. And I know there will be people in the comments saying that all of these people they work hard. they deserve big pay increases they haven't been given theay pay increases they deserve for a long time. Join the club, it's well overdue and I do sympathize, but the UK economy is in such a storm right now that getting out huge pay increases is only making that storm worse for two main reasons.

The first reason is that when people get a 12% pay increase, they now have a little bit more money to pay their bills and for some discretionary spending. And I know that it's tough, but these are the facts when everyone is getting big pay increases. People who sell products sell Services Know that they can increase prices because there's a little bit more money that they can squeeze out of the customers. So the companies do keep increasing prices, making the inflation problem a lot worse.

And this is the first part of the Spiral. The second part of the Spiral is the fact that higher wages do not, in fact come from a Magic Money Tree I Know incredible When wages of Staff in a company go up, that company will be forced to increase the price of their products. or Services as the price of their products increases, the staff demand even more more wages because they can't afford the prices on the products that have just gone up. And you get this: Vicious Circle Prices in shops are going up, but it's kind of hard to track.

But you know what's easy to track when you get those non-stop emails in your inbox about the price of every single subscription, service, and whatever else going up every few months. But this wage price spiral is not only for the private sector. I Know, a lot of people misunderstand this bit and they say that you know it doesn't apply to doctors. It doesn't apply for teachers because they're not looking for a company.

Unfortunately, it very much does. If public sector staff suddenly start costing 10% more than they did last year, then, well, three or four different things happen. They still get more money in their pockets, which means that they have more buying power, which means prices on goods and services they buy go up. People who work in the private sector, then look at the people in the public sector and see the pay increases that they get and that creates all kind of upward pressures on the salaries there from people potentially moving leaving their jobs to go and get better pay elsewhere.

Also, if the public sector wages go up, the money to pay for that has to come from the wages of people in the private sector. And yet it's not an exact science Because there are other taxes, there's the deficit, whatever, blah blah. But income tax is 56% of the total UK government's Revenue So at the end of the day, it's the one tax that matters. If public sector wages go up, they can be financed in one of only two ways: One, the tax rate increases so that take more of the income from a private sector in tax and hand it over to the public sector in wages, or two the wages in the private sector increase so that at the same percentage of tax, you collect more money and we're very much seeing that second thing happen.

Now now I Know the economy can also grow out of nowhere and more tax can just magically arrive from that. But I Am here talking about the reality of Life the actual situation that we find ourselves in, not a rose tinted World covered in fairy dust and pink unicorn. on if neither of these things happen, if the private sector does not suddenly generate more income, and if the tax rate does not go up, then the government will have a bigger hole. The hole will be growing at a very fast rate, and they'll be forced to print money to come out of inflation, which would pretty much immediately collapse the economy.

But then there's a third thing that happens when public sector wages go up. The cost of providing those public sector services to the whole country goes up. If the rate at which that cost accelerates is faster than say in other countries in general around the world, then you risk a run on your currency. and that is a whole other show.

With the minimum wage going up in April and all the other pay increases that we're seeing in the public and the private sectors, the UK is seeing the rate at which the wages are increasing increase. This is really important. So I'm going to repeat it. The rate at which wages are increasing is increasing.

The union turns down a 3% pay after getting getting an 8.8% increase 3 months ago because the union wants a 35% pay increase. This is not a good thing. Wages going up 12% a year is not a good thing. It is destabilizing.

It fuels inflation. It destroys the economy. It creates a vicious cycle where a few months later you repeat the same exact dance because you need another pay increase because the prices have gone up that much in the meantime. In the meantime, in the US inflation is down to just 3.2% and showing none of the worrying signs that we seeing in the UK every number is pointing in the right direction.

In the Euro Zone inflation just fell to 2.4% in November, The UK government is an absolute incompetent clown show, pretending that they know what they are doing while doing absolutely nothing. Un watching the whole thing implode. The Prime Minister and the Chancellor make a load of pointless statements tweet random, but are so completely useless. Such a waste of space that they can't come up with a single policy to actually tackle the mortgage crisis or the wage price spiral.

The idea seems to be that you can just kick the cannon down the road far enough so that you only have to deal with it after the next election because then when you get voted out for being a complete you can blame all the problems that you have created on the other party because they will be in charge. The people in charge do not give a crap about doing the right thing. It's all posturing and taking photes in a shirt would rolled up sleeves to show how hardworking you are. And the problem is that the other part seems to be equally clueless.

Somehow, this was all obvious that the UK is going in the wrong direction for a very long time now. So obvious that a random guy on YouTube was talking about it for over a year now. But hey, let's just keep increasing wages by 12% Or maybe 20% Or 100% It? Why not 500% Who cares that you'll need a wheelbarrow to replace your wallet?.