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What can Pencils, the Cucumber and Gin Teach Us About Inflation and Consequences?

As we wait for The Bank of England to address the latest inflation miss – consider Pencil Complexity Theory, Cucumber Inflation Modelling and why Wimbledon will be Hell this year.  

Blain’s Morning Porridge 22nd June 2023:  What can Pencils, the Cucumber and Gin Teach Us About Inflation and Consequences?

“A perfect martini is made by filling a frozen glass with chilled gin then waving it in the general direction of Italy.”

As we wait for The Bank of England to address the latest inflation miss – consider Pencil Complexity Theory, Cucumber Inflation Modelling and why Wimbledon will be Hell this year.  

There is a school of economic thinking that, for want of a better term, I shall call “How to make a Pencil”.

It has evolved into Pencil Complexity Theory. This is based on the observation that constructing the simple pencil from first principles requires a tremendous number of things to happen – planting and growing trees, mining and extracting the ores to refine metals to make the saws to cut them down, building the machines to make the thin graphite core, perfecting the design and production of the pencil sharpener, gluing it all together…

Yet the humble pencil is the core of one of the most sublime explanations of mercantile overkill of all time: “During the space race, the USA spent $11 bln developing a pen that would work in zero-gravity. The Soviet Union used pencils instead.” No matter how hard we try, you can’t digitise a pencil. Nor can an AI startup replace a pencil. Pencil Complexity Theory pretty much explains why the global economy is such a damn mess these days. Nations that can quickly innovate pens, or handle lumps of chalk on blackboards, are set to outperform. What about the UK? Oh dear…

Yesterday I came across a great example of Pencil Complexity in a series of tweets from SKY Economics editor Ed Conway: how The Bank of England would understand inflation better if only they understood the price of cucumbers. It is rather good – it sums up consequences rather well.

I have never been one for the quintessential English summer sandwich, and salads have never featured much in my diet. Except from a peripheral role in a glass pitcher of Pimms, cucumbers have never played much part in my economic thinking either, but cucumber prices provide fascinating insights and analysis into the imminent collapse of the UK:

  • For centuries the price of Cucumbers barely changed – seaonality being the only factor.
  • Prices began to fall early this millennium as deflationary new ways of growing cucumbers were innovated. Vast swathes of the countryside were given over to technologically advanced greenhouses. They were cheap to build and used cheap energy to heat and light the growing tunnels. The price of a domestically produced cucumber in 2021 was less than a cucumber in 1988 – joy to sandwich makers and Pimms drinkers.
  • Then came the energy shock – the greenhouses became too expensive. The Russians destroyed the English Summer Season overnight. The greenhouses were shut down. They are still shut.
  • The UK now imports cucumbers from overseas, generating multiple Brexit and import frictions. Cucumbers have doubled in Price. They are no longer British. Crispy duck sandwiches have become ruinously expensive.
  • The Bank of England’s very complex inflation modelling failed to predict any of the above consequences.

Without cucumbers Wimbledon will be hell.

Food inflation last month was 20%. It is still 19%.. We are so doomed. Headline inflation is stuck at 8.7%. Core inflation (stripping out food and energy) rose to 7.1%. Everyone is demanding wage rises to cope. Companies are engaging in Greedflation – trying to pump up prices. The City is demanding action….All eyes on the Bank of England – they could hike a point today and frankly who would be surprised..? Well.. I would. It would infer they are awake.

As inflation threatens to engulf the nation, this morning the UK’s political leadership stands on the edge of a precipice (about to step forward if Rishi Sunak has any sense of what is coming his way), we are close to industrial collapse, social revolution hovers in the air, and it’s pretty much the end of everything… Only the cockroaches and HRMC will survive. It all the fault of these very, very clever chaps in The Bank of England who couldn’t model, and didn’t understand the consequences of the Ukraine energy shock and energy prices upon the actual real economy that makes and sells stuff…

Well… maybe not quite as bleak as all that….

As we caught a late train home last night we had a very jolly carriage full of folk who’d spent the day at the Ascot Races or Queens tennis. They were all very “happy” if you get my drift.  They acknowledged cucumber sandwiches were something of a problem – but were quite willing to suspend their disbelief and, after a few Pimms, would quite willingly take out second mortgages to buy a round of them.

Which pretty much explains the UK’s addiction to borrowing, the fact the debt/GDP ratio is over 100%, shoplifting is emptying shops faster than paying customers, everyone thinks interest rates rising to quosh demand is the only answer.

As always, during times of economic and market hyperbole it’s important to remind readers of my trading mantra: “Things are never as bad as you fear, but never as good as you hope.”

Except… maybe sometimes they feel like they are. Economies are all about confidence. And the UK increasingly feels like we’ve had the stuffing of Economic confidence kicked out of us. Real Wages haven’t risen in nearly 20 years. People are more in debt than ever. Savers receive nothing for saving. Every single service in the country feels worse. The NHS is disappearing into a ravening maw of ever more expensive and less meaningful bureaucracy. The much maligned railway to nowhere – ok, Birmingham and maybe Manchester – is going to cost more than the total amount of gold ever mined and will be decades late, and it won’t even start in London, but from somewhere closer to Devon.. apparently. (It’s a railway FFS! What is so difficult about a railway..?? We’ve been building them for 190 years…????)

Calm down. Where are my pills…

Although 1.7 million homeowners are going to struggle to pay their mortgages with zero savings left to fall back on, government ministers are confident bank stress and affordability tests on these borrowers mean very few of them will be foreclosed on.. So absolutely no reason to fear a housing collapse, millions of homeless voters, or a run on UK banks. Wow… if a government minister is telling me it wont happen that’s something definitely not to worry about. (US Readers – obvious dripping sarcasm alert.)

The thing is… housing costs, burgeoning rents, inequality and the sheer bloody misery of it all… we’ve seen it all before. We’re a resilient nation. Sometime in the next 18 months we will cheer up, buoyed and happy because the useless Conservatives will be out of power, and the (probably) equally useless Labour Party is in power. Bring it on. (I suspect Labour may be marginally less useless than the current shambles, but if I was Starmer I’d offer Rishi a job..)

With renewed vigour, our new government will get back the critical business of national reconstruction by ostentatiously not building railways, not fixing the NHS, and not filling-in potholes. They will assiduously strive to not sort the housing or rental crisis, and we Brits will all be happy because living in this happy, bejewelled Island Set in a Silver Sea where nothing really works very well.. because it is still simply the very best place to ever be.. No matter how pathetically useless we are, or the fact our economy is now smaller than Moldova.. (don’t ask), we will smile at being beaten in Tennis, Golf, Cricket or whatever.

To cheer everyone up, here is a rather fun film, The Official Wimbledon Throw. My son Jack produced it with the God of Martini, Alessandro Palazzi, Head Barman of Dukes, and Founder and Master Distiller of Sipsmith Gin, the marvellous Jared Brown. (Jack works for Sipsmith.) I had Martinis at Dukes with Jack, Jared and Alessandro last night. Frankly surprised I was able to write a Porridge at all this morning..

Five things to read this morning:

FT                    How high will UK interest rates go?

Guardian         Labour piles pressure on Sunak with plan to prevent “mortgage catastrophe”

Bloomberg      Sunak Struggles to Contain Tory Anxiety over UK Mortgages

WSJ                 Biden’s Trade Challenge: Kicking the China Dependency Habit

Zerohedge       These are the world’s most competitive economies – US 9th, UK -?

Out of time, and back to the day job..

Bill Blain

Strategist – Shard Capital


  1. I do enjoy Bill’s writing. I may not always agree with his analysis (although I do here), but it is always a pleasure to read.

  2. Good to see Alessandro has made his way into Morning Porridge. No better cure to an economic headache…

    • Dennis is a menace with his anyone for NFTs
      Beseeching me to come and keep the score..
      And Maud says oh, lord I’m so terribly bored…

      Or something like that…

      the reality is in time like this fraud multiplies to pray on the scared and fearful..

  3. A decade of austerity and now some Tory MPs are suggesting we now need a recession to cure inflation. 🤦‍♂️

  4. Bill

    As always, Morning Porridge was cause for thought and looking at the markets through a different lens. Thanks

    The Official Wimbledon Throw was brilliant. I also watched the entire Series on Sipsmith. Good stuff. Is it available on the side of the Pond.

    I have stayed at the Caledonian Club for many years when in London. Before that, I stayed at the Dukes two or three times a year for the better part of 15 years. Absolutely wonderful old London Hotel but the Duke’s Bar and the Perfect Martini made the Martini (prepared properly in accordance with Duke’s mandates) my go to thought juice, second only to a good Highland Single Malt.

    Sorry for the long comment.

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