Ed Conway Profile picture
Jun 21, 2023 19 tweets 7 min read Read on X
🧵
Why is Britain facing higher inflation than any other G7 member?
How did the @bankofengland get so far behind the curve?
Why will UK households end up facing higher interest rates than anyone expected a few years ago?
Best place to begin: cucumbers.
Yes, really: cucumbers
🥒
For not only is the cucumber one of Britain’s great vegetable stables, the iconic filling in sandwiches at tea parties up and down the land, its story also tells you rather a lot about the economic pickle we’re in right now (pun intended). Image
You’ve prob noticed the price of cucumbers has risen. A lot. That’s borne out by official data👇
Average price of a cucumber hovered around 50p for most of the past decade or so. It’s now up to 83p, according to this morning’s data (NB these are averages. Cucumber prices vary) Image
There’s something else important to note about that chart: while cucumber prices today are pretty high vs recent years, if anything the real outlier was the past decade or so.
Look at the (v rough) trend line I’ve drawn.
Actually cucumber prices were v depressed up til recently Image
Why? It’s partly a story of technology and partly a story of economics.
The economics first: supermarkets have been in a long and drawn out price war. Wholesalers have been selling much fruit & veg for below cost price to increase market share. Hurrah, cheaper cucumbers! Image
Then there’s the tech, mainly the way they’re grown.
These days nearly all domestic cucumbers are grown in massive greenhouses. “Controlled environment agriculture” is the big new thing in farming.
Massive glass houses, kept at perfect temperatures, plants fed on hydroponics Image
I wrote a bit about this last year in a thread abt tomatoes.🍅 In short, these greenhouses are a BIG deal: an increasing proportion of our food comes from them.
Much of the technology was developed in the Netherlands, where large parts of the country are covered, lit up at night
Those greenhouses grow tomatoes, peppers, aubergines and, most of all (in the UK) cucumbers.
But they’re VERY energy intensive to run.
You need lots of gas to heat them, lots of fertilisers 👇and they’re also fed with CO2 from the gas boiler. It’s a fossil fuel business! ImageImage
These technological leaps meant growers were able to generate even more veg from ever smaller inputs. You could be more forensic with chemical interventions, spend less on fertilisers, charge less for your veg.
We all benefited: in 2016 the avg cucumber was CHEAPER than in 1988!
We all know what happened next.
Since cucumbers are a fossil fuel product when the price of those fossil fuels rose, suddenly the greenhouses were too expensive to run. Growers stopped growing.
Here’s an abandoned cucumber greenhouse I visited last May.
Still abandoned this year Image
For the second year in a row, half the greenhouses in the Lea Valley are empty.
Similar story in the Netherlands.
High gas prices are killing the greenhouse growing sector. Supermarkets aren’t helping either - they’re only paying for cheaper varieties
Nor is Brexit helping - it’s making it harder to find cheap labour. And cheap labour is what you need to pick tomatoes - esp the more expensive varieties like on the vine cherry tomatoes.
So no-one’s growing this stuff here anymore. Mainly the cheaper stuff. In smaller quantities Image
Upshot is we’re having to import ever more cucumbers (and tomatoes and peppers etc) from overseas.
From Spain and Morocco, from Egypt and Greece.
But there are problems there too.
Some of these countries have had tough harvests. And Brexit means more paperwork to get the stuff in
Anyway, put all of this together and it shouldn’t be surprising that 🥒cucumber inflation is going through the ROOF.
Look: cucumber prices are up around 50% in the past year! Highest rate in many, many years. Far higher than wider food price inflation. Image
So why should you care about any of the above?
One big reason:
Most of this stuff shouldn’t have been a surprise!
It was all v predictable!
All you needed to do was look at the world from the bottom up - not the top down…
And understand how we make & get the stuff we consume…
The problem is: the @bankofengland and for that matter nearly all conventional economists, DIDN’T do that.
They trusted their economic models which took no account of this stuff👆. Upshot was they totally missed the inflationary spike.
And now they’re behind the curve… Image
And because inflation is contagious, now it’s spreading through the system.
Even if cucumber & food prices come down, people have gotten used to paying higher prices and so higher prices are being set and paid across the economy, wages too.
Inflation has become STICKY
And we’re all going to feel the consequences. The @bankofengland is now expected to raise interest rates to 6%, a level at which millions of households will face the biggest mortgage squeeze since the late 1980s - possibly ever.
It will be grim for many.
And all because the @bankofengland and others didn’t understand where cucumbers come from 🥒
But it doesn’t have to be this way.
We can and SHOULD think about the world differently.
From the bottom up. Not just top down.
That’s what my new book’s all about lnk.to/MaterialWorld

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More from @EdConwaySky

Mar 27
🚨
The Chinese owners of British Steel say they are now considering shutting their blast furnaces and end steelmaking at Scunthorpe in early June - only a few months away.
It would mean an end of virgin steelmaking in the country that invented it during the industrial revolution
British Steel say the main question now is timing: whether the operations will close in June, in September or later.
It says tariffs are one of the reasons the blast furnaces are "no longer financially sustainable".
Press release 👇 Image
The news means @jreynoldsMP faces two interlocking crises in the coming months:
1. The imposition of US tariffs on an ever growing segment of British exports
2. The end of virgin steelmaking (the UK would be the first G7 country to face this watershed moment).
This is big stuff
Read 5 tweets
Mar 25
Donald Trump just announced 25% tariffs on anyone importing oil from Venezuela.
This is odd.
Because the country importing the most crude from Venezuela is... the US.
Capital Economics chart of Ven oil exports by Capital Economics via @rbrtrmstrng
But it raises a bigger point
🧵 Image
Why does the US import so much oil from Venezuela?
Mainly for the same reason it imports so much oil from Canada.
And no it's not just because they're close.
It's because most US refineries are set up to refine the kind of oil they have in Venezuela and Canada.
To understand this it helps to recall that crude oil is actually a broad term. There are LOTS of different varieties of crude - a function of the geology of where the oil formed and the organic ingredients that went into it millions of years ago.
It's called "crude" for a reason
Read 14 tweets
Mar 23
🚨
Here's a thread about ALUMINIUM.
Why this commonplace metal is actually pretty extraordinary.
How the process of making it is a modern miracle...
... which also teaches you some profound lessons about the trade war being waged by Donald Trump. And why it might be doomed.
🧵
Aluminium is totally amazing.
It's strong but also very light, as metals go.
Essentially rust proof, highly electrically conductive. It is one of the foundations of modern civilisation.
No aluminium: no planes, no electricity grids.
A very different world. Image
Yet, commonplace as it is today, up until the 19th century no one had even set eyes on aluminium. Unlike most other major metals we didn't work out how to refine it until surprisingly recently.
The upshot is it used to be VERY precious. More than gold!
Read 36 tweets
Mar 21
🚨TARIFFS🚨
Here's a story that tells you lots about the reality of tariffs both for those paying them & those hoping to benefit from them.
A story of ships, storms, bad luck and bad policy.
It begins a week and a bit ago, with a man frantically refreshing his web browser...
🧵
That man is Liam Bates.
He runs the UK unit of a steel company called Marcegaglia. They make stainless steel - one of the most important varieties of this important alloy. The method of making it was invented in Sheffield. And this company traces its DNA back to that invention. Image
Watching the process is TOTALLY amazing.
They tip a massive amount of scrap: old car parts, sinks etc, into a kind of cauldron and then lower big glowing electrodes into it.
Then flip the switch.
⚡️Cue a massive thunder sound as a controlled lightning storm erupts inside it.
Read 15 tweets
Feb 24
🧵Three years ago, when Russia invaded Ukraine, EU, UK and other nations vowed to wage economic war, via the toughest sanctions in history.
So... how's that going?
We've spent months documenting what ACTUALLY happened. Here's a thread of threads on the REAL story on sanctions...
1. Flows of dual use items, including radar parts, drone components and other parts used by Russia to kill Ukrainians, carried on from the UK and Europe to Russia, via the backdoor (eg the Caucasus & Central Asia)
2. Of all the goods sent by the UK to Russian neighbours, few were as significant as luxury cars.
Having sanctioned Russia (the idea being to starve Putin's cronies of luxuries) Britain (and Europe more widely) began sending those sanctioned cars in via the backdoor instead
Read 9 tweets
Feb 16
If the main thing the US really wants out of a deal with Ukraine is "50% of its rare earth minerals" then I'm surprised this can't be wrapped up pretty quickly.
Why? Because Ukraine doesn't HAVE many rare earth resources.
Really. As far as anyone knows it's got barely any... Image
Yes, Ukraine has lots of coal and iron and manganese.
It also has some potential sizeable reserves of stuff like titanium, graphite and lithium. Not to mention some promising shale gas.
But of the 109 deposits identified by KSE only 3 are rare earth elements Image
Now in one respect I'm making a pedantic point: a lot of people say "rare earth elements" when they actually mean "critical minerals".
The two aren't the same thing.
Rare earth elements are a v specific bit of the periodic table: actually they're NOT all that rare.
More on them👇
Read 7 tweets

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