The Old Lady is in a sticky spot. Inflation is at a 40-year high and an early 1990s-style recession looms. The UK has a tight labour market, like the US, and an energy shock, like the eurozone. Finding an escape route may be further complicated by the unorthodox economic policies of Liz Truss, the candidate likely to become the next prime minister.
Tax cuts are set to be an important feature of the Truss premiership. That, as her rival Rishi Sunak argues, is likely to stoke inflation and put upward pressure on interest rates. Nigel Lawson, chancellor in the Thatcher government, draws parallels with the 1972 “dash for growth” Budget that was followed by years of high inflation.
In that era, gold outperformed. Its value increased almost seven-fold in real terms. Commodities like oil and wheat also did well. The dismal performance of equities showed they were a feeble hedge against inflation.