Why, why, why did the Tory MPs who were anti-Truss back Rishi? All the polls said Truss would beat him. If they didn't want Truss they had to back either Kemi or Penny. I doubt either of them would have done as badly as Truss has so far. I said at the time they had made a mistake.
It was a bit like in 2015 when Labour MPs nominated Corbyn to open up the debate. In both situations they were thinking tactically rather than strategically.
That - plus it is proving less that ideal that Wallace didn't stand.
I normally greatly enjoy turmoil and chaos (I still have the Jan 6 debacle on my Sky box) but I am struggling to derive any broken joy from whatever the fuck this is because I don't understand it.
Me too. Listening to the radio the only sensible thing would be to bring Rishi back. Ideally as PM but Chancellor would do. He predicted this with a megaphone. He must be laughing himself stupid
What on earth is the message going to be at the Conference next week?
Sunak will be looking like the cat that got the cream.
He maybe more likely he is extremely worried
This ends Kwarteng and Truss time in office, if not now very shortly
Why on earth would that worry Sunak ?
His time as Chancellor is looking absolubtely amazing.
To be fair he must be horrified and frankly conservative mps need to move him in fast as PM
Not happening, he has just been rejected by the membership and failed to win a majority of MPs even I the final round.
At most if Truss went he might come back as Chancellor if Wallace was given a coronation as PM
He hardly matter as the conservatives party are facing utter humiliation after the next GE and at least we can be happy to see the end of JRM, Dorries, Redwood, and most if not all the ERG
The conservatives will be out of office until these incompetents are cleared out
I normally greatly enjoy turmoil and chaos (I still have the Jan 6 debacle on my Sky box) but I am struggling to derive any broken joy from whatever the fuck this is because I don't understand it.
Me too. Listening to the radio the only sensible thing would be to bring Rishi back. Ideally as PM but Chancellor would do. He predicted this with a megaphone. He must be laughing himself stupid
He must be mightily relieved that he isn't in Truss's cabinet.
I genuinely thought the Tories could not find a worse leader than Boris Johnson. How wrong I was.
Sorry to say, that I repeatedly told my mates down the pub that much as we all loathed Johnson over the lying, the replacement would end up being worse.
I had no idea the replacement would be this many light years worse.
What the hell have they done. Where are the Tory MPs who need to shout as loud as possible and get these two idiots out
I'm still struggling - really struggling - to see why a tax cut worth at most £2 billion has caused such an extreme reaction. It seems utterly irrational.
They should have stamped on this 'its the 45p tax cut' bullshit right at the start. It might be a twatty policy but it is not responsible for what is happening.
The market - the thing that is the problem - says it is responsible.
So, who might be right here? The market - the thing taking the action and saying "its the 45p rate" Or you?
The market isnt saying that. They might be saying the whole package, they might be saying any additional borrowing. They are not saying 'reverse the 45p tax decision and its all good' The IMF were very clearly saying to change the dnergy freeze plan 'support that is more targetted' So, no, its not the 45p alone wot dunnit
I genuinely thought the Tories could not find a worse leader than Boris Johnson. How wrong I was.
Sorry to say, that I repeatedly told my mates down the pub that much as we all loathed Johnson over the lying, the replacement would end up being worse.
I had no idea the replacement would be this many light years worse.
My error was to believe there was some level of residual sanity and decency inside the Conservative party. I was a fool.
I genuinely thought the Tories could not find a worse leader than Boris Johnson. How wrong I was.
Sorry to say, that I repeatedly told my mates down the pub that much as we all loathed Johnson over the lying, the replacement would end up being worse.
I had no idea the replacement would be this many light years worse.
I'm told by a city source it's hard to overstate how serious the situation is today. There is concern over the health of pension funds and this is why the Bank of England has acted...
This is a self inflicted financial crisis by the Truss government. Quite something
I find this a little hard to believe. The rise in gilt rates over the last week has been huge. This significantly reduces the capital that pension funds need to meet their liabilities to their members because they need to buy fewer gilts to meet the pension payments. Most pension funds of any size will also have reasonable investments in the US in particular and they are getting the upside of sterling weakness in that their assets their are getting a boost.
Of course, the rise in gilt rates, mortgage rates and the imported inflation of a fall in sterling are all bad things for the domestic economy so there are lots and lots of good reasons to be worried but pension funds are unlikely to be on the list.
The strong suggestion from so many of the "oh fuck" tweets this morning is that as yields skyrocket, the number of buyers collapse. If your £100 worth of gilt has no buyer, what is its value?
This is what killed the banking sector in 2008. A balance sheet full of assets with healthy paper values but no buyer = zero.
If you are sitting on a lot of gilts you have a serious problem. If you have a long dated gilt offering 2% its value may be down nearly 50%. Obviously for shorter dated gilts the risk would be less because you will get your capital back sooner. But I think the demand for gilts by pensions not yet in payment will be quite modest, they have been a crap investment ever since inflation took off. Liquidity in the gilts market has been an issue for most of this year.
There also used to be a saying in the City about not trying to catch a falling knife. That effectively is what the BoE is doing today. What could possibly go wrong?
What on earth is the message going to be at the Conference next week?
I honestly don't know. This is such a huge fuck up, having the central bank essentially tell them they're a bunch of dickheads and have pushed the UK economy to the brink of crisis is pretty terrible.
BOE buying gilts indemnified by the government via gilt issuance because the market has lost faith in gilts, while the currency is in free fall, mortgage lending has shut down, inflation at 10%... We are heading for potentially the worst economic crisis in the UK in my lifetime.
This is what 25 years of Treasury orthodoxy has led to. It's all very well blaming the event that triggered it, but you shouldn't be in denial about the underlying issues it has exposed.
Why, why, why did the Tory MPs who were anti-Truss back Rishi? All the polls said Truss would beat him. If they didn't want Truss they had to back either Kemi or Penny. I doubt either of them would have done as badly as Truss has so far. I said at the time they had made a mistake.
It was a bit like in 2015 when Labour MPs nominated Corbyn to open up the debate. In both situations they were thinking tactically rather than strategically.
So, after almost 60 years, the Tory economic mythology of modern Britain is finally broken.
After successfully recasting our last trip to the IMF as purely the result of "socialist profligacy and decadence" for almost six decades, when in fact a key contributor was a Tory budget by Anthony Barber very much like Kwarteng's earlier in the decade, we could soon be going back to the IMF in the shadow of a very similar Tory event.
It's as much the end of an era and the start of a new one as the Queen's passing was.
I just discovered something called a "mortgage prisoner" today. My work has been so focused on renters and benefit claimants in the past, it's a bit of a shock doing poverty analysis on non-claiming mortgage holders.
Back of envelope doesn't look good. There are definitely some tipping points on interest rates which dump disproportionate numbers of households into the red/poverty.
Negative equity will be back and what a background for the next GE
I know some will be surprised for me to say this but an early GE and Starmer in No 10 would be a relief
And another one on the turn. Labour landslide incoming!
I just discovered something called a "mortgage prisoner" today. My work has been so focused on renters and benefit claimants in the past, it's a bit of a shock doing poverty analysis on non-claiming mortgage holders.
Back of envelope doesn't look good. There are definitely some tipping points on interest rates which dump disproportionate numbers of households into the red/poverty.
If "mortgage prisoner" is someone who can't move without taking an unaffordable loss, then I was one for a decade.
How did you manage that? I didn’t think you were old enough to have bought then.
I just discovered something called a "mortgage prisoner" today. My work has been so focused on renters and benefit claimants in the past, it's a bit of a shock doing poverty analysis on non-claiming mortgage holders.
Back of envelope doesn't look good. There are definitely some tipping points on interest rates which dump disproportionate numbers of households into the red/poverty.
If "mortgage prisoner" is someone who can't move without taking an unaffordable loss, then I was one for a decade.
We are defining it as someone who has kept up with payments on a mortgage in a closed book, and for whom it would be beneficial to switch mortgage, but their mortgage or risk characteristics mean they cannot jump to the better deal. A result of regulatory change after 2008.
I'm told by a city source it's hard to overstate how serious the situation is today. There is concern over the health of pension funds and this is why the Bank of England has acted...
This is a self inflicted financial crisis by the Truss government. Quite something
I find this a little hard to believe. The rise in gilt rates over the last week has been huge. This significantly reduces the capital that pension funds need to meet their liabilities to their members because they need to buy fewer gilts to meet the pension payments. Most pension funds of any size will also have reasonable investments in the US in particular and they are getting the upside of sterling weakness in that their assets their are getting a boost.
Of course, the rise in gilt rates, mortgage rates and the imported inflation of a fall in sterling are all bad things for the domestic economy so there are lots and lots of good reasons to be worried but pension funds are unlikely to be on the list.
Pension funds don't suddenly hold bonds that are paying out more interest.
They are holding bonds that have now gone down in value.
& if they used those bonds as collateral for interest rate swaps or other financial instrucments, their counterparties expect them to post more liquid collateral which they a) might not have and/or b) puts the rest of the fund at risk.
Could be very dicey for some closed final salary pension schemes I’m told.
We are where we are. Question is what happens now. Hopefully the BofE intervention buys us time, but as market commentators are already saying it hasn't fixed the underlying collapse in confidence and other acute crises will surface.
I was going to post "I don't care about the politics" but actually I do - because it is important. In every other great financial crisis, the government takes it very seriously, is seen to be tackling both the immediate issue and the drivers behind it. This time, we have the opposite. A "no comment" government and its sneering coterie snarling and hissing as it blames absolutely everyone else for the crisis including the markets themselves.
Even worse, this will go on into next week. A triumphant Tory conference as Truss and her idiots sneer about having taken control and brought back True Conservatism. Boasts from the Chancellor and PM about how their ideas are superior. John Fucking Redwood lauded as a sage by a giffer gathering on the fringe.
Instead of saying "this is a crisis, we are working flat out to resolve it", this lot will keep throwing petrol on the bonfire that is our economy. To bring it back to politics, this is important. Because apparently Obi-one Sunak is our Last Hope. And we need Tory MPs to recognise just how perilous things now are and remove Empress Truss from the throne. Quickly.
An existential threat to our pensions. Today. And some berks keep posting "I don't understand, the markets are wrong".
Kwarteng and Truss have virtually assured a labour government in 2024 and at the same time put the perceived mortgage rate rises at their door, when in truth the bond market worldwide is being routed through the authorities aggressive rise in interest rates as inflation is being fought against everywhere . It is likely about 1% has been added because of the kamikaze behaviour of Kwarteng but even if Starmer had been in no 10 he would be looking at a housing crisis that is hard to see how it is mitigated
I am old enough to remember negative equity and it looks as if this could return over the next few yeaes, but sadly we have become used to very low interest rates which look like being returned to more normal ones and yes many will be affected but we are not immune to worldwide events
Labour have had a good conference but the one thing missing is that they have failed to understand that the economy in 2024 is going to be in a very poor place, and ironically they may well have to raise taxes and reduce public sector spending by an amount that to a Labour party will be very difficult
I do not defend Kwarteng or Truss but at the very least she needs to sack Kwarteng if she wants to have any chance of surviving , and she has a ready made successor she knows only too well, one Rishi Sunak
The obvious pivot - which Starmer and his team have hinted at already - is how we rebuild after the Great Truss Financial Crisis. We invest, and gain a return on that investment. Some of that investing will need to come from government and he's already announced the first StateCo to do energy. Much will need to come from the private sector, and as they are always looking for something sane to put money in there will be plenty of opportunities.
This final phase of Torynomics will kill dead the stupidty of "who will pay for that" and "what will you cut to find the money". Investment had been turned by the Tories into a dirty word. Their spivvy hedgie friends don't want investment, they just want to turn a quick profit now and not care about tomorrow.
That has to end. So many of the things this country needs - infrastructure, hospitals and schools fit for purpose, sustainable self-reliant energy generation - deliver both a long-term positive ROI but a short-term boost when money goes to pay people to build stuff who then pay taxes and spend. Which gives other people jobs.
We used to call it capitalism. Starmer will lead us back there.
In normal times yes but 2024 will not be normal
As far as GB Energy is concerned it is modelled on EDF in France who have just had a 15 billion buy out by Macron and Lucy Powell this morning simply was wholly unconvincing in her explanation about its funding
Its pretty simple: 1. UK needs a big expansion in generating capacity 2. Instead of paying a foreign company to install, own and manage this, the UK will create its own company to do so 3. Instead of buying all of the components from abroad, the UK will promote UK manufacturing to supply turbines and solar panels.
The money will be spend regardless. Because there is no scenario where "sorry, we can't afford to create the generating capacity we need, we'll just have to have brownouts instead"
Also, France's issues this summer stemmed from the fact loads of their nuclear power stations were on rivers which obviously dry up somewhat in a heatwave. Sea level rises are quite predictable beyond the lifespan of any nuclear plant so it's not an issue we'd encounter as ours are all by the sea.
There are some things we cannot afford not to do. Energy generating capacity is a pertinent example - we either invest or we suffer both brownouts and crazy spot price gouging. So the money is being spent regardless - do we hand this over to the French government or the Swedish government, or copy their successful examples and do it ourselves?
With our geographic location and our tech / industrial abilities we should be a global leader in renewables. Instead the market and a "government involvement is communism" mindset means we are nowhere. If we're to spend the money - and we are - why not have something to show for it other than just the infrastructure?
It is more or less what I was advocating on here a couple of days ago, except I thought of renationalisation of existing companies rather than setting one up from scratch.
Personally, I like SKS's idea. The UK needs control of its critical infrastructure rather than bleeding money to foreign owners
Why renationalise any of them? We have regulated markets. Simply regulate them so that the new StateCo is in prime position and let the private sector decide whether it wants to play in a competitive market instead of the protected cartels we have now.
Big_G and DavidL have raised concerns and they are understandable to a point. But the only way we will ever regain our ability to manufacture, install and manage wind turbines is if we do so. And there is something seriously pathetic about an argument that Britain is unable to do the basics that somewhere like Sweden can and its too hard / risky for us to repair that position so that we can.
So much for global Britain. Some on the right would have us an eternal supplicant.
The problem with that is that StateCo becomes the new cartel, and when it fails to work properly the industry - and hence all of us - are screwed. This has happened time and time again.
You also seem to be in favour of protectionism?
The problem with state owned monopolies is that
- they tend to producer interest. If you are state defined monoply, fucking the customers over is the sensible option. 6 week waits for installing a telephone were good for BT. Think DVLA….
- investment tends to be controlled for political interest. Locations for one. Long term investment vanishes - why spend money to bear fruit after the next election?
Ultimately they see producing the service as irritating byproduct of their existence. See the Yes Minister episode about the best hospital in the NHS. The one with no patients.
I'm at a loss at all the DVLA stories, For the simple stuff things are done in minutes automatically and then sent in days...
What is left and takes time is the complex bits...
My Dad (83) had his driving licence withdrawn after an eye test in Dec, midway between cataract surgery (both eyes, completed in Jan). It took 8 months to get it back, despite his eyesight being fine in January. There have been stories of staff refusing to return to the office because covid. Utter shambles. MP was useless, didn't even answer emails for help.
One thing they could do is stop the requirement to send your driving licence to them when you get penalty points. There is simply no reason for doing this, as licences don't actually show the points. Yet it creates a time consuming paper trail for no reason.
There’s absolutely no way Truss recovers any confidence from this. It’s not like she didn’t spend weeks before becoming PM saying she’ll do exactly the kind of crazy thing she’s done.
No one will trust her. Her credibility is shot.
There is a precedent for someone who came in, lost market confidence, but then went on to serve 14 years at the top: François Mitterrand.
If I was a Tory as we enter the mushroom season I would find your loyalty embarrassing
What the hell have they done. Where are the Tory MPs who need to shout as loud as possible and get these two idiots out
I'm still struggling - really struggling - to see why a tax cut worth at most £2 billion has caused such an extreme reaction. It seems utterly irrational.
They should have stamped on this 'its the 45p tax cut' bullshit right at the start. It might be a twatty policy but it is not responsible for what is happening.
The market - the thing that is the problem - says it is responsible.
So, who might be right here? The market - the thing taking the action and saying "its the 45p rate" Or you?
The market isnt saying that. They might be saying the whole package, they might be saying any additional borrowing. They are not saying 'reverse the 45p tax decision and its all good' The IMF were very clearly saying to change the dnergy freeze plan 'support that is more targetted' So, no, its not the 45p alone wot dunnit
The IMF is not the market, though. The argument for the energy action is that it would take too long to work out a targeted policy, and failing to put something in place would cause economic problems in itself, so the stimulus measure is sensible. But the corollary of that is that some of the benefits to the better off would need to be clawed back. Cutting taxes is the opposite of that.
There’s absolutely no way Truss recovers any confidence from this. It’s not like she didn’t spend weeks before becoming PM saying she’ll do exactly the kind of crazy thing she’s done.
No one will trust her. Her credibility is shot.
There is a precedent for someone who came in, lost market confidence, but then went on to serve 14 years at the top: François Mitterrand.
If you think Truss is an equal politician to Mitterand then I have a bridge to sell you.
Je connus François Mitterrand. Premier ministre, tu n'es pas François Mitterrand.
So, after almost 60 years, the Tory mythology of modern Britain is broken.
After successfully recasting our last trip to the IMF as purely the result of "socialist profligacy and decadence" for almost six decades, when in fact a key contributor was a Tory budget by Anthony Barber very much like Kwarteng's, we could soon be going back to the IMF in the shadow of a very similar Tory event.
It's as much a new era as the Queen's passing is.
Ironically, I don't think Callaghan actually needed the IMF funds, perhaps in part because of restored confidence.
I believe 76-77 was the only time in NHS history with real cuts rather than inadequate increases .
There’s absolutely no way Truss recovers any confidence from this. It’s not like she didn’t spend weeks before becoming PM saying she’ll do exactly the kind of crazy thing she’s done.
No one will trust her. Her credibility is shot.
There is a precedent for someone who came in, lost market confidence, but then went on to serve 14 years at the top: François Mitterrand.
If you think Truss is an equal politician to Mitterand then I have a bridge to sell you.
Coincidentally there's a bridge here in Oxford that has been closed for a couple of years because the truss has failed.
There’s absolutely no way Truss recovers any confidence from this. It’s not like she didn’t spend weeks before becoming PM saying she’ll do exactly the kind of crazy thing she’s done.
No one will trust her. Her credibility is shot.
There is a precedent for someone who came in, lost market confidence, but then went on to serve 14 years at the top: François Mitterrand.
Yes but Mitterand was a Socialist President, his core support was less worried what the markets thought. By the end of his term he was also in cohabitation with the centre right who controlled the legislature
I'm told by a city source it's hard to overstate how serious the situation is today. There is concern over the health of pension funds and this is why the Bank of England has acted...
This is a self inflicted financial crisis by the Truss government. Quite something
I find this a little hard to believe. The rise in gilt rates over the last week has been huge. This significantly reduces the capital that pension funds need to meet their liabilities to their members because they need to buy fewer gilts to meet the pension payments. Most pension funds of any size will also have reasonable investments in the US in particular and they are getting the upside of sterling weakness in that their assets their are getting a boost.
Of course, the rise in gilt rates, mortgage rates and the imported inflation of a fall in sterling are all bad things for the domestic economy so there are lots and lots of good reasons to be worried but pension funds are unlikely to be on the list.
The strong suggestion from so many of the "oh fuck" tweets this morning is that as yields skyrocket, the number of buyers collapse. If your £100 worth of gilt has no buyer, what is its value?
This is what killed the banking sector in 2008. A balance sheet full of assets with healthy paper values but no buyer = zero.
If you are sitting on a lot of gilts you have a serious problem. If you have a long dated gilt offering 2% its value may be down nearly 50%. Obviously for shorter dated gilts the risk would be less because you will get your capital back sooner. But I think the demand for gilts by pensions not yet in payment will be quite modest, they have been a crap investment ever since inflation took off. Liquidity in the gilts market has been an issue for most of this year.
There also used to be a saying in the City about not trying to catch a falling knife. That effectively is what the BoE is doing today. What could possibly go wrong?
Indeed. But a lot of pension funds are sat on a lot of gilts. A solid long-term bet. Except that now the market has had a collapse of confidence in said gilts, they have a serious balance sheet problem. Sam Coates reports "Banks are forcing them to make margin calls and liquidate assets". To create cash. To bake their balance sheet balance.
Thanks to your government, our pension funds are sat on investments that are now worth a lot less than they need to be. That is an existential crisis both to the funds and to the pensions they hold. Asset worth less so must sell to raise cash, but nobody will buy so asset value drops again so a bigger raise needed.
That is what almost sank AIG. The amount they needed to raise kept increasing in large chunks quicker than they could hope to raise the first cash ask.
I genuinely thought the Tories could not find a worse leader than Boris Johnson. How wrong I was.
Sorry to say, that I repeatedly told my mates down the pub that much as we all loathed Johnson over the lying, the replacement would end up being worse.
I had no idea the replacement would be this many light years worse.
My error was to believe there was some level of residual sanity and decency inside the Conservative party. I was a fool.
Most of that sanity was thrown out by Johnson.
I cannot believe we are not going to see one or two floor crossings when the Commons reopens.
What the hell have they done. Where are the Tory MPs who need to shout as loud as possible and get these two idiots out
I'm still struggling - really struggling - to see why a tax cut worth at most £2 billion has caused such an extreme reaction. It seems utterly irrational.
They should have stamped on this 'its the 45p tax cut' bullshit right at the start. It might be a twatty policy but it is not responsible for what is happening.
The market - the thing that is the problem - says it is responsible.
So, who might be right here? The market - the thing taking the action and saying "its the 45p rate" Or you?
The market isnt saying that. They might be saying the whole package, they might be saying any additional borrowing. They are not saying 'reverse the 45p tax decision and its all good' The IMF were very clearly saying to change the dnergy freeze plan 'support that is more targetted' So, no, its not the 45p alone wot dunnit
The IMF is not the market, though. The argument for the energy action is that it would take too long to work out a targeted policy, and failing to put something in place would cause economic problems in itself, so the stimulus measure is sensible. But the corollary of that is that some of the benefits to the better off would need to be clawed back. Cutting taxes is the opposite of that.
OK, So its the package of tax cuts thats done it, or rather borrowing to fund them. Not 2 billion for the top rate. Its politically expedient for the opposition to blame that one measure because they support other aspects, but its the whole.
"To achieve this, the Bank will carry out temporary purchases of long-dated UK government bonds from 28 September. The purpose of these purchases will be to restore orderly market conditions. The purchases will be carried out on whatever scale is necessary to effect this outcome. The operation will be fully indemnified by HM Treasury."
A rough translation of which is "come and have a go if you think you are hard enough".
Or, alternatively, rather than going on Black the Bank and the government today have decided to place the economy and our collective savings on number 26.
So, after almost 60 years, the Tory economic mythology of modern Britain is finally broken.
After successfully recasting our last trip to the IMF as purely the result of "socialist profligacy and decadence" for almost six decades, when in fact a key contributor was a Tory budget by Anthony Barber very much like Kwarteng's earlier in the decade, we could soon be going back to the IMF in the shadow of a very similar Tory event.
It's as much the end of an era and the start of a new one as the Queen's passing was.
At least Barber managed to generate a brief economic boom.
In the go-go 21st Century, we seem to have jumped straight to the bust.
There’s absolutely no way Truss recovers any confidence from this. It’s not like she didn’t spend weeks before becoming PM saying she’ll do exactly the kind of crazy thing she’s done.
No one will trust her. Her credibility is shot.
There is a precedent for someone who came in, lost market confidence, but then went on to serve 14 years at the top: François Mitterrand.
If you think Truss is an equal politician to Mitterand then I have a bridge to sell you.
Coincidentally there's a bridge here in Oxford that has been closed for a couple of years because the truss has failed.
There’s absolutely no way Truss recovers any confidence from this. It’s not like she didn’t spend weeks before becoming PM saying she’ll do exactly the kind of crazy thing she’s done.
No one will trust her. Her credibility is shot.
There is a precedent for someone who came in, lost market confidence, but then went on to serve 14 years at the top: François Mitterrand.
Yes but Mitterand was a Socialist President, his core support was less worried what the markets thought. By the end of his term he was also in cohabitation with the centre right who controlled the legislature
My understanding was that he was in temporary cohabitation with half the female population of Paris.
"To achieve this, the Bank will carry out temporary purchases of long-dated UK government bonds from 28 September. The purpose of these purchases will be to restore orderly market conditions. The purchases will be carried out on whatever scale is necessary to effect this outcome. The operation will be fully indemnified by HM Treasury."
A rough translation of which is "come and have a go if you think you are hard enough".
Or, alternatively, rather than going on Black the Bank and the government today have decided to place the economy and our collective savings on number 26.
Disgusting...we have an inflation problem so the bofe rather than raise interest rates does more qe...utterly pathetic Bailey should go
What the hell have they done. Where are the Tory MPs who need to shout as loud as possible and get these two idiots out
I'm still struggling - really struggling - to see why a tax cut worth at most £2 billion has caused such an extreme reaction. It seems utterly irrational.
They should have stamped on this 'its the 45p tax cut' bullshit right at the start. It might be a twatty policy but it is not responsible for what is happening.
The market - the thing that is the problem - says it is responsible.
So, who might be right here? The market - the thing taking the action and saying "its the 45p rate" Or you?
The market isnt saying that. They might be saying the whole package, they might be saying any additional borrowing. They are not saying 'reverse the 45p tax decision and its all good' The IMF were very clearly saying to change the dnergy freeze plan 'support that is more targetted' So, no, its not the 45p alone wot dunnit
The IMF is not the market, though. The argument for the energy action is that it would take too long to work out a targeted policy, and failing to put something in place would cause economic problems in itself, so the stimulus measure is sensible. But the corollary of that is that some of the benefits to the better off would need to be clawed back. Cutting taxes is the opposite of that.
OK, So its the package of tax cuts thats done it, or rather borrowing to fund them. Not 2 billion for the top rate. Its politically expedient for the opposition to blame that one measure because they support other aspects, but its the whole.
But the opposition aren't blaming just that one measure. They are also opposed to the reversal of Sunak's proposed increase in corporation tax. And they want to raise a lot more money from windfall taxes rather than borrowing it all. Not to mention bankers' bonuses.
Rachel Wearmouth @REWearmouth · 6m Punchy yet good humoured speech from Rayner. She says she is using all her Boris Johnson jokes now “while people still remember him” & “before he becomes a footnote in the history of failures”
I genuinely thought the Tories could not find a worse leader than Boris Johnson. How wrong I was.
Sorry to say, that I repeatedly told my mates down the pub that much as we all loathed Johnson over the lying, the replacement would end up being worse.
I had no idea the replacement would be this many light years worse.
My error was to believe there was some level of residual sanity and decency inside the Conservative party. I was a fool.
Most of that sanity was thrown out by Johnson.
I cannot believe we are not going to see one or two floor crossings when the Commons reopens.
The chickens will run at some point.
A neat trick would be sensible Tories in marginal seats defecting en masse.
When Kwarteng-Truss announced their budget, I compared it to someone attempting to escape a loathsome traffic jam: by veering on to the empty but wrong side of the road and driving past everyone at 140mph
"To achieve this, the Bank will carry out temporary purchases of long-dated UK government bonds from 28 September. The purpose of these purchases will be to restore orderly market conditions. The purchases will be carried out on whatever scale is necessary to effect this outcome. The operation will be fully indemnified by HM Treasury."
A rough translation of which is "come and have a go if you think you are hard enough".
Or, alternatively, rather than going on Black the Bank and the government today have decided to place the economy and our collective savings on number 26.
"Whatever scale is necessary" - as if they have unlimited power to control the market!
OK, finance boffins, what's the best realistic case from here?
Suppose KK goes, Truss is allowed to stay on condition that she stays sat at her desk, is very quiet and doesn't touch anything, Rishi returns to No 11...
What does he do? How much worse off are we all compared to the case where Last Week Didn't Happen?
What the hell have they done. Where are the Tory MPs who need to shout as loud as possible and get these two idiots out
I'm still struggling - really struggling - to see why a tax cut worth at most £2 billion has caused such an extreme reaction. It seems utterly irrational.
They should have stamped on this 'its the 45p tax cut' bullshit right at the start. It might be a twatty policy but it is not responsible for what is happening.
The market - the thing that is the problem - says it is responsible.
So, who might be right here? The market - the thing taking the action and saying "its the 45p rate" Or you?
The market isnt saying that. They might be saying the whole package, they might be saying any additional borrowing. They are not saying 'reverse the 45p tax decision and its all good' The IMF were very clearly saying to change the dnergy freeze plan 'support that is more targetted' So, no, its not the 45p alone wot dunnit
The IMF is not the market, though. The argument for the energy action is that it would take too long to work out a targeted policy, and failing to put something in place would cause economic problems in itself, so the stimulus measure is sensible. But the corollary of that is that some of the benefits to the better off would need to be clawed back. Cutting taxes is the opposite of that.
OK, So its the package of tax cuts thats done it, or rather borrowing to fund them. Not 2 billion for the top rate. Its politically expedient for the opposition to blame that one measure because they support other aspects, but its the whole.
But the opposition aren't blaming just that one measure. They are also opposed to the reversal of Sunak's proposed increase in corporation tax. And they want to raise a lot more money from windfall taxes rather than borrowing it all. Not to mention bankers' bonuses.
Bankers bonuses should generate tax, though, shouldn't they?
"To achieve this, the Bank will carry out temporary purchases of long-dated UK government bonds from 28 September. The purpose of these purchases will be to restore orderly market conditions. The purchases will be carried out on whatever scale is necessary to effect this outcome. The operation will be fully indemnified by HM Treasury."
A rough translation of which is "come and have a go if you think you are hard enough".
Or, alternatively, rather than going on Black the Bank and the government today have decided to place the economy and our collective savings on number 26.
Disgusting...we have an inflation problem so the bofe rather than raise interest rates does more qe...utterly pathetic Bailey should go
I have been saying that for a week. The decision of the majority, including him, to vote for a 0.5% increase at the last meeting was the final straw for me. Even without the insanity of Friday a currency crisis was then baked in. And if they had had a hint of what was coming they really should have been even more cautious.
What the hell have they done. Where are the Tory MPs who need to shout as loud as possible and get these two idiots out
I'm still struggling - really struggling - to see why a tax cut worth at most £2 billion has caused such an extreme reaction. It seems utterly irrational.
They should have stamped on this 'its the 45p tax cut' bullshit right at the start. It might be a twatty policy but it is not responsible for what is happening.
The market - the thing that is the problem - says it is responsible.
So, who might be right here? The market - the thing taking the action and saying "its the 45p rate" Or you?
The market isnt saying that. They might be saying the whole package, they might be saying any additional borrowing. They are not saying 'reverse the 45p tax decision and its all good' The IMF were very clearly saying to change the dnergy freeze plan 'support that is more targetted' So, no, its not the 45p alone wot dunnit
The IMF is not the market, though. The argument for the energy action is that it would take too long to work out a targeted policy, and failing to put something in place would cause economic problems in itself, so the stimulus measure is sensible. But the corollary of that is that some of the benefits to the better off would need to be clawed back. Cutting taxes is the opposite of that.
OK, So its the package of tax cuts thats done it, or rather borrowing to fund them. Not 2 billion for the top rate. Its politically expedient for the opposition to blame that one measure because they support other aspects, but its the whole.
But the opposition aren't blaming just that one measure. They are also opposed to the reversal of Sunak's proposed increase in corporation tax. And they want to raise a lot more money from windfall taxes rather than borrowing it all. Not to mention bankers' bonuses.
Yeah, the idea you can go back to a March budget, take out a load of tax rises that were wrong (because it was the wrong mechanism not that we did not need the money), pledge an unspecified enormous amount for energy (required but expensive), and then add further tax cuts to corporation tax, high earners and income tax from April, and think we are only talking about £2bn so why worry is yet another very strange mental contortion from the fan boys.
When Kwarteng-Truss announced their budget, I compared it to someone attempting to escape a loathsome traffic jam: by veering on to the empty but wrong side of the road and driving past everyone at 140mph
I fear we have hit an oncoming bus
And, apparently, it will take months for DVLA to cancel their driving licences.
There’s absolutely no way Truss recovers any confidence from this. It’s not like she didn’t spend weeks before becoming PM saying she’ll do exactly the kind of crazy thing she’s done.
No one will trust her. Her credibility is shot.
There is a precedent for someone who came in, lost market confidence, but then went on to serve 14 years at the top: François Mitterrand.
If you think Truss is an equal politician to Mitterand then I have a bridge to sell you.
Coincidentally there's a bridge here in Oxford that has been closed for a couple of years because the truss has failed.
Oh, which one is that, please?
It’s the pedestrian bridge across the Thames just upstream of Folly Bridge.
I get the impression nobody was maintaining it & the ironwork rusted out. The old railway bridge further upstream has the same problem - the ironwork is clearly rusting out & no-one is keeping up the paintwork in order to stop it getting worse. I guess (but don’t actually know) that there’s some kind of fight over responsibility & the council doesn’t want to pay for it, but if they don’t do it no one else will.
I'm told by a city source it's hard to overstate how serious the situation is today. There is concern over the health of pension funds and this is why the Bank of England has acted...
This is a self inflicted financial crisis by the Truss government. Quite something
I find this a little hard to believe. The rise in gilt rates over the last week has been huge. This significantly reduces the capital that pension funds need to meet their liabilities to their members because they need to buy fewer gilts to meet the pension payments. Most pension funds of any size will also have reasonable investments in the US in particular and they are getting the upside of sterling weakness in that their assets their are getting a boost.
Of course, the rise in gilt rates, mortgage rates and the imported inflation of a fall in sterling are all bad things for the domestic economy so there are lots and lots of good reasons to be worried but pension funds are unlikely to be on the list.
The strong suggestion from so many of the "oh fuck" tweets this morning is that as yields skyrocket, the number of buyers collapse. If your £100 worth of gilt has no buyer, what is its value?
This is what killed the banking sector in 2008. A balance sheet full of assets with healthy paper values but no buyer = zero.
If you are sitting on a lot of gilts you have a serious problem. If you have a long dated gilt offering 2% its value may be down nearly 50%. Obviously for shorter dated gilts the risk would be less because you will get your capital back sooner. But I think the demand for gilts by pensions not yet in payment will be quite modest, they have been a crap investment ever since inflation took off. Liquidity in the gilts market has been an issue for most of this year.
There also used to be a saying in the City about not trying to catch a falling knife. That effectively is what the BoE is doing today. What could possibly go wrong?
Indeed. But a lot of pension funds are sat on a lot of gilts. A solid long-term bet. Except that now the market has had a collapse of confidence in said gilts, they have a serious balance sheet problem. Sam Coates reports "Banks are forcing them to make margin calls and liquidate assets". To create cash. To bake their balance sheet balance.
Thanks to your government, our pension funds are sat on investments that are now worth a lot less than they need to be. That is an existential crisis both to the funds and to the pensions they hold. Asset worth less so must sell to raise cash, but nobody will buy so asset value drops again so a bigger raise needed.
That is what almost sank AIG. The amount they needed to raise kept increasing in large chunks quicker than they could hope to raise the first cash ask.
But this is what I don't understand - there is no way that any Pension funds should be buying anything on margin. So what does it matter if the nominal value of the gilt asset they hold has gone down - if they are liability matched then the whole point of the gilt is to pay out fixed amounts of interest and principal which haven't changed. I'm clearly missing something about this but I really don't see an issue with the long-dated gilt being at the heady heights of (checks...) 4.5%. If there are investors who have been caught with their trousers down then caveat emptor - but I don't see an issue for any pension funds who have been prudent.
Place your bets now for a “this lady’s not for turning either” line in her speech next week. Also look for a lot of “woke” bashing, a push beyond the 20k target on the police, and some numbers around the defence spending commitment.
The markets* are over-reacting, but that’s what markets do and she ought to have been more careful. She now has to try and push through because it’s the only way to have any chance of not dooming herself and her party to election loss. She might have a 50% chance of getting away with it. “If you’re going through hell, keep going”.
*Or more accurately, analysts and traders who generally aren’t very bright and only earn megabucks because too few people understand that their jobs aren’t actually very complex.
"To achieve this, the Bank will carry out temporary purchases of long-dated UK government bonds from 28 September. The purpose of these purchases will be to restore orderly market conditions. The purchases will be carried out on whatever scale is necessary to effect this outcome. The operation will be fully indemnified by HM Treasury."
A rough translation of which is "come and have a go if you think you are hard enough".
Or, alternatively, rather than going on Black the Bank and the government today have decided to place the economy and our collective savings on number 26.
Its perfectly possible that one of the bank's objectives here is to light a fire under the short sellers.
IF you've ever shorted government bonds, you will know that the paper should ideally be synthetically delivered to the buyer via the repo market to reduce costs.
The costs of borrowing paper to deliver are far from fixed and can soar if there are few actual willing lenders or sellers of bonds at a given level, making your short extremely costly to run for any length of time.
What on earth is the message going to be at the Conference next week?
I honestly don't know. This is such a huge fuck up, having the central bank essentially tell them they're a bunch of dickheads and have pushed the UK economy to the brink of crisis is pretty terrible.
BOE buying gilts indemnified by the government via gilt issuance because the market has lost faith in gilts, while the currency is in free fall, mortgage lending has shut down, inflation at 10%... We are heading for potentially the worst economic crisis in the UK in my lifetime.
In your lifetime? Surely it's a lot worse than that. When has it been worse?
2008 to 2011 for starters.
A low sterling to dollar rate is actually good for the UK tourist industry and exporters to the US, even if bad for UK importers and tourists to the US.
After the 2008 crash unemployment reached 8% in the UK, it is now 4%.
In the mid 1970s inflation was also even higher than now
Delusional. This has the potential to be the biggest UK crisis I have ever seen. We run an 8% current account deficit. The currency is tanking. The Bank is having to reverse monetary tightening to prevent the collapse of the gilt market. The government has just unveiled insane fiscal plans that it refused to submit to independent scrutiny. We are financed by foreigners, they have lost confidence in us, completely.
For the average voter the £ tanking against the $ affects them little unless they travel a lot to the US or work for a business that imports a lot from the US. They also have little interest in gilt markets.
Only if unemployment really starts to rise and inflation soars further or there are deep spending cuts to pay for the big tax cuts will it really hit them personally
Place your bets now for a “this lady’s not for turning either” line in her speech next week. Also look for a lot of “woke” bashing, a push beyond the 20k target on the police, and some numbers around the defence spending commitment.
The markets* are over-reacting, but that’s what markets do and she ought to have been more careful. She now has to try and push through because it’s the only way to have any chance of not dooming herself and her party to election loss. She might have a 50% chance of getting away with it. “If you’re going through hell, keep going”.
*Or more accurately, analysts and traders who generally aren’t very bright and only earn megabucks because too few people understand that their jobs aren’t actually very complex.
Well Boris taught them don't resign under any circumstances - it was only 50 odd ministerial resignations that did for him. So that is what has to happen to remove them
OK, finance boffins, what's the best realistic case from here?
Suppose KK goes, Truss is allowed to stay on condition that she stays sat at her desk, is very quiet and doesn't touch anything, Rishi returns to No 11...
What does he do? How much worse off are we all compared to the case where Last Week Didn't Happen?
It's an idiotic position. If we have a change back to sensible economics, then Rishi would be PM in all but name, and the true-blues would go crazy.
We would need to hear from Truss on what she believes her economy plan is.
When Kwarteng-Truss announced their budget, I compared it to someone attempting to escape a loathsome traffic jam: by veering on to the empty but wrong side of the road and driving past everyone at 140mph
I hate to be the kind of poster who just shares Twitter links, but FinTwit is absolutely awash with rumours about several large UK pension funds being insolvent.
The word here is contagion. We seem to be looking at a systemic risk similar to the GFC - only this time, central banks have run out of road.
This looks big and not just for Britain. It may be that we're just the first domino to fall.
It turns out that the people who did not understand the Single Market, Freedom of Movement and the Customs Union do not understand the UK economy either. Whoever would have thought it?
Extremely unfair.
There're are TONS of things they don't understand.
"Does this matter? LDI managers claim that their activities pose no systemic risk, and I read the Bank of England financial policy committee’s silence as agreement. But UK pension funds are collectively very large derivative counterparties and they move together."
I hate to be the kind of poster who just shares Twitter links, but FinTwit is absolutely awash with rumours about several large UK pension funds being insolvent.
The word here is contagion. We seem to be looking at a systemic risk similar to the GFC - only this time, central banks have run out of road.
This looks big and not just for Britain. It may be that we're just the first domino to fall.
Gordon Brown saved the world, the Tories crashed it!!!
The chances of a new Faragist populist movement must be pretty high. Throw his lot back in with Tice or start up a new one? And whilst we are at it, a Change UK style Tory centrist splitters party. Come on guys, lets have some new toys
OK, finance boffins, what's the best realistic case from here?
Suppose KK goes, Truss is allowed to stay on condition that she stays sat at her desk, is very quiet and doesn't touch anything, Rishi returns to No 11...
What does he do? How much worse off are we all compared to the case where Last Week Didn't Happen?
The economics of it, I doubt anyone really knows, although some will pretend they do.
The politics of it are more clear cut. There is no way Truss and Kwasi can survive this. It's unprecedented as far as I know for a CoL in this country to destroy confidence in such rapid order.
On top of that, none of this has any political mandate from the country. Truss was not elected on a libertarian ticket, she was elected on the Boris pledge of levelling up .
Not only does the mini-budget call into question the financial stability of the country but it raises serious issues with our constitutional setup. We simply can't go through this process again with a new Prime Minister coming in, based on a tiny vote amongst a weird selectorate, and then just ripping up the manifesto / mandate that the governing party was elected upon.
"To achieve this, the Bank will carry out temporary purchases of long-dated UK government bonds from 28 September. The purpose of these purchases will be to restore orderly market conditions. The purchases will be carried out on whatever scale is necessary to effect this outcome. The operation will be fully indemnified by HM Treasury."
A rough translation of which is "come and have a go if you think you are hard enough".
Or, alternatively, rather than going on Black the Bank and the government today have decided to place the economy and our collective savings on number 26.
"Whatever scale is necessary" - as if they have unlimited power to control the market!
They could, in theory buy all of our long dated stocks. Not sure we would ever be able to sell any again but it is possible. The wording is a deliberate echo of the Draghi put, which is a bit ironic for a government of Brexiteers.
It looks worrying because we discovered 30 years ago that the BoE doesn't have the resources to buck the markets. Black Wednesday happened because we unilaterally entered the EMS 'snake' at too high a level. This year we're unilaterally defending £ at $1.06. It won't work. Bretton Woods only succeeded (and not for long) because (a) governments and central banks had much more clout in relation to the market place and (b) they made a political agreement to use all their resources to defend pre-assigned exchange rates. Neither of these conditions are present today.
I know all about Bretton Woods, by the way, because I stopped off for a beer there when hiking the Appalachian Trail. Five stars.
"As chance would have it, 28 September 1976 was also the day when an earlier sterling crisis went into overdrive. The then Labour chancellor, Denis Healey, had to abandon plans to fly to an IMF meeting in the Philippines because the pound had hit the skids."
The reason Sunak is quiet is that he is the author of the situation we are in.
It was Sunak who blew GBP400bn on thin air during covid, in a scheme ridden with profiteering and fraud, to almost universal applause on here and in parliament. The worst use of taxpaper money ever.
A very few of us questioned the sanity of this at the time, and asserted that banktupcty, or close to it, was the almost inevitable outcome of what Sunak and Johnson were doing. To almost universal derision.
I hate to be the kind of poster who just shares Twitter links, but FinTwit is absolutely awash with rumours about several large UK pension funds being insolvent.
The word here is contagion. We seem to be looking at a systemic risk similar to the GFC - only this time, central banks have run out of road.
This looks big and not just for Britain. It may be that we're just the first domino to fall.
Great, and we’ll forever be known as the twits that started it.
What on earth is the message going to be at the Conference next week?
I honestly don't know. This is such a huge fuck up, having the central bank essentially tell them they're a bunch of dickheads and have pushed the UK economy to the brink of crisis is pretty terrible.
BOE buying gilts indemnified by the government via gilt issuance because the market has lost faith in gilts, while the currency is in free fall, mortgage lending has shut down, inflation at 10%... We are heading for potentially the worst economic crisis in the UK in my lifetime.
In your lifetime? Surely it's a lot worse than that. When has it been worse?
2008 to 2011 for starters.
A low sterling to dollar rate is actually good for the UK tourist industry and exporters to the US, even if bad for UK importers and tourists to the US.
After the 2008 crash unemployment reached 8% in the UK, it is now 4%.
In the mid 1970s inflation was also even higher than now
Delusional. This has the potential to be the biggest UK crisis I have ever seen. We run an 8% current account deficit. The currency is tanking. The Bank is having to reverse monetary tightening to prevent the collapse of the gilt market. The government has just unveiled insane fiscal plans that it refused to submit to independent scrutiny. We are financed by foreigners, they have lost confidence in us, completely.
For the average voter the £ tanking against the $ affects them little unless they travel a lot to the US or work for a business that imports a lot from the US. They also have little interest in gilt markets.
Only if unemployment really starts to rise and inflation soars further or there are deep spending cuts to pay for the big tax cuts will it really hit them personally
How many voters understood the nuts and bolts of being in and then not being in the ERM? And that wasn't accompanied by unemployment or interest rate rises (except in the very short term). Still did for the govt.
The reason Sunak is quiet is that he is the author of the situation we are in.
It was Sunak who blew GBP400bn on thin air during covid, in a scheme ridden with profiteering and fraud, to almost universal applause on here and in parliament. The worst use of taxpaper money ever.
A very few of us questioned the sanity of this at the time, and asserted that banktupcty, or close to it, was the almost inevitable outcome of what Sunak and Johnson were doing. To almost universal derision.
And now here we f8cking are....
But didn't most economies spend a shit ton during covid to cover costs of schemes and such, and they're not planning on going the Truss route, nor have their economies imploded (indeed, many of them are doing better than us).
The reason Sunak is quiet is that he is the author of the situation we are in.
It was Sunak who blew GBP400bn on thin air during covid, in a scheme ridden with profiteering and fraud, to almost universal applause on here and in parliament. The worst use of taxpaper money ever.
A very few of us questioned the sanity of this at the time, and asserted that banktupcty, or close to it, was the almost inevitable outcome of what Sunak and Johnson were doing. To almost universal derision.
And now here we f8cking are....
And large amounts of that money just increased house prices to the daft levels they are currently at.
There’s absolutely no way Truss recovers any confidence from this. It’s not like she didn’t spend weeks before becoming PM saying she’ll do exactly the kind of crazy thing she’s done.
No one will trust her. Her credibility is shot.
There is a precedent for someone who came in, lost market confidence, but then went on to serve 14 years at the top: François Mitterrand.
If you think Truss is an equal politician to Mitterand then I have a bridge to sell you.
Coincidentally there's a bridge here in Oxford that has been closed for a couple of years because the truss has failed.
Oh, which one is that, please?
It’s the pedestrian bridge across the Thames just upstream of Folly Bridge.
I get the impression nobody was maintaining it & the ironwork rusted out. The old railway bridge further upstream has the same problem - the ironwork is clearly rusting out & no-one is keeping up the paintwork in order to stop it getting worse. I guess (but don’t actually know) that there’s some kind of fight over responsibility & the council doesn’t want to pay for it, but if they don’t do it no one else will.
Thanks. I know it - used to visit some good friends of mine who lived very near by. My memory is that the bridge was old even in the 1980s - between two parts of the gas works complex originally, for piping or whatever, between the two sides of the river. Much of the area was brownfield dereliction at the time.
PS not on the same level as some modern concrete road bridge with wider implications for the road network, obvs. But still.
Comments
I had no idea the replacement would be this many light years worse.
https://twitter.com/IAPonomarenko/status/1575028962362765312
The IMF were very clearly saying to change the dnergy freeze plan 'support that is more targetted'
So, no, its not the 45p alone wot dunnit
There also used to be a saying in the City about not trying to catch a falling knife. That effectively is what the BoE is doing today. What could possibly go wrong?
After successfully recasting our last trip to the IMF as purely the result of "socialist profligacy and decadence" for almost six decades, when in fact a key contributor was a Tory budget by Anthony Barber very much like Kwarteng's earlier in the decade, we could soon be going back to the IMF in the shadow of a very similar Tory event.
It's as much the end of an era and the start of a new one as the Queen's passing was.
Could be very dicey for some closed final salary pension schemes I’m told.
I was going to post "I don't care about the politics" but actually I do - because it is important. In every other great financial crisis, the government takes it very seriously, is seen to be tackling both the immediate issue and the drivers behind it. This time, we have the opposite. A "no comment" government and its sneering coterie snarling and hissing as it blames absolutely everyone else for the crisis including the markets themselves.
Even worse, this will go on into next week. A triumphant Tory conference as Truss and her idiots sneer about having taken control and brought back True Conservatism. Boasts from the Chancellor and PM about how their ideas are superior. John Fucking Redwood lauded as a sage by a giffer gathering on the fringe.
Instead of saying "this is a crisis, we are working flat out to resolve it", this lot will keep throwing petrol on the bonfire that is our economy. To bring it back to politics, this is important. Because apparently Obi-one Sunak is our Last Hope. And we need Tory MPs to recognise just how perilous things now are and remove Empress Truss from the throne. Quickly.
An existential threat to our pensions. Today. And some berks keep posting "I don't understand, the markets are wrong".
The argument for the energy action is that it would take too long to work out a targeted policy, and failing to put something in place would cause economic problems in itself, so the stimulus measure is sensible.
But the corollary of that is that some of the benefits to the better off would need to be clawed back. Cutting taxes is the opposite of that.
She could be the UKs shortest serving PM.
I believe 76-77 was the only time in NHS history with real cuts rather than inadequate increases .
But LOL.
https://en.wikipedia.org/wiki/Arthur_Wellesley,_1st_Duke_of_Wellington
Thanks to your government, our pension funds are sat on investments that are now worth a lot less than they need to be. That is an existential crisis both to the funds and to the pensions they hold. Asset worth less so must sell to raise cash, but nobody will buy so asset value drops again so a bigger raise needed.
That is what almost sank AIG. The amount they needed to raise kept increasing in large chunks quicker than they could hope to raise the first cash ask.
I cannot believe we are not going to see one or two floor crossings when the Commons reopens.
The chickens will run at some point.
The Conservatives won't look good if they axe her. But keeping this may be far, far worse.
"To achieve this, the Bank will carry out temporary purchases of long-dated UK government bonds from 28 September. The purpose of these purchases will be to restore orderly market conditions. The purchases will be carried out on whatever scale is necessary to effect this outcome. The operation will be fully indemnified by HM Treasury."
A rough translation of which is "come and have a go if you think you are hard enough".
Or, alternatively, rather than going on Black the Bank and the government today have decided to place the economy and our collective savings on number 26.
In the go-go 21st Century, we seem to have jumped straight to the bust.
@REWearmouth
·
6m
Punchy yet good humoured speech from Rayner. She says she is using all her Boris Johnson jokes now “while people still remember him” & “before he becomes a footnote in the history of failures”
===
Not so fast, Tonto...
I fear we have hit an oncoming bus
https://twitter.com/josiahmortimer/status/1575081406803619840
https://twitter.com/monakdohle/status/1575082112189108226?s=21&t=Fya7yO3gbiwTOj1z3x31qg
Suppose KK goes, Truss is allowed to stay on condition that she stays sat at her desk, is very quiet and doesn't touch anything, Rishi returns to No 11...
What does he do?
How much worse off are we all compared to the case where Last Week Didn't Happen?
I get the impression nobody was maintaining it & the ironwork rusted out. The old railway bridge further upstream has the same problem - the ironwork is clearly rusting out & no-one is keeping up the paintwork in order to stop it getting worse. I guess (but don’t actually know) that there’s some kind of fight over responsibility & the council doesn’t want to pay for it, but if they don’t do it no one else will.
The markets* are over-reacting, but that’s what markets do and she ought to have been more careful. She now has to try and push through because it’s the only way to have any chance of not dooming herself and her party to election loss. She might have a 50% chance of getting away with it. “If you’re going through hell, keep going”.
*Or more accurately, analysts and traders who generally aren’t very bright and only earn megabucks because too few people understand that their jobs aren’t actually very complex.
IF you've ever shorted government bonds, you will know that the paper should ideally be synthetically delivered to the buyer via the repo market to reduce costs.
The costs of borrowing paper to deliver are far from fixed and can soar if there are few actual willing lenders or sellers of bonds at a given level, making your short extremely costly to run for any length of time.
Unsurprisingly, long gilt yields are down 50bp.
Only if unemployment really starts to rise and inflation soars further or there are deep spending cuts to pay for the big tax cuts will it really hit them personally
We would need to hear from Truss on what she believes her economy plan is.
https://www.bing.com/videos/search?q=wile+e+coyote+flattedn+by+big+roller&view=detail&mid=70CB355EB9F930A880AD70CB355EB9F930A880AD&FORM=VIRE
Labour: you've crashed the economy and are not fit to govern.
Tories: yeh, but we've got an old photo of Keir and Angie taking the knee.
https://en.wikipedia.org/wiki/List_of_prime_ministers_of_the_United_Kingdom_by_length_of_tenure
The word here is contagion. We seem to be looking at a systemic risk similar to the GFC - only this time, central banks have run out of road.
This looks big and not just for Britain. It may be that we're just the first domino to fall.
There're are TONS of things they don't understand.
The big collateral call facing UK pension funds
Some schemes might have to sell riskier assets as part of trades to hedge liabilities
https://www.ft.com/content/83927688-e0d1-4934-8d91-e279da6d6b6c
"Does this matter? LDI managers claim that their activities pose no systemic risk, and I read the Bank of England financial policy committee’s silence as agreement. But UK pension funds are collectively very large derivative counterparties and they move together."
And whilst we are at it, a Change UK style Tory centrist splitters party.
Come on guys, lets have some new toys
Robert Peston
@Peston
Tory minister: "Kwasi is toast"
The politics of it are more clear cut. There is no way Truss and Kwasi can survive this. It's unprecedented as far as I know for a CoL in this country to destroy confidence in such rapid order.
On top of that, none of this has any political mandate from the country. Truss was not elected on a libertarian ticket, she was elected on the Boris pledge of levelling up .
Not only does the mini-budget call into question the financial stability of the country but it raises serious issues with our constitutional setup. We simply can't go through this process again with a new Prime Minister coming in, based on a tiny vote amongst a weird selectorate, and then just ripping up the manifesto / mandate that the governing party was elected upon.
I know all about Bretton Woods, by the way, because I stopped off for a beer there when hiking the Appalachian Trail. Five stars.
"As chance would have it, 28 September 1976 was also the day when an earlier sterling crisis went into overdrive. The then Labour chancellor, Denis Healey, had to abandon plans to fly to an IMF meeting in the Philippines because the pound had hit the skids."
It was Sunak who blew GBP400bn on thin air during covid, in a scheme ridden with profiteering and fraud, to almost universal applause on here and in parliament. The worst use of taxpaper money ever.
A very few of us questioned the sanity of this at the time, and asserted that banktupcty, or close to it, was the almost inevitable outcome of what Sunak and Johnson were doing. To almost universal derision.
And now here we f8cking are....
Liz and Kwasi are true geniuses.
PS not on the same level as some modern concrete road bridge with wider implications for the road network, obvs. But still.