Not something that I am involved in, though there may be some collateral damage to markets that I am in, but surely the reason that pension companies invest in gilts is to ensure safe, albeit low returns.
Surely creating gilt derivatives, leveraged by borrowing defeats the whole intent? Those Pension Trustees have questions to answer.
Not necessarily. I did read a technical explanation. The issue is a mismatch between accounting and real values, so that an investment manager who performed well could end up reporting an accounting loss. Hence they bought derivatives to hedge that loss. But the details escape me at this point
Is it that there was no intrinsic problem with the investment vehicles per se, but rather the amount in them which was the problem for some funds ?
Not something that I am involved in, though there may be some collateral damage to markets that I am in, but surely the reason that pension companies invest in gilts is to ensure safe, albeit low returns.
Surely creating gilt derivatives, leveraged by borrowing defeats the whole intent? Those Pension Trustees have questions to answer.
Not necessarily. I did read a technical explanation. The issue is a mismatch between accounting and real values, so that an investment manager who performed well could end up reporting an accounting loss. Hence they bought derivatives to hedge that loss. But the details escape me at this point
She can’t u-turn on windfall tax now, it would destroy all her credibility and Tory’s would plunge in the polls.
Remember it was very first question of her first PMQ.
Might be very first question of her second.
Sure, it would be humiliating. But if the alternative is a bond strike that sees the government unable to raise the cash to pay the bills, well, that would be somewhat worse. So she'll have to swallow the humiliation of a windfall tax.
Not something that I am involved in, though there may be some collateral damage to markets that I am in, but surely the reason that pension companies invest in gilts is to ensure safe, albeit low returns.
Surely creating gilt derivatives, leveraged by borrowing defeats the whole intent? Those Pension Trustees have questions to answer.
Not necessarily. I did read a technical explanation. The issue is a mismatch between accounting and real values, so that an investment manager who performed well could end up reporting an accounting loss. Hence they bought derivatives to hedge that loss. But the details escape me at this point
Sounds like yet another Ponzi scheme.
Do these feckers never learn?
How else are the teenage scribblers supposed to get their unlimited bonuses?
It requires financial alchemy to turn lead into gold, but you do have to skip town quite sharpish...
She can’t u-turn on windfall tax now, it would destroy all her credibility and Tory’s would plunge in the polls.
Remember it was very first question of her first PMQ.
Might be very first question of her second.
"...Tory's would plunge in the polls" Where have you been?
(And it's Tories btw).
Hang on, stop being pedantic, there’s maybe a serious Labour Party cock up here - Miliband all over the guardian calling it a windfall tax and Labour leading the way - all the other papers call it “a cap only on renewables to avoid a windfall tax”. 🤔
Starmer’s first question has to be more nuanced than “are you still opposed to a windfall tax” tomorrow.
This can’t go on for two years, or can it? They’ll be nothing left.
It will go on until the possible alternatives are no longer feared as being potentially worse. At the moment Truss and Kwarteng are still in place because Tory MPs are scared that removing them so soon would damage the credibility of the Conservative Party with the voters even further, and that the eventual replacements might be even less capable.
Things clearly have to get a lot worse to reach the point where these are risks worth taking.
The problem is Truss. You can’t solve the problem with her in charge. They need to wake up to that. She’s not going to suddenly switch and do normal or Conservative. It’s not who she is. Until she goes the precise flavour of crazy might change, but crazy is what’s on the menu. It’s not going to settle down. She doesn’t want it to.
The problem is more than Truss. The problem is the people who elected her - Tory members.
If enough Tory members wake up, it will change. It was pretty close last time. You don’t need that many.
Be inspired by Labour Starmer won over a party previously 60:40 in favour of Corbyn. That sort of shift seemed impossible.
Why would they wake up? These are the people who gave us IDS. Given another choice they'll go for Braverman or Badenoch. They need to be made a proscribed organisation.
"Gaslight is a 1944 American psychological thriller film directed by George Cukor and starring Charles Boyer, Ingrid Bergman, Joseph Cotten, and Angela Lansbury (in her film debut)."
What were the odds on getting the worst PM in living memory, the worst Chancellor in living memory and the worst BoE Governor in living memory, all at the same time?
You've not been following the 2020s have you?
There’s been a worse Chancellor or BoE Governor? I accept Truss may only be the second worst PM after Johnson.
This can’t go on for two years, or can it? They’ll be nothing left.
It will go on until the possible alternatives are no longer feared as being potentially worse. At the moment Truss and Kwarteng are still in place because Tory MPs are scared that removing them so soon would damage the credibility of the Conservative Party with the voters even further, and that the eventual replacements might be even less capable.
Things clearly have to get a lot worse to reach the point where these are risks worth taking.
The problem is Truss. You can’t solve the problem with her in charge. They need to wake up to that. She’s not going to suddenly switch and do normal or Conservative. It’s not who she is. Until she goes the precise flavour of crazy might change, but crazy is what’s on the menu. It’s not going to settle down. She doesn’t want it to.
The problem is more than Truss. The problem is the people who elected her - Tory members.
If enough Tory members wake up, it will change. It was pretty close last time. You don’t need that many.
Be inspired by Labour Starmer won over a party previously 60:40 in favour of Corbyn. That sort of shift seemed impossible.
Why would they wake up? These are the people who gave us IDS. Given another choice they'll go for Braverman or Badenoch. They need to be made a proscribed organisation.
They also chose Cameron.
Both Labour and the Tories give members the final say
Not something that I am involved in, though there may be some collateral damage to markets that I am in, but surely the reason that pension companies invest in gilts is to ensure safe, albeit low returns.
Surely creating gilt derivatives, leveraged by borrowing defeats the whole intent? Those Pension Trustees have questions to answer.
Not necessarily. I did read a technical explanation. The issue is a mismatch between accounting and real values, so that an investment manager who performed well could end up reporting an accounting loss. Hence they bought derivatives to hedge that loss. But the details escape me at this point
As I understand the issue in my lay man's way it is mainly with closed DB (i.e no new members).
For these schemes they had fairly clear liabilities but because they were closed they were expected to focus on gilts which allow a much more solid basis of risk for long term. As they were closed the members of the DB were obviously ageing and more and more coming to retirement - so the DB needed a solid basis of pretty risk free stuff i.e. gilts. In principle the closer you are to retirement the more your stash should be in risk free stuff.
But, gilts have been dire for years and this meant deficits in schemes and their parent companies being pissed off. So some whizz kids came up with the idea of using the gilts as leverage in some kind of complex derivative trade which allowed them access to non-gilt stuff like shares which performed better - so hopefully closing the deficits.
It was all tickety boo until the gilt market prices collapsed (yields raised to the 4-5% sort of figures we see on the news). This happened very quickly. Faster than ever before iirc. The counter parties to these complex derivatives wanted more collateral to be posted to cover margins and by this they meant cash and now. The quick way to get cash was for DB schemes to flog gilts in a hurry. The firesale led to further collapse in gilt price and so more fire sale.
"Gaslight is a 1944 American psychological thriller film directed by George Cukor and starring Charles Boyer, Ingrid Bergman, Joseph Cotten, and Angela Lansbury (in her film debut)."
Not something that I am involved in, though there may be some collateral damage to markets that I am in, but surely the reason that pension companies invest in gilts is to ensure safe, albeit low returns.
Surely creating gilt derivatives, leveraged by borrowing defeats the whole intent? Those Pension Trustees have questions to answer.
Not necessarily. I did read a technical explanation. The issue is a mismatch between accounting and real values, so that an investment manager who performed well could end up reporting an accounting loss. Hence they bought derivatives to hedge that loss. But the details escape me at this point
Sounds like yet another Ponzi scheme.
Do these feckers never learn?
When your bonus depends on not learning, you are unlikely to learn.
She can’t u-turn on windfall tax now, it would destroy all her credibility and Tory’s would plunge in the polls.
Remember it was very first question of her first PMQ.
Might be very first question of her second.
Sure, it would be humiliating. But if the alternative is a bond strike that sees the government unable to raise the cash to pay the bills, well, that would be somewhat worse. So she'll have to swallow the humiliation of a windfall tax.
What's the betting the overall tax take as a % of GDP rises next year, after all?
That whole Truss "not for turning" cosplay Thatcher stuff didn't last long. Now it seems to be a case of what won't she U-turn on?
Indeed. The “windfall” phrase is flapping in the breeze tonight, but also wavering on the entire Growth Budget according to this front page of Independent.
"Gaslight is a 1944 American psychological thriller film directed by George Cukor and starring Charles Boyer, Ingrid Bergman, Joseph Cotten, and Angela Lansbury (in her film debut)."
On Look North this evening there was an item on Warm Spaces - public buildings where people can go to keep warm if they are unable to do so at home. Our local library is on the list.
There then followed a story about an organisation that provides baby clothes and equipment to parents who can't afford them.
Lots of folk in need of a lot more than Dizzy and Krazi's Trickle Down.
Interesting - both former IMF chief economist Ken Rogoff and Ngaire Woods of the Blavatnik School of Government tell #Newsnight they don't think the Chancellor can wait until 31 October to reveal his medium term fiscal plan...
Not something that I am involved in, though there may be some collateral damage to markets that I am in, but surely the reason that pension companies invest in gilts is to ensure safe, albeit low returns.
Surely creating gilt derivatives, leveraged by borrowing defeats the whole intent? Those Pension Trustees have questions to answer.
Not necessarily. I did read a technical explanation. The issue is a mismatch between accounting and real values, so that an investment manager who performed well could end up reporting an accounting loss. Hence they bought derivatives to hedge that loss. But the details escape me at this point
As I understand the issue in my lay man's way it is mainly with closed DB (i.e no new members).
For these schemes they had fairly clear liabilities but because they were closed they were expected to focus on gilts which allow a much more solid basis of risk for long term. As they were closed the members of the DB were obviously ageing and more and more coming to retirement - so the DB needed a solid basis of pretty risk free stuff i.e. gilts. In principle the closer you are to retirement the more your stash should be in risk free stuff.
But, gilts have been dire for years and this meant deficits in schemes and their parent companies being pissed off. So some whizz kids came up with the idea of using the gilts as leverage in some kind of complex derivative trade which allowed them access to non-gilt stuff like shares which performed better - so hopefully closing the deficits.
It was all tickety boo until the gilt market prices collapsed (yields raised to the 4-5% sort of figures we see on the news). This happened very quickly. Faster than ever before iirc. The counter parties to these complex derivatives wanted more collateral to be posted to cover margins and by this they meant cash and now. The quick way to get cash was for DB schemes to flog gilts in a hurry. The firesale led to further collapse in gilt price and so more fire sale.
Not something that I am involved in, though there may be some collateral damage to markets that I am in, but surely the reason that pension companies invest in gilts is to ensure safe, albeit low returns.
Surely creating gilt derivatives, leveraged by borrowing defeats the whole intent? Those Pension Trustees have questions to answer.
Not necessarily. I did read a technical explanation. The issue is a mismatch between accounting and real values, so that an investment manager who performed well could end up reporting an accounting loss. Hence they bought derivatives to hedge that loss. But the details escape me at this point
As I understand the issue in my lay man's way it is mainly with closed DB (i.e no new members).
For these schemes they had fairly clear liabilities but because they were closed they were expected to focus on gilts which allow a much more solid basis of risk for long term. As they were closed the members of the DB were obviously ageing and more and more coming to retirement - so the DB needed a solid basis of pretty risk free stuff i.e. gilts. In principle the closer you are to retirement the more your stash should be in risk free stuff.
But, gilts have been dire for years and this meant deficits in schemes and their parent companies being pissed off. So some whizz kids came up with the idea of using the gilts as leverage in some kind of complex derivative trade which allowed them access to non-gilt stuff like shares which performed better - so hopefully closing the deficits.
It was all tickety boo until the gilt market prices collapsed (yields raised to the 4-5% sort of figures we see on the news). This happened very quickly. Faster than ever before iirc. The counter parties to these complex derivatives wanted more collateral to be posted to cover margins and by this they meant cash and now. The quick way to get cash was for DB schemes to flog gilts in a hurry. The firesale led to further collapse in gilt price and so more fire sale.
She can’t u-turn on windfall tax now, it would destroy all her credibility and Tory’s would plunge in the polls.
Remember it was very first question of her first PMQ.
Might be very first question of her second.
"...Tory's would plunge in the polls" Where have you been?
(And it's Tories btw).
Well, they're still ahead of the Lib Dems in current polling, so still plenty of space to trough at.
Yes Ben’s got it wrong. Will Bart and Lucky still support her if she abandons the bits they like, will she gain anyone to replace those two key losses with even less credibility.
I have been able to access a portal today which gives me sight of the current situation in respect of the pension fund of which I am a trustee. At our last official valuation, after some pretty cautious assumptions, we had 105% of the funding required. By the time of the Kamikwase budget that had gone up to 110%. Today it is at 140%. This is because although the value of our investments have fallen sharply the value of our liabilities, based upon gilt rates, have fallen much more quickly still.
Basically, the death of our DB pension system came from artificially low interest rates over very long periods of time which multiplied the capital required to pay those pensions when they became due. Increased government gilt yields will have massively (because they are so highly geared) increased pension solvency.
We have lived with a deeply distorted economy since 2008. We have encouraged debt by making it cheap, we have inflated asset prices benefiting the better off and companies which frankly should have gone to the wall have continued a zombie existence using up assets that could have been put to better use. We absolutely need to get interest rates back to something like normal, that is roughly 2% above inflation. Doing this is going to be very painful for those who borrowed large sums for mortgages on the basis that borrowing was cheap. But not doing this has increased inequality, pulled up the rungs of the housing market for our youth and completely distorted our tax system, increasing the burden on earnings but allowing massive gains to effectively go untaxed.
Yep.
We should have done an Iceland in 2008.
14 stupid, wasted years of financial repression with huge consequences for the young.
As someone who graduated in July 2008, into the great financial crisis, I feel really sorry for my contemporaries - those in their late 20’s and 30’s who have had to swim against an incredible tide, for the last decade and a half and have had to load themselves up with massive mortgages, just to get some kind of stability and raise a family.
They’re now left holding the can.
Political choices have made life very unfair for my generation.
It all could have been so different.
Personally I think the entire generation under 50 have been sacrificed.
You either can’t afford to buy a house, or you’ve bought with heavy leverage and even then are unlikely to have been able to afford a standard of accommodation accessible to the generation before you.
Even QCs now live in Archway, not Hampstead. And so on, all the way down the ladder.
The only winners are those who’ve inherited or been gifted by their parents.
Also if you are the beneficiary of house price inflation. Some people who bought houses around 2010 will have seen the prices triple. So if you bought at £200k terraced house in parts of the south east it is now worth £600k, etc. Wealth is either going to come through via inheritance/gifts or house price inflation, or a combination of both. There are lots of people under 50 who are 'winners'.
But not enough attention is paid to the fact that life is close to impossible for a large number of people. If you are in debt and only get offered precarious 30 hour a week 'part time' work, you are just never going to get on the ladder to anywhere and will be dependent on the state for the whole of your life. There just seem to be millions of people in this position. I would say that many of the families in my son's school class are in this position. Who exactly in the government is looking out for these people and trying to solve this problem? I don't think anyone is.
I agree strongly about those at the very bottom (or near bottom), but I don’t think even those who got on the property market in 2010 are really winners.
They tended to buy already over-valued properties, and as I said, had to over-leverage themselves to do so. House price inflation of course has flattered them..until they need to move house…
Hence my main argument; the entire under 50s have been blighted, even if the bad fortune is unevenly distributed.
Are you suggesting that people shouldn't have gone in to the property market in 2010 and rented for the last 13 years instead? We bought a flat because we didn't want the uncertainty of renting, and with no expectation of prices rising. But the valuation has doubled. With our current earnings and low fixed rates we could pay most of the mortgage off in the next 5 years. Even if the forthcoming crash halves the value of the flat, we could sell it and afford almost any house we want instead, assuming they also halve in value, whereas we can't afford them now due to the amount of borrowing we'd need to do. How are we not winning? It just seems to me like we are winning in every scenario, and I know many people well under 50 in a similar position. This is not to boast but to point out the problem is that the situation is deeply uneven.
Certainly not.
You see some arguing on here that mortgage holders should not have borrowed and I hold that idea in contempt.
My belief though is that, as well as you’ve done, you are probably not living in the same “style” the previous generation did.
For one thing, you’ve been in your place 12 years already and a previous generation would have moved “up” already. People can’t afford to move as often as those over 50 did.
You’ll be telling me that rumours of her demise are exaggerated next.
Word on the streets of Cabot Cove, is that Jessica Landbury has cleverly faked her "death" in order to embark on a new career as an intergalactic porn star on the Planet Tralfamadore with her old friend Montana Wildhack.
RIP Dame Angela Lansbury, one of the true Hollywood Greats with a prolific career starting in the 1940s and including Murder She Wrote, Bedknobs and Broomsticks, Beauty and the Beast and even playing Elvis' mother in one film
Angela Lansbury was, I think - though I suspect I am teaching fellow posters to suck eggs by even raising this and am only doing so because someone has to, given the nature of the site - the granddaughter of the 1930s Labour leader George Lansbury and the cousin of Oliver Postgate, creator of Noggin the Nog and Bagpuss and Ivor the Engine and Clangers.
What were the odds on getting the worst PM in living memory, the worst Chancellor in living memory and the worst BoE Governor in living memory, all at the same time?
You've not been following the 2020s have you?
There’s been a worse Chancellor or BoE Governor? I accept Truss may only be the second worst PM after Johnson.
No, I meant given how shit the 2020s have been in general so far the chances of a triple clusterfeck was quite high.
She can’t u-turn on windfall tax now, it would destroy all her credibility and Tory’s would plunge in the polls.
Remember it was very first question of her first PMQ.
Might be very first question of her second.
Sure, it would be humiliating. But if the alternative is a bond strike that sees the government unable to raise the cash to pay the bills, well, that would be somewhat worse. So she'll have to swallow the humiliation of a windfall tax.
What's the betting the overall tax take as a % of GDP rises next year, after all?
Given that the market doesn't seem minded to lend us the money for the energy bailout I'd say it's pretty high, but it might be because of a severe contraction in GDP, rather than a determination to increase taxes to balance the budget.
You’ll be telling me that rumours of her demise are exaggerated next.
Word on the streets of Cabot Cove, is that Jessica Landbury has cleverly faked her "death" in order to embark on a new career as an intergalactic porn star on the Planet Tralfamadore with her old friend Montana Wildhack.
Good plan. On Tralfalmadore 3 time is not considered linear, so she can be any age at all.
Though she may have to screw Billy Pilgrim. So it goes.
RIP Dame Angela Lansbury, one of the true Hollywood Greats with a prolific career starting in the 1940s and including Murder She Wrote, Bedknobs and Broomsticks, Beauty and the Beast and even playing Elvis' mother in one film
Angela Lansbury was, I think - though I suspect I am teaching fellow posters to suck eggs by even raising this and am only doing so because someone has to, given the nature of the site - the granddaughter of the 1930s Labour leader George Lansbury and the cousin of Oliver Postgate, creator of Noggin the Nog and Bagpuss and Ivor the Engine and Clangers.
To be more precise, George Lansbury was Angela’s Lansbury’s grand-father; Malcolm Turnbull is a distant cousin; and Penny Mordaunt is the grand-daughter of one of Angela Lansbury’s cousins.
Governor Bailey really meant what he said about the pension funds having to accept that the government bond purchases are over … BBC briefly caught up with him on way out of the speech, and he said there was an “important task now for the funds to ensure they are done”… https://twitter.com/faisalislam/status/1579933041568665600/photo/1
Bailey to BBC News: “We are doing everything to ensure financial stability and you have my assurance on that…” asked about the market response.. “They have got three days, this has to be done for the sake of financial stability”
surprised by the market reaction. Bank has been clear the operation was over this weekend… its a message for the funds that do have the solvency but not the liquidity to make necessary adjustments…. But it is a message with consequences for the Government too..
In other words, right from the beginning the Bank of England have been clear that this is not an attempt to artificially manage the gilt rate, or stand in the way of a repricing to reflect new fiscal policies…. Ie its not going to QE this away, given the inflation situation.
Whether or not you agree with the ongoing gilt sales policy, that is at least consistent. As far as I understand it (please correct me if I’m wrong) the emergency gilt purchases are confined to the pension funds with solvency problems rather than being open market interventions ?
If I understand Bailey correctly he's in effect saying to pension funds, if you individually become insolvent that's not my problem - it's what the Pension Protection Fund is there for. If hundreds of pension funds become insolvent that's a systemic risk affecting the economy, which is my problem. The gilt purchases were dealing with the second.
Now administrators of struggling pension funds probably would prefer the Bank of England to bail them out than to declare insolvency. So he's taking a hard and potentially risky line with them. The fact he's dealing with an irresponsible government is also probably informing that hard line.
This can’t go on for two years, or can it? They’ll be nothing left.
It will go on until the possible alternatives are no longer feared as being potentially worse. At the moment Truss and Kwarteng are still in place because Tory MPs are scared that removing them so soon would damage the credibility of the Conservative Party with the voters even further, and that the eventual replacements might be even less capable.
Things clearly have to get a lot worse to reach the point where these are risks worth taking.
The problem is Truss. You can’t solve the problem with her in charge. They need to wake up to that. She’s not going to suddenly switch and do normal or Conservative. It’s not who she is. Until she goes the precise flavour of crazy might change, but crazy is what’s on the menu. It’s not going to settle down. She doesn’t want it to.
The problem is more than Truss. The problem is the people who elected her - Tory members.
If enough Tory members wake up, it will change. It was pretty close last time. You don’t need that many.
Be inspired by Labour Starmer won over a party previously 60:40 in favour of Corbyn. That sort of shift seemed impossible.
Why would they wake up? These are the people who gave us IDS. Given another choice they'll go for Braverman or Badenoch. They need to be made a proscribed organisation.
They also chose Cameron.
Both Labour and the Tories give members the final say
It's got to stop. And Cameron really wasn't all that.
Note the illogical asymmetry that voting out is MPs only.
There are people on this site who come from all sorts of professional backgrounds, so can I please ask for your collective help in explaining, in simple terms, the concept of 'growth', by which I understand to mean (and I am happy to be corrected) the change in GDP over time. Growth, in the economic sense, appears to be universally held to be a good thing.
Suppose someone decides to walk to work each day rather than go by bus. This saves him £20 per week, and deprives the bus company of £20 per week, so there has been (in a minute sense) a decline in economic activity, and a reduction in GDP. He uses the £20 saved each week to pay off a credit card debt, so his bank makes less profit, and GDP again falls a tiny amount.
So at the end of a year GDP has declined, but the individual is better off, spending less of his money on servicing his debt, and being a stone lighter because he walks (he has cancelled his gym membership as well, and given up his pre-work Starbucks). He is fitter and happier.
So GDP has declined, but in what sense are we worse off
You make a good point, and its certainly swings and roundabouts on an individual basis.
But there is a distinction in economics between microeconomics and macroeconomics. The actions of an individual fall under microeconomics, so aren't typically analysed with regards to GDP. GDP is the preserve of macroeconomics, the study of the economy or country as a whole and on average, in aggregate, GDP going up would normally be more good than bad.
But certainly any sensible discussion of the state of the economy would involve more than just GDP. Debt or savings ratios are also factors looked at, and your individual being in less debt would show up there so that should be considered a positive there.
Unfortunately a lot of media discussion on economics is very dumbed down and tends to run on only a few metrics, or just one, rather than a balanced overview.
Indeed. The example of walking to work is a good one though. If we could engineer a situation where everyone was able to, it would cause a significant fall in GDP. And a collapse in certain sectors of the economy. But it would be wonderful for everyone's mental and physical health. And probably their productivity, too.
Easiest way to look at it: we are a bacterium in a test tube, multiplying on a nutrient substrate. Growth is a measure of how fast we are consuming the substrate and filling up the finite space in the test tube. This can only end one way.
Escaping the test tube and colonizing other test tubes?
She can’t u-turn on windfall tax now, it would destroy all her credibility and Tory’s would plunge in the polls.
Remember it was very first question of her first PMQ.
Might be very first question of her second.
They are already on the barrel scrapings of Sweet Fanny Adams in the polls, what further “plunge” were you expecting?
Will PBs Bart and Lucky, representatives for Libertarians and disrupters throughout the land still support her if she abandons the bits they like, will Truss gain anyone to replace those two key losses now with less credibility?
There still needs to be clarification though over exactly what her plan now is - is the new cap on renewable profits a windfall tax, and surely the renewables are good guys, why hurt their reinvestment opportunities alone?
On Look North this evening there was an item on Warm Spaces - public buildings where people can go to keep warm if they are unable to do so at home. Our local library is on the list.
There then followed a story about an organisation that provides baby clothes and equipment to parents who can't afford them.
Lots of folk in need of a lot more than Dizzy and Krazi's Trickle Down.
Not something that I am involved in, though there may be some collateral damage to markets that I am in, but surely the reason that pension companies invest in gilts is to ensure safe, albeit low returns.
Surely creating gilt derivatives, leveraged by borrowing defeats the whole intent? Those Pension Trustees have questions to answer.
Not necessarily. I did read a technical explanation. The issue is a mismatch between accounting and real values, so that an investment manager who performed well could end up reporting an accounting loss. Hence they bought derivatives to hedge that loss. But the details escape me at this point
As I understand the issue in my lay man's way it is mainly with closed DB (i.e no new members).
For these schemes they had fairly clear liabilities but because they were closed they were expected to focus on gilts which allow a much more solid basis of risk for long term. As they were closed the members of the DB were obviously ageing and more and more coming to retirement - so the DB needed a solid basis of pretty risk free stuff i.e. gilts. In principle the closer you are to retirement the more your stash should be in risk free stuff.
But, gilts have been dire for years and this meant deficits in schemes and their parent companies being pissed off. So some whizz kids came up with the idea of using the gilts as leverage in some kind of complex derivative trade which allowed them access to non-gilt stuff like shares which performed better - so hopefully closing the deficits.
It was all tickety boo until the gilt market prices collapsed (yields raised to the 4-5% sort of figures we see on the news). This happened very quickly. Faster than ever before iirc. The counter parties to these complex derivatives wanted more collateral to be posted to cover margins and by this they meant cash and now. The quick way to get cash was for DB schemes to flog gilts in a hurry. The firesale led to further collapse in gilt price and so more fire sale.
Interesting - both former IMF chief economist Ken Rogoff and Ngaire Woods of the Blavatnik School of Government tell #Newsnight they don't think the Chancellor can wait until 31 October to reveal his medium term fiscal plan...
Not a mover and shaker in world of global finance. But did wonder the same thing, assuming that big-time money-mongers have similar psychology timewise, a sugar-crazed kids (also) awaiting Halloween.
She can’t u-turn on windfall tax now, it would destroy all her credibility and Tory’s would plunge in the polls.
Remember it was very first question of her first PMQ.
Might be very first question of her second.
They are already on the barrel scrapings of Sweet Fanny Adams in the polls, what further “plunge” were you expecting?
Will PBs Bart and Lucky, representatives for Libertarians and disrupters throughout the land still support her if she abandons the bits they like, will Truss gain anyone to replace those two key losses now with less credibility?
There still needs to be clarification though over exactly what her plan now is - is the new cap on renewable profits a windfall tax, and surely
the renewables are good guys, why hurt their reinvestment opportunities alone?
The problem she has is that nobody any longer cares what her ‘plan’ is - if indeed she has one at all - she is widely accepted to be a crank who has lost the ear of the public.
Times Radio's Lucy Fisher says the Prime Minister was ambushed by the Work and Pensions Secretary today and was told the benefits uprating "had to protect the most vulnerable."
RIP Dame Angela Lansbury, one of the true Hollywood Greats with a prolific career starting in the 1940s and including Murder She Wrote, Bedknobs and Broomsticks, Beauty and the Beast and even playing Elvis' mother in one film
Angela Lansbury was, I think - though I suspect I am teaching fellow posters to suck eggs by even raising this and am only doing so because someone has to, given the nature of the site - the granddaughter of the 1930s Labour leader George Lansbury and the cousin of Oliver Postgate, creator of Noggin the Nog and Bagpuss and Ivor the Engine and Clangers.
To be more precise, George Lansbury was Angela’s Lansbury’s grand-father; Malcolm Turnbull is a distant cousin; and Penny Mordaunt is the grand-daughter of one of Angela Lansbury’s cousins.
On the upside I can tell PBers that I just got notably hammered in the new Soho House on 180 Strand with its rooftop swimming pool (actually being used) and London is looking superb. Just magical
If we’re all gonna die, the greatest city in the world has never looked better
Governor Bailey really meant what he said about the pension funds having to accept that the government bond purchases are over … BBC briefly caught up with him on way out of the speech, and he said there was an “important task now for the funds to ensure they are done”… https://twitter.com/faisalislam/status/1579933041568665600/photo/1
Bailey to BBC News: “We are doing everything to ensure financial stability and you have my assurance on that…” asked about the market response.. “They have got three days, this has to be done for the sake of financial stability”
surprised by the market reaction. Bank has been clear the operation was over this weekend… its a message for the funds that do have the solvency but not the liquidity to make necessary adjustments…. But it is a message with consequences for the Government too..
In other words, right from the beginning the Bank of England have been clear that this is not an attempt to artificially manage the gilt rate, or stand in the way of a repricing to reflect new fiscal policies…. Ie its not going to QE this away, given the inflation situation.
Whether or not you agree with the ongoing gilt sales policy, that is at least consistent. As far as I understand it (please correct me if I’m wrong) the emergency gilt purchases are confined to the pension funds with solvency problems rather than being open market interventions ?
If I understand Bailey correctly he's in effect saying to pension funds, if you individually become insolvent that's not my problem - it's what the Pension Protection Fund is there for. If hundreds of pension funds become insolvent that's a systemic risk affecting the economy, which is my problem. The gilt purchases were dealing with the second.
Now administrators of struggling pension funds probably would prefer the Bank of England to bail them out than to declare insolvency. So he's taking a hard and potentially risky line with them. The fact he's dealing with an irresponsible government is also probably informing that hard line.
Getting the problem out in the open, quickly. Not necessarily a daft idea.
Bank of England warns of risk to financial stability
Is the BBC headline.
PB is mulling over a 2016 referendum.
The 2016 referendum has cost the Tories three Prime Ministers. It was not without significance and still isn't. It looks likely to cost them a fourth and for those who believe in retribution it could bring about the destruction of the party.
eh? It cost them Cameron, certainly. You could argue TMay was brought down by Brexit - though I would put a lot of her downfall down to her inability to win a majority in 2017. Which you could put down to many things, chief among which I would put Dementia Tax (which I still think sat on the right side of the wrong/right thing to do balance, but was clearly unpopular). Boris was in no way whatsoever brought down by Brexit. And Liz won't be brought down by Brexit either; she will be brought down by not having sufficient support for her particular approach to economics - like what politics used to be about.
It's not about Brexit any more.
You can't simoly claim that because Boris became PM as a result of Brexit tjat he was brought down by Brexit. Your distaste for him might be due to Brexit, but you never changed your mind on him. He was brought down becaise many of those who had previously supported him - and remember the Tories were polling in the high 40s in the first 17 months of his leadership - no longer did so. And that was down to a number of things, chiefly, in my view, partygate - but none of those things were Brexit. The number of voters who thought " I used to like Boris, but because of his stance in Brexit I can no longer support him" is negligible. You appear to be generalising from yourself here "I don't like Boris because he was pro-Brexit; other people appear not to like him, that must also be because of his stance on Brexit." But Brexit was not what brought Boris down. Boris was what brought Boris down. And Brexit will not be what brings Liz down. If Liz is brought down it will be down to old fashioned tax vs spend vs economic reality.
What are the chances of Boris Johnson making a comeback to 10 Downing Street?
Zero. Unless there's a party he's invited to.
Agreed. These fantastical ideas of Bozzatron returning as PM slide neatly into the time-honoured category of “things some PBers frequently predict but never happen” - like moving the capital to York or closing the Bakerloo line.
On the upside I can tell PBers that I got notably hammered in the new Soho House on 180 Strand with its rooftop swimming pool (actually being used) and London is looking superb. Just magical
If we’re all gonna die the greatest city in the world has never looked better
Remember to wait at least 20 minutes after dining before entering the pool!
This can’t go on for two years, or can it? They’ll be nothing left.
It will go on until the possible alternatives are no longer feared as being potentially worse. At the moment Truss and Kwarteng are still in place because Tory MPs are scared that removing them so soon would damage the credibility of the Conservative Party with the voters even further, and that the eventual replacements might be even less capable.
Things clearly have to get a lot worse to reach the point where these are risks worth taking.
The problem is Truss. You can’t solve the problem with her in charge. They need to wake up to that. She’s not going to suddenly switch and do normal or Conservative. It’s not who she is. Until she goes the precise flavour of crazy might change, but crazy is what’s on the menu. It’s not going to settle down. She doesn’t want it to.
The problem is more than Truss. The problem is the people who elected her - Tory members.
If enough Tory members wake up, it will change. It was pretty close last time. You don’t need that many.
Be inspired by Labour Starmer won over a party previously 60:40 in favour of Corbyn. That sort of shift seemed impossible.
Why would they wake up? These are the people who gave us IDS. Given another choice they'll go for Braverman or Badenoch. They need to be made a proscribed organisation.
They also chose Cameron.
Both Labour and the Tories give members the final say
It's got to stop. And Cameron really wasn't all that.
Note the illogical asymmetry that voting out is MPs only.
Didn’t it used to be the PCP and PLP (? on the latter) that chose the leader until relatively recently (a few decades ago)?
Bank of England warns of risk to financial stability
Is the BBC headline.
PB is mulling over a 2016 referendum.
The 2016 referendum has cost the Tories three Prime Ministers. It was not without significance and still isn't. It looks likely to cost them a fourth and for those who believe in retribution it could bring about the destruction of the party.
eh? It cost them Cameron, certainly. You could argue TMay was brought down by Brexit - though I would put a lot of her downfall down to her inability to win a majority in 2017. Which you could put down to many things, chief among which I would put Dementia Tax (which I still think sat on the right side of the wrong/right thing to do balance, but was clearly unpopular). Boris was in no way whatsoever brought down by Brexit. And Liz won't be brought down by Brexit either; she will be brought down by not having sufficient support for her particular approach to economics - like what politics used to be about.
It's not about Brexit any more.
You can't simoly claim that because Boris became PM as a result of Brexit tjat he was brought down by Brexit. Your distaste for him might be due to Brexit, but you never changed your mind on him. He was brought down becaise many of those who had previously supported him - and remember the Tories were polling in the high 40s in the first 17 months of his leadership - no longer did so. And that was down to a number of things, chiefly, in my view, partygate - but none of those things were Brexit. The number of voters who thought " I used to like Boris, but because of his stance in Brexit I can no longer support him" is negligible. You appear to be generalising from yourself here "I don't like Boris because he was pro-Brexit; other people appear not to like him, that must also be because of his stance on Brexit." But Brexit was not what brought Boris down. Boris was what brought Boris down. And Brexit will not be what brings Liz down. If Liz is brought down it will be down to old fashioned tax vs spend vs economic reality.
Ha - appear to have somehow missed out all the quoye which annoyed me, rendering my belated comeback pointless. Never use a phone to post while pissed. It's just too hard to do accurately. FWIW, I've had a very nice and tremendously interesting evening.
On the upside I can tell PBers that I got notably hammered in the new Soho House on 180 Strand with its rooftop swimming pool (actually being used) and London is looking superb. Just magical
If we’re all gonna die the greatest city in the world has never looked better
Remember to wait at least 20 minutes after dining before entering the pool!
Not something that I am involved in, though there may be some collateral damage to markets that I am in, but surely the reason that pension companies invest in gilts is to ensure safe, albeit low returns.
Surely creating gilt derivatives, leveraged by borrowing defeats the whole intent? Those Pension Trustees have questions to answer.
Not necessarily. I did read a technical explanation. The issue is a mismatch between accounting and real values, so that an investment manager who performed well could end up reporting an accounting loss. Hence they bought derivatives to hedge that loss. But the details escape me at this point
As I understand the issue in my lay man's way it is mainly with closed DB (i.e no new members).
For these schemes they had fairly clear liabilities but because they were closed they were expected to focus on gilts which allow a much more solid basis of risk for long term. As they were closed the members of the DB were obviously ageing and more and more coming to retirement - so the DB needed a solid basis of pretty risk free stuff i.e. gilts. In principle the closer you are to retirement the more your stash should be in risk free stuff.
But, gilts have been dire for years and this meant deficits in schemes and their parent companies being pissed off. So some whizz kids came up with the idea of using the gilts as leverage in some kind of complex derivative trade which allowed them access to non-gilt stuff like shares which performed better - so hopefully closing the deficits.
It was all tickety boo until the gilt market prices collapsed (yields raised to the 4-5% sort of figures we see on the news). This happened very quickly. Faster than ever before iirc. The counter parties to these complex derivatives wanted more collateral to be posted to cover margins and by this they meant cash and now. The quick way to get cash was for DB schemes to flog gilts in a hurry. The firesale led to further collapse in gilt price and so more fire sale.
Why not invest in equities from the get-go?
They’re not allowed to. Or rather they are obliged to hold government bonds.
Governor Bailey really meant what he said about the pension funds having to accept that the government bond purchases are over … BBC briefly caught up with him on way out of the speech, and he said there was an “important task now for the funds to ensure they are done”… https://twitter.com/faisalislam/status/1579933041568665600/photo/1
Bailey to BBC News: “We are doing everything to ensure financial stability and you have my assurance on that…” asked about the market response.. “They have got three days, this has to be done for the sake of financial stability”
surprised by the market reaction. Bank has been clear the operation was over this weekend… its a message for the funds that do have the solvency but not the liquidity to make necessary adjustments…. But it is a message with consequences for the Government too..
In other words, right from the beginning the Bank of England have been clear that this is not an attempt to artificially manage the gilt rate, or stand in the way of a repricing to reflect new fiscal policies…. Ie its not going to QE this away, given the inflation situation.
Whether or not you agree with the ongoing gilt sales policy, that is at least consistent. As far as I understand it (please correct me if I’m wrong) the emergency gilt purchases are confined to the pension funds with solvency problems rather than being open market interventions ?
If I understand Bailey correctly he's in effect saying to pension funds, if you individually become insolvent that's not my problem - it's what the Pension Protection Fund is there for. If hundreds of pension funds become insolvent that's a systemic risk affecting the economy, which is my problem. The gilt purchases were dealing with the second.
Now administrators of struggling pension funds probably would prefer the Bank of England to bail them out than to declare insolvency. So he's taking a hard and potentially risky line with them. The fact he's dealing with an irresponsible government is also probably informing that hard line.
Getting the problem out in the open, quickly. Not necessarily a daft idea.
This is a very enlightening mini thread - thank you.
Is the risk though, you are letting the markets know exactly what the plan is?
There are people on this site who come from all sorts of professional backgrounds, so can I please ask for your collective help in explaining, in simple terms, the concept of 'growth', by which I understand to mean (and I am happy to be corrected) the change in GDP over time. Growth, in the economic sense, appears to be universally held to be a good thing.
Suppose someone decides to walk to work each day rather than go by bus. This saves him £20 per week, and deprives the bus company of £20 per week, so there has been (in a minute sense) a decline in economic activity, and a reduction in GDP. He uses the £20 saved each week to pay off a credit card debt, so his bank makes less profit, and GDP again falls a tiny amount.
So at the end of a year GDP has declined, but the individual is better off, spending less of his money on servicing his debt, and being a stone lighter because he walks (he has cancelled his gym membership as well, and given up his pre-work Starbucks). He is fitter and happier.
So GDP has declined, but in what sense are we worse off
You make a good point, and its certainly swings and roundabouts on an individual basis.
But there is a distinction in economics between microeconomics and macroeconomics. The actions of an individual fall under microeconomics, so aren't typically analysed with regards to GDP. GDP is the preserve of macroeconomics, the study of the economy or country as a whole and on average, in aggregate, GDP going up would normally be more good than bad.
But certainly any sensible discussion of the state of the economy would involve more than just GDP. Debt or savings ratios are also factors looked at, and your individual being in less debt would show up there so that should be considered a positive there.
Unfortunately a lot of media discussion on economics is very dumbed down and tends to run on only a few metrics, or just one, rather than a balanced overview.
Indeed. The example of walking to work is a good one though. If we could engineer a situation where everyone was able to, it would cause a significant fall in GDP. And a collapse in certain sectors of the economy. But it would be wonderful for everyone's mental and physical health. And probably their productivity, too.
Easiest way to look at it: we are a bacterium in a test tube, multiplying on a nutrient substrate. Growth is a measure of how fast we are consuming the substrate and filling up the finite space in the test tube. This can only end one way.
Escaping the test tube and colonizing other test tubes?
Nearest test tube is likely 100 l.y. away. Giantest step so far for mankind 1.3 light seconds.
Not something that I am involved in, though there may be some collateral damage to markets that I am in, but surely the reason that pension companies invest in gilts is to ensure safe, albeit low returns.
Surely creating gilt derivatives, leveraged by borrowing defeats the whole intent? Those Pension Trustees have questions to answer.
Not necessarily. I did read a technical explanation. The issue is a mismatch between accounting and real values, so that an investment manager who performed well could end up reporting an accounting loss. Hence they bought derivatives to hedge that loss. But the details escape me at this point
As I understand the issue in my lay man's way it is mainly with closed DB (i.e no new members).
For these schemes they had fairly clear liabilities but because they were closed they were expected to focus on gilts which allow a much more solid basis of risk for long term. As they were closed the members of the DB were obviously ageing and more and more coming to retirement - so the DB needed a solid basis of pretty risk free stuff i.e. gilts. In principle the closer you are to retirement the more your stash should be in risk free stuff.
But, gilts have been dire for years and this meant deficits in schemes and their parent companies being pissed off. So some whizz kids came up with the idea of using the gilts as leverage in some kind of complex derivative trade which allowed them access to non-gilt stuff like shares which performed better - so hopefully closing the deficits.
It was all tickety boo until the gilt market prices collapsed (yields raised to the 4-5% sort of figures we see on the news). This happened very quickly. Faster than ever before iirc. The counter parties to these complex derivatives wanted more collateral to be posted to cover margins and by this they meant cash and now. The quick way to get cash was for DB schemes to flog gilts in a hurry. The firesale led to further collapse in gilt price and so more fire sale.
Why not invest in equities from the get-go?
They’re not allowed to. Or rather they are obliged to hold government bonds.
Why not? Let's face it, the returns on any fixed interest security have been shit for 14 years.
This can’t go on for two years, or can it? They’ll be nothing left.
It will go on until the possible alternatives are no longer feared as being potentially worse. At the moment Truss and Kwarteng are still in place because Tory MPs are scared that removing them so soon would damage the credibility of the Conservative Party with the voters even further, and that the eventual replacements might be even less capable.
Things clearly have to get a lot worse to reach the point where these are risks worth taking.
The problem is Truss. You can’t solve the problem with her in charge. They need to wake up to that. She’s not going to suddenly switch and do normal or Conservative. It’s not who she is. Until she goes the precise flavour of crazy might change, but crazy is what’s on the menu. It’s not going to settle down. She doesn’t want it to.
The problem is more than Truss. The problem is the people who elected her - Tory members.
If enough Tory members wake up, it will change. It was pretty close last time. You don’t need that many.
Be inspired by Labour Starmer won over a party previously 60:40 in favour of Corbyn. That sort of shift seemed impossible.
Why would they wake up? These are the people who gave us IDS. Given another choice they'll go for Braverman or Badenoch. They need to be made a proscribed organisation.
They also chose Cameron.
Both Labour and the Tories give members the final say
It's got to stop. And Cameron really wasn't all that.
Note the illogical asymmetry that voting out is MPs only.
Didn’t it used to be the PCP and PLP (? on the latter) that chose the leader until relatively recently (a few decades ago)?
On the upside I can tell PBers that I got notably hammered in the new Soho House on 180 Strand with its rooftop swimming pool (actually being used) and London is looking superb. Just magical
If we’re all gonna die the greatest city in the world has never looked better
Remember to wait at least 20 minutes after dining before entering the pool!
It is possibly the greatest urban space I have ever been in (the photos don't do it justice). It is completely stunning. Right in the heart of London so you get these views of the Inns of Court, the City, the river, the south Bank, the Shard, ancient Westminster, all in one go, historic and modern, plus tremendous restaurants, cool bars, a rooftop swimming pool, hot women, fucketty fuck
London is BACK. But, also, BOOM
Also it was full of non-Brits in London for Frieze saying "OMFG this place is amazing I want to live in London, are you a member" - which is gratifying
I don't think any u-turn by Truss and Kwarteng has anything to do with Conservative fortunes at the next GE. I think they have done those chances already.
Its about a) doing the right thing by the country and b) surviving themselves. The latter I'd rate for them both as barely 50-50
There are people on this site who come from all sorts of professional backgrounds, so can I please ask for your collective help in explaining, in simple terms, the concept of 'growth', by which I understand to mean (and I am happy to be corrected) the change in GDP over time. Growth, in the economic sense, appears to be universally held to be a good thing.
Suppose someone decides to walk to work each day rather than go by bus. This saves him £20 per week, and deprives the bus company of £20 per week, so there has been (in a minute sense) a decline in economic activity, and a reduction in GDP. He uses the £20 saved each week to pay off a credit card debt, so his bank makes less profit, and GDP again falls a tiny amount.
So at the end of a year GDP has declined, but the individual is better off, spending less of his money on servicing his debt, and being a stone lighter because he walks (he has cancelled his gym membership as well, and given up his pre-work Starbucks). He is fitter and happier.
So GDP has declined, but in what sense are we worse off
You make a good point, and its certainly swings and roundabouts on an individual basis.
But there is a distinction in economics between microeconomics and macroeconomics. The actions of an individual fall under microeconomics, so aren't typically analysed with regards to GDP. GDP is the preserve of macroeconomics, the study of the economy or country as a whole and on average, in aggregate, GDP going up would normally be more good than bad.
But certainly any sensible discussion of the state of the economy would involve more than just GDP. Debt or savings ratios are also factors looked at, and your individual being in less debt would show up there so that should be considered a positive there.
Unfortunately a lot of media discussion on economics is very dumbed down and tends to run on only a few metrics, or just one, rather than a balanced overview.
Indeed. The example of walking to work is a good one though. If we could engineer a situation where everyone was able to, it would cause a significant fall in GDP. And a collapse in certain sectors of the economy. But it would be wonderful for everyone's mental and physical health. And probably their productivity, too.
Easiest way to look at it: we are a bacterium in a test tube, multiplying on a nutrient substrate. Growth is a measure of how fast we are consuming the substrate and filling up the finite space in the test tube. This can only end one way.
Escaping the test tube and colonizing other test tubes?
Nearest test tube is likely 100 l.y. away. Giantest step so far for mankind 1.3 light seconds.
Nevertheless I want to be in an end testube, I understand the views are amazing.
Governor Bailey really meant what he said about the pension funds having to accept that the government bond purchases are over … BBC briefly caught up with him on way out of the speech, and he said there was an “important task now for the funds to ensure they are done”… https://twitter.com/faisalislam/status/1579933041568665600/photo/1
Bailey to BBC News: “We are doing everything to ensure financial stability and you have my assurance on that…” asked about the market response.. “They have got three days, this has to be done for the sake of financial stability”
surprised by the market reaction. Bank has been clear the operation was over this weekend… its a message for the funds that do have the solvency but not the liquidity to make necessary adjustments…. But it is a message with consequences for the Government too..
In other words, right from the beginning the Bank of England have been clear that this is not an attempt to artificially manage the gilt rate, or stand in the way of a repricing to reflect new fiscal policies…. Ie its not going to QE this away, given the inflation situation.
Whether or not you agree with the ongoing gilt sales policy, that is at least consistent. As far as I understand it (please correct me if I’m wrong) the emergency gilt purchases are confined to the pension funds with solvency problems rather than being open market interventions ?
If I understand Bailey correctly he's in effect saying to pension funds, if you individually become insolvent that's not my problem - it's what the Pension Protection Fund is there for. If hundreds of pension funds become insolvent that's a systemic risk affecting the economy, which is my problem. The gilt purchases were dealing with the second.
Now administrators of struggling pension funds probably would prefer the Bank of England to bail them out than to declare insolvency. So he's taking a hard and potentially risky line with them. The fact he's dealing with an irresponsible government is also probably informing that hard line.
Getting the problem out in the open, quickly. Not necessarily a daft idea.
This is a very enlightening mini thread - thank you.
Is the risk though, you are letting the markets know exactly what the plan is?
Not if the problem is liquidity rather than price. I don’t know (as I’m very far from an expert) whether any funds will have lost enough money to be in real trouble, but this effectively puts quite a lot of pressure on those who are over leveraged to unwind their positions.
And remember that the other side if the coin is that higher bond yield will have reduced their future liabilities.
Someone like MaxPB might have a better idea of how it’s likely to wash out.
This can’t go on for two years, or can it? They’ll be nothing left.
It will go on until the possible alternatives are no longer feared as being potentially worse. At the moment Truss and Kwarteng are still in place because Tory MPs are scared that removing them so soon would damage the credibility of the Conservative Party with the voters even further, and that the eventual replacements might be even less capable.
Things clearly have to get a lot worse to reach the point where these are risks worth taking.
The problem is Truss. You can’t solve the problem with her in charge. They need to wake up to that. She’s not going to suddenly switch and do normal or Conservative. It’s not who she is. Until she goes the precise flavour of crazy might change, but crazy is what’s on the menu. It’s not going to settle down. She doesn’t want it to.
The problem is more than Truss. The problem is the people who elected her - Tory members.
If enough Tory members wake up, it will change. It was pretty close last time. You don’t need that many.
Be inspired by Labour Starmer won over a party previously 60:40 in favour of Corbyn. That sort of shift seemed impossible.
Why would they wake up? These are the people who gave us IDS. Given another choice they'll go for Braverman or Badenoch. They need to be made a proscribed organisation.
They also chose Cameron.
Both Labour and the Tories give members the final say
It's got to stop. And Cameron really wasn't all that.
Note the illogical asymmetry that voting out is MPs only.
The problem is that the MPs also come up with terrible candidates. A fair-sized minority of them are actually criminals, and the majority are wilfully incompetent.
Governor Bailey really meant what he said about the pension funds having to accept that the government bond purchases are over … BBC briefly caught up with him on way out of the speech, and he said there was an “important task now for the funds to ensure they are done”… https://twitter.com/faisalislam/status/1579933041568665600/photo/1
Bailey to BBC News: “We are doing everything to ensure financial stability and you have my assurance on that…” asked about the market response.. “They have got three days, this has to be done for the sake of financial stability”
surprised by the market reaction. Bank has been clear the operation was over this weekend… its a message for the funds that do have the solvency but not the liquidity to make necessary adjustments…. But it is a message with consequences for the Government too..
In other words, right from the beginning the Bank of England have been clear that this is not an attempt to artificially manage the gilt rate, or stand in the way of a repricing to reflect new fiscal policies…. Ie its not going to QE this away, given the inflation situation.
Whether or not you agree with the ongoing gilt sales policy, that is at least consistent. As far as I understand it (please correct me if I’m wrong) the emergency gilt purchases are confined to the pension funds with solvency problems rather than being open market interventions ?
If I understand Bailey correctly he's in effect saying to pension funds, if you individually become insolvent that's not my problem - it's what the Pension Protection Fund is there for. If hundreds of pension funds become insolvent that's a systemic risk affecting the economy, which is my problem. The gilt purchases were dealing with the second.
Now administrators of struggling pension funds probably would prefer the Bank of England to bail them out than to declare insolvency. So he's taking a hard and potentially risky line with them. The fact he's dealing with an irresponsible government is also probably informing that hard line.
To hark back to Cyclefree's very good thread header, it's a line that should have been taken with Northern Rock and others in 2008. Let the institution fail but protect the depositors.
This can’t go on for two years, or can it? They’ll be nothing left.
It will go on until the possible alternatives are no longer feared as being potentially worse. At the moment Truss and Kwarteng are still in place because Tory MPs are scared that removing them so soon would damage the credibility of the Conservative Party with the voters even further, and that the eventual replacements might be even less capable.
Things clearly have to get a lot worse to reach the point where these are risks worth taking.
The problem is Truss. You can’t solve the problem with her in charge. They need to wake up to that. She’s not going to suddenly switch and do normal or Conservative. It’s not who she is. Until she goes the precise flavour of crazy might change, but crazy is what’s on the menu. It’s not going to settle down. She doesn’t want it to.
The problem is more than Truss. The problem is the people who elected her - Tory members.
If enough Tory members wake up, it will change. It was pretty close last time. You don’t need that many.
Be inspired by Labour Starmer won over a party previously 60:40 in favour of Corbyn. That sort of shift seemed impossible.
Why would they wake up? These are the people who gave us IDS. Given another choice they'll go for Braverman or Badenoch. They need to be made a proscribed organisation.
They also chose Cameron.
Both Labour and the Tories give members the final say
It's got to stop. And Cameron really wasn't all that.
Note the illogical asymmetry that voting out is MPs only.
The problem is that the MPs also come up with terrible candidates. A fair-sized minority of them are actually criminals, and the majority are wilfully incompetent.
Governor Bailey really meant what he said about the pension funds having to accept that the government bond purchases are over … BBC briefly caught up with him on way out of the speech, and he said there was an “important task now for the funds to ensure they are done”… https://twitter.com/faisalislam/status/1579933041568665600/photo/1
Bailey to BBC News: “We are doing everything to ensure financial stability and you have my assurance on that…” asked about the market response.. “They have got three days, this has to be done for the sake of financial stability”
surprised by the market reaction. Bank has been clear the operation was over this weekend… its a message for the funds that do have the solvency but not the liquidity to make necessary adjustments…. But it is a message with consequences for the Government too..
In other words, right from the beginning the Bank of England have been clear that this is not an attempt to artificially manage the gilt rate, or stand in the way of a repricing to reflect new fiscal policies…. Ie its not going to QE this away, given the inflation situation.
Whether or not you agree with the ongoing gilt sales policy, that is at least consistent. As far as I understand it (please correct me if I’m wrong) the emergency gilt purchases are confined to the pension funds with solvency problems rather than being open market interventions ?
If I understand Bailey correctly he's in effect saying to pension funds, if you individually become insolvent that's not my problem - it's what the Pension Protection Fund is there for. If hundreds of pension funds become insolvent that's a systemic risk affecting the economy, which is my problem. The gilt purchases were dealing with the second.
Now administrators of struggling pension funds probably would prefer the Bank of England to bail them out than to declare insolvency. So he's taking a hard and potentially risky line with them. The fact he's dealing with an irresponsible government is also probably informing that hard line.
To hark back to Cyclefree's very good thread header, it's a line that should have been taken with Northern Rock and others in 2008. Let the institution fail but protect the depositors.
Yes. Undoubtedly. The past 14 years have been spent, propping up institutions that ought to have died.
Governor Bailey really meant what he said about the pension funds having to accept that the government bond purchases are over … BBC briefly caught up with him on way out of the speech, and he said there was an “important task now for the funds to ensure they are done”… https://twitter.com/faisalislam/status/1579933041568665600/photo/1
Bailey to BBC News: “We are doing everything to ensure financial stability and you have my assurance on that…” asked about the market response.. “They have got three days, this has to be done for the sake of financial stability”
surprised by the market reaction. Bank has been clear the operation was over this weekend… its a message for the funds that do have the solvency but not the liquidity to make necessary adjustments…. But it is a message with consequences for the Government too..
In other words, right from the beginning the Bank of England have been clear that this is not an attempt to artificially manage the gilt rate, or stand in the way of a repricing to reflect new fiscal policies…. Ie its not going to QE this away, given the inflation situation.
Whether or not you agree with the ongoing gilt sales policy, that is at least consistent. As far as I understand it (please correct me if I’m wrong) the emergency gilt purchases are confined to the pension funds with solvency problems rather than being open market interventions ?
If I understand Bailey correctly he's in effect saying to pension funds, if you individually become insolvent that's not my problem - it's what the Pension Protection Fund is there for. If hundreds of pension funds become insolvent that's a systemic risk affecting the economy, which is my problem. The gilt purchases were dealing with the second.
Now administrators of struggling pension funds probably would prefer the Bank of England to bail them out than to declare insolvency. So he's taking a hard and potentially risky line with them. The fact he's dealing with an irresponsible government is also probably informing that hard line.
To hark back to Cyclefree's very good thread header, it's a line that should have been taken with Northern Rock and others in 2008. Let the institution fail but protect the depositors.
Yes. Undoubtedly. The past 14 years have been spent, propping up institutions that ought to have died.
Governor Bailey really meant what he said about the pension funds having to accept that the government bond purchases are over … BBC briefly caught up with him on way out of the speech, and he said there was an “important task now for the funds to ensure they are done”… https://twitter.com/faisalislam/status/1579933041568665600/photo/1
Bailey to BBC News: “We are doing everything to ensure financial stability and you have my assurance on that…” asked about the market response.. “They have got three days, this has to be done for the sake of financial stability”
surprised by the market reaction. Bank has been clear the operation was over this weekend… its a message for the funds that do have the solvency but not the liquidity to make necessary adjustments…. But it is a message with consequences for the Government too..
In other words, right from the beginning the Bank of England have been clear that this is not an attempt to artificially manage the gilt rate, or stand in the way of a repricing to reflect new fiscal policies…. Ie its not going to QE this away, given the inflation situation.
Whether or not you agree with the ongoing gilt sales policy, that is at least consistent. As far as I understand it (please correct me if I’m wrong) the emergency gilt purchases are confined to the pension funds with solvency problems rather than being open market interventions ?
If I understand Bailey correctly he's in effect saying to pension funds, if you individually become insolvent that's not my problem - it's what the Pension Protection Fund is there for. If hundreds of pension funds become insolvent that's a systemic risk affecting the economy, which is my problem. The gilt purchases were dealing with the second.
Now administrators of struggling pension funds probably would prefer the Bank of England to bail them out than to declare insolvency. So he's taking a hard and potentially risky line with them. The fact he's dealing with an irresponsible government is also probably informing that hard line.
To hark back to Cyclefree's very good thread header, it's a line that should have been taken with Northern Rock and others in 2008. Let the institution fail but protect the depositors.
Yes. Undoubtedly. The past 14 years have been spent, propping up institutions that ought to have died.
The Conservative Party.
You may be right. Everything comes to an end, eventually, including all political parties. What is the point of the Conservative Party any more? The enrichment of its MP's, seems to be the answer.
This can’t go on for two years, or can it? They’ll be nothing left.
It will go on until the possible alternatives are no longer feared as being potentially worse. At the moment Truss and Kwarteng are still in place because Tory MPs are scared that removing them so soon would damage the credibility of the Conservative Party with the voters even further, and that the eventual replacements might be even less capable.
Things clearly have to get a lot worse to reach the point where these are risks worth taking.
The problem is Truss. You can’t solve the problem with her in charge. They need to wake up to that. She’s not going to suddenly switch and do normal or Conservative. It’s not who she is. Until she goes the precise flavour of crazy might change, but crazy is what’s on the menu. It’s not going to settle down. She doesn’t want it to.
The problem is more than Truss. The problem is the people who elected her - Tory members.
If enough Tory members wake up, it will change. It was pretty close last time. You don’t need that many.
Be inspired by Labour Starmer won over a party previously 60:40 in favour of Corbyn. That sort of shift seemed impossible.
Why would they wake up? These are the people who gave us IDS. Given another choice they'll go for Braverman or Badenoch. They need to be made a proscribed organisation.
They also chose Cameron.
Both Labour and the Tories give members the final say
It's got to stop. And Cameron really wasn't all that.
Note the illogical asymmetry that voting out is MPs only.
The problem is that the MPs also come up with terrible candidates. A fair-sized minority of them are actually criminals, and the majority are wilfully incompetent.
Well, when you put it like that…
I remember having dinner at which a prominent journalist was present, c.2009. The stuff he was saying about the Conservative and Labour Parliamentary parties made them sound like rival mafia families.
On the upside I can tell PBers that I just got notably hammered in the new Soho House on 180 Strand with its rooftop swimming pool (actually being used) and London is looking superb. Just magical
If we’re all gonna die, the greatest city in the world has never looked better
This can’t go on for two years, or can it? They’ll be nothing left.
It will go on until the possible alternatives are no longer feared as being potentially worse. At the moment Truss and Kwarteng are still in place because Tory MPs are scared that removing them so soon would damage the credibility of the Conservative Party with the voters even further, and that the eventual replacements might be even less capable.
Things clearly have to get a lot worse to reach the point where these are risks worth taking.
The problem is Truss. You can’t solve the problem with her in charge. They need to wake up to that. She’s not going to suddenly switch and do normal or Conservative. It’s not who she is. Until she goes the precise flavour of crazy might change, but crazy is what’s on the menu. It’s not going to settle down. She doesn’t want it to.
The problem is more than Truss. The problem is the people who elected her - Tory members.
If enough Tory members wake up, it will change. It was pretty close last time. You don’t need that many.
Be inspired by Labour Starmer won over a party previously 60:40 in favour of Corbyn. That sort of shift seemed impossible.
Why would they wake up? These are the people who gave us IDS. Given another choice they'll go for Braverman or Badenoch. They need to be made a proscribed organisation.
They also chose Cameron.
Both Labour and the Tories give members the final say
It's got to stop. And Cameron really wasn't all that.
Note the illogical asymmetry that voting out is MPs only.
The problem is that the MPs also come up with terrible candidates. A fair-sized minority of them are actually criminals, and the majority are wilfully incompetent.
Tory MPs would almost certainly have chosen Sunak. Not perfect I'm sure but I doubt we'd be in the self-inflicted mess.
She can’t u-turn on windfall tax now, it would destroy all her credibility and Tory’s would plunge in the polls.
Remember it was very first question of her first PMQ.
Might be very first question of her second.
They are already on the barrel scrapings of Sweet Fanny Adams in the polls, what further “plunge” were you expecting?
Will PBs Bart and Lucky, representatives for Libertarians and disrupters throughout the land still support her if she abandons the bits they like, will Truss gain anyone to replace those two key losses now with less credibility?
There still needs to be clarification though over exactly what her plan now is - is the new cap on renewable profits a windfall tax, and surely
the renewables are good guys, why hurt their reinvestment opportunities alone?
The problem she has is that nobody any longer cares what her ‘plan’ is - if indeed she has one at all - she is widely accepted to be a crank who has lost the ear of the public.
Quite right. A 'How Green were the Nazis?' type discussion. A case for Nurse Ratched
Governor Bailey really meant what he said about the pension funds having to accept that the government bond purchases are over … BBC briefly caught up with him on way out of the speech, and he said there was an “important task now for the funds to ensure they are done”… https://twitter.com/faisalislam/status/1579933041568665600/photo/1
Bailey to BBC News: “We are doing everything to ensure financial stability and you have my assurance on that…” asked about the market response.. “They have got three days, this has to be done for the sake of financial stability”
surprised by the market reaction. Bank has been clear the operation was over this weekend… its a message for the funds that do have the solvency but not the liquidity to make necessary adjustments…. But it is a message with consequences for the Government too..
In other words, right from the beginning the Bank of England have been clear that this is not an attempt to artificially manage the gilt rate, or stand in the way of a repricing to reflect new fiscal policies…. Ie its not going to QE this away, given the inflation situation.
Whether or not you agree with the ongoing gilt sales policy, that is at least consistent. As far as I understand it (please correct me if I’m wrong) the emergency gilt purchases are confined to the pension funds with solvency problems rather than being open market interventions ?
If I understand Bailey correctly he's in effect saying to pension funds, if you individually become insolvent that's not my problem - it's what the Pension Protection Fund is there for. If hundreds of pension funds become insolvent that's a systemic risk affecting the economy, which is my problem. The gilt purchases were dealing with the second.
Now administrators of struggling pension funds probably would prefer the Bank of England to bail them out than to declare insolvency. So he's taking a hard and potentially risky line with them. The fact he's dealing with an irresponsible government is also probably informing that hard line.
To hark back to Cyclefree's very good thread header, it's a line that should have been taken with Northern Rock and others in 2008. Let the institution fail but protect the depositors.
This can’t go on for two years, or can it? They’ll be nothing left.
It will go on until the possible alternatives are no longer feared as being potentially worse. At the moment Truss and Kwarteng are still in place because Tory MPs are scared that removing them so soon would damage the credibility of the Conservative Party with the voters even further, and that the eventual replacements might be even less capable.
Things clearly have to get a lot worse to reach the point where these are risks worth taking.
The problem is Truss. You can’t solve the problem with her in charge. They need to wake up to that. She’s not going to suddenly switch and do normal or Conservative. It’s not who she is. Until she goes the precise flavour of crazy might change, but crazy is what’s on the menu. It’s not going to settle down. She doesn’t want it to.
The problem is more than Truss. The problem is the people who elected her - Tory members.
If enough Tory members wake up, it will change. It was pretty close last time. You don’t need that many.
Be inspired by Labour Starmer won over a party previously 60:40 in favour of Corbyn. That sort of shift seemed impossible.
Why would they wake up? These are the people who gave us IDS. Given another choice they'll go for Braverman or Badenoch. They need to be made a proscribed organisation.
They also chose Cameron.
Both Labour and the Tories give members the final say
It's got to stop. And Cameron really wasn't all that.
Note the illogical asymmetry that voting out is MPs only.
The problem is that the MPs also come up with terrible candidates. A fair-sized minority of them are actually criminals, and the majority are wilfully incompetent.
Well, when you put it like that…
I remember having dinner at which a prominent journalist was present, c.2009. The stuff he was saying about the Conservative and Labour Parliamentary parties made them sound like rival mafia families.
Comments
Do these feckers never learn?
Truss on windfall taxes…two months ago.
https://twitter.com/KateAndrs/status/1579949505260457984
https://twitter.com/ThisIsTomLittle/status/1579926769314201601
It requires financial alchemy to turn lead into gold, but you do have to skip town quite sharpish...
Starmer’s first question has to be more nuanced than “are you still opposed to a windfall tax” tomorrow.
https://twitter.com/belfastEmpire/status/1579923441972805632
https://en.wikipedia.org/wiki/Gaslight_(1944_film)#Cast
Both Labour and the Tories give members the final say
For these schemes they had fairly clear liabilities but because they were closed they were expected to focus on gilts which allow a much more solid basis of risk for long term. As they were closed the members of the DB were obviously ageing and more and more coming to retirement - so the DB needed a solid basis of pretty risk free stuff i.e. gilts. In principle the closer you are to retirement the more your stash should be in risk free stuff.
But, gilts have been dire for years and this meant deficits in schemes and their parent companies being pissed off. So some whizz kids came up with the idea of using the gilts as leverage in some kind of complex derivative trade which allowed them access to non-gilt stuff like shares which performed better - so hopefully closing the deficits.
It was all tickety boo until the gilt market prices collapsed (yields raised to the 4-5% sort of figures we see on the news). This happened very quickly. Faster than ever before iirc. The counter parties to these complex derivatives wanted more collateral to be posted to cover margins and by this they meant cash and now. The quick way to get cash was for DB schemes to flog gilts in a hurry. The firesale led to further collapse in gilt price and so more fire sale.
There then followed a story about an organisation that provides baby clothes and equipment to parents who can't afford them.
Lots of folk in need of a lot more than Dizzy and Krazi's Trickle Down.
...Ngaire Woods: "It's got to come sooner"
Ken Rogoff: "I agree it's got to come sooner"
https://twitter.com/BenChu_/status/1579952211840630784
(Lansbury, not Truss)
They are already on the barrel scrapings of Sweet FA in the polls, what further “plunge” were you expecting?
https://www.bbc.com/news/uk-politics-63206989.amp
I was thinking the other day it said something about Boris the press never described him as embattled.
Though she may have to screw Billy Pilgrim. So it goes.
https://twitter.com/MichaelLCrick/status/1579942488168861697
Now administrators of struggling pension funds probably would prefer the Bank of England to bail them out than to declare insolvency. So he's taking a hard and potentially risky line with them. The fact he's dealing with an irresponsible government is also probably informing that hard line.
Note the illogical asymmetry that voting out is MPs only.
There still needs to be clarification though over exactly what her plan now is - is the new cap on renewable profits a windfall tax, and surely the renewables are good guys, why hurt their reinvestment opportunities alone?
Plymouth: https://twitter.com/Plymouth_Live/status/1579370081234321408?t=eIZ0Ev74Q6iG2Dn5JbZiug&s=19
And Brighton: https://twitter.com/ShaunLintern/status/1579879341147971584?t=uFxQFyZkxYzRYaRm163vPw&s=19
Thank the Lord we have those 40 new hospitals up and running. We would be in the shit without...
The problem she has is that nobody any longer cares what her ‘plan’ is - if indeed she has one at all - she is widely accepted to be a crank who has lost the ear of the public.
https://twitter.com/SCClemons/status/1579892094021570560
Interesting development.
@tnewtondunn | @LOS_Fisher | @TimesRadio https://twitter.com/FirstEdition/status/1579953212240846848/video/1
https://www.itv.com/news/calendar/2022-10-11/eddie-izzard-launches-campaign-to-be-elected-mp
If we’re all gonna die, the greatest city in the world has never looked better
Not necessarily a daft idea.
Your distaste for him might be due to Brexit, but you never changed your mind on him. He was brought down becaise many of those who had previously supported him - and remember the Tories were polling in the high 40s in the first 17 months of his leadership - no longer did so. And that was down to a number of things, chiefly, in my view, partygate - but none of those things were Brexit. The number of voters who thought " I used to like Boris, but because of his stance in Brexit I can no longer support him" is negligible.
You appear to be generalising from yourself here "I don't like Boris because he was pro-Brexit; other people appear not to like him, that must also be because of his stance on Brexit." But Brexit was not what brought Boris down. Boris was what brought Boris down.
And Brexit will not be what brings Liz down. If Liz is brought down it will be down to old fashioned tax vs spend vs economic reality.
FWIW, I've had a very nice and tremendously interesting evening.
Or rather they are obliged to hold government bonds.
Is the risk though, you are letting the markets know exactly what the plan is?
London is BACK. But, also, BOOM
Also it was full of non-Brits in London for Frieze saying "OMFG this place is amazing I want to live in London, are you a member" - which is gratifying
Finally, some Levelling Up
Its about a) doing the right thing by the country and b) surviving themselves. The latter I'd rate for them both as barely 50-50
I don’t know (as I’m very far from an expert) whether any funds will have lost enough money to be in real trouble, but this effectively puts quite a lot of pressure on those who are over leveraged to unwind their positions.
And remember that the other side if the coin is that higher bond yield will have reduced their future liabilities.
Someone like MaxPB might have a better idea of how it’s likely to wash out.
*burps, happily*
https://twitter.com/redhistorian/status/1579957801321107457?s=46&t=y8jV5R4-53bLJE4q7ZNQKg