‘Mini’ budget
- Thread starter Mungo
- Start date
Sinistral
Well-Known Member
Genius? You have to be joking.
This is serious stuff, not the usual scenario of the money markets getting their nickers in a twist.
Just for once I'll benefit from this, but I feel sorry for those with mortgages and unfunded debt like too much credit card borrowing.
www.theguardian.com
This is serious stuff, not the usual scenario of the money markets getting their nickers in a twist.
Just for once I'll benefit from this, but I feel sorry for those with mortgages and unfunded debt like too much credit card borrowing.
Sterling slides back towards record low as Bank of England and Treasury fail to reassure markets – as it happened
Bank of England says it ‘will not hesitate’ to change interest rate but appears to be trying to squash expectations of an emergency rise
www.theguardian.com
It is stupid, insane and odd. They simply refuse to let the band aid be ripped off. It just causes so much turmoil over a longer period of time.
The smaller more obvious picture is that people earning £1m a year will be somewhere in the region of £50k a year better off. Which seems idiotic. Giving the normal folk a bit more seems sensible to get through the hard times but will it make any difference if the cost of everything goes up even more due to these decisions?
The stamp duty thing is laughable. Rates are continuing to rise. The housing market is certainly creaking now and I cannot see these changes altering that. They should be getting whatever money in they can after the last coupla years of giving money away for free and crippling the nation with scary levels of debt.
Generally speaking, Sunak had the right sort of idea albeit it was a horrible cup of tea to be given to drink.
The worst thing is the impact this is having on sterling. Sure, the dollar has been strong for some time now and only appears to be going on an upward trend but this latest moronic set of decisions is causing sterling to be battered more and this seems to be the case. We are getting closer to parity with the dollar and that is not good as we rely so heavily on imports, most of which are paid for in US dollars. Oil being the main one. And we need lots of that. So look forward to higher prices on anything that is not created in the UK which is, well, umm, most things.
So they give with one hand but the impacts mean you end up paying more. That is hardly going to help inflation, so the independant body (supposedly independant) BOE who set interest rates will have to raise them more to protect sterling in an effort to make at least some people want to buy our quids. I sense a massive stand off between Kwarteng and Bailey. I don't like either much but I prefer Bailey (just). He has acted too late but most of the issues with late rate raises were down to that muppet Carney and his crew. Bailey is the message giver though, so he is the one who gets a bullet. He must hate Truss and co. Something I can sympathise with him over.
Anyhow, are we doomed? No. Are we in for the roughest of rough rides? Probably.
Cash is king at the moment. Keep as much as you can and pray it is still worth something in a few months/years. My savings accounts are emailing me at least on a monthly basis to tell me that my interest rates are going up which makes a nice change from the last decade of paltry returns. Although your cash is still being eroded on a daily basis by inflation, it is not as bad having none and not being able to afford the basics in life. Something that more and more people are going to have to get used to. Very very sad.
Next schedule rate meeting is for November with nothing scheduled for October. I imagine they might be having a meeting today to discuss an emergency rate hike to offset the crap Kwarteng has created. Sterling cannot continue to drop against the dollar so much. Our rate rises must at least keep pace with the Federal reserve or we simply are seen as a less attractive place to park money, reducing demand and price further. Keep a close eye on the DXY (dollar index) for clues as to when things might reverse a little. It impacts most things financial.
The smaller more obvious picture is that people earning £1m a year will be somewhere in the region of £50k a year better off. Which seems idiotic. Giving the normal folk a bit more seems sensible to get through the hard times but will it make any difference if the cost of everything goes up even more due to these decisions?
The stamp duty thing is laughable. Rates are continuing to rise. The housing market is certainly creaking now and I cannot see these changes altering that. They should be getting whatever money in they can after the last coupla years of giving money away for free and crippling the nation with scary levels of debt.
Generally speaking, Sunak had the right sort of idea albeit it was a horrible cup of tea to be given to drink.
The worst thing is the impact this is having on sterling. Sure, the dollar has been strong for some time now and only appears to be going on an upward trend but this latest moronic set of decisions is causing sterling to be battered more and this seems to be the case. We are getting closer to parity with the dollar and that is not good as we rely so heavily on imports, most of which are paid for in US dollars. Oil being the main one. And we need lots of that. So look forward to higher prices on anything that is not created in the UK which is, well, umm, most things.
So they give with one hand but the impacts mean you end up paying more. That is hardly going to help inflation, so the independant body (supposedly independant) BOE who set interest rates will have to raise them more to protect sterling in an effort to make at least some people want to buy our quids. I sense a massive stand off between Kwarteng and Bailey. I don't like either much but I prefer Bailey (just). He has acted too late but most of the issues with late rate raises were down to that muppet Carney and his crew. Bailey is the message giver though, so he is the one who gets a bullet. He must hate Truss and co. Something I can sympathise with him over.
Anyhow, are we doomed? No. Are we in for the roughest of rough rides? Probably.
Cash is king at the moment. Keep as much as you can and pray it is still worth something in a few months/years. My savings accounts are emailing me at least on a monthly basis to tell me that my interest rates are going up which makes a nice change from the last decade of paltry returns. Although your cash is still being eroded on a daily basis by inflation, it is not as bad having none and not being able to afford the basics in life. Something that more and more people are going to have to get used to. Very very sad.
Next schedule rate meeting is for November with nothing scheduled for October. I imagine they might be having a meeting today to discuss an emergency rate hike to offset the crap Kwarteng has created. Sterling cannot continue to drop against the dollar so much. Our rate rises must at least keep pace with the Federal reserve or we simply are seen as a less attractive place to park money, reducing demand and price further. Keep a close eye on the DXY (dollar index) for clues as to when things might reverse a little. It impacts most things financial.
Bavarianbrit
Well-Known Member
Almost the worst midrate on offer since the Brexit vote plummet in 2016.
Today at 11:22am 1.00 British Pound = 1.1091496 Euros
Today at 11:22am 1.00 British Pound = 1.1091496 Euros
And with £1=$1.03 any shooting related parts coming from the USA just got even more expensive
Cheers
Bruce
Cheers
Bruce
I think it rather depends on whether market participants are swayed for more than a few days by the hysterical and incorrect analyses put forward by our serially incorrect and hysterical media. The loudest mouths are habitually wrong.
@Sinistral has added a link showing that the British economics correspondent at the Economist considers the current market reaction to be wrong. Meanwhile Starmer thinks that reducing costs to individuals is a bad thing to do in a "cost-of-living-crisis" (??).
We'll have to see whether the lemmings or the sentient prevail. The facts of the matter are that the recent budget made fairly minor changes (especially in comparison to the scale of state interventions made her and abroad to e.g. covid, QE, . The immediate market reaction is clearly unwarranted by the fundamentals of the budget.
The important thing to do is to separate and attribute correctly the market behaviour. Currently we have reaction to one side of the coin, but everyone is pushing a narrative that ignores the other side of the coin (mainly because they are socialists). Less tax will do at least some of the following: directly stimulate economic growth, increase tax receipts by reducing incentives to legitimately avoid the previous rates of tax, increase investment in the UK, increase corporate spending and so on.
To the extent that the exchange rate declines, it improves the attractiveness of the country to foreign investment, which then raises the rate. At the moment, the fixation is on the increase in cost to the government of servicing its debt. In the longer term that is a good thing because it will disincentivise the public sector's hosepipe approach to squandering the country's money. I've been more concerned about the (international) establishment's consensus view for the past 15 years that emergency war spending levels are appropriate reactions to every challenge - from sub-prime debt crisis, to euro crisis, to covid, to self-induced energy crisis, to self-induced inflation crisis.
There is obviously a disequilibrium when the balance is altered by policy. That's the whole point of having a policy - to change the conditions.
@Sinistral has added a link showing that the British economics correspondent at the Economist considers the current market reaction to be wrong. Meanwhile Starmer thinks that reducing costs to individuals is a bad thing to do in a "cost-of-living-crisis" (??).
We'll have to see whether the lemmings or the sentient prevail. The facts of the matter are that the recent budget made fairly minor changes (especially in comparison to the scale of state interventions made her and abroad to e.g. covid, QE, . The immediate market reaction is clearly unwarranted by the fundamentals of the budget.
The important thing to do is to separate and attribute correctly the market behaviour. Currently we have reaction to one side of the coin, but everyone is pushing a narrative that ignores the other side of the coin (mainly because they are socialists). Less tax will do at least some of the following: directly stimulate economic growth, increase tax receipts by reducing incentives to legitimately avoid the previous rates of tax, increase investment in the UK, increase corporate spending and so on.
To the extent that the exchange rate declines, it improves the attractiveness of the country to foreign investment, which then raises the rate. At the moment, the fixation is on the increase in cost to the government of servicing its debt. In the longer term that is a good thing because it will disincentivise the public sector's hosepipe approach to squandering the country's money. I've been more concerned about the (international) establishment's consensus view for the past 15 years that emergency war spending levels are appropriate reactions to every challenge - from sub-prime debt crisis, to euro crisis, to covid, to self-induced energy crisis, to self-induced inflation crisis.
There is obviously a disequilibrium when the balance is altered by policy. That's the whole point of having a policy - to change the conditions.
Heym SR20
Well-Known Member
Have a read off
And
But don’t worry there are plenty on SD who think everything is good and healthy and that nothing to worry about as the £ goes through parity and becomes worth less than a US$, although suspect many will clenching the butt cheeks.
I don’t think those who vote in Truss and KK will worry too much,
But for those of us who can remember the misery of the 1970’s - well we got through those, and the sun will keep rising.
KK is running the country like a tech stock - Uber, AirBnB, Brewdog or even Tesla etc - lots of spin, lots of jingoistic rhetoric and keep using cheap borrowings to fuel the company and lets not worry about actually having a business that makes money cos somebody else is out there who will pay silly money for secondary shares so everything is ok.
The UK’s Monumental Policy Mistake – how bad will it get? - Blain's Morning Porridge
What a mess. Kwasi Kwarteng’s Special Fiscal Operation failed to stabilise UK markets and has zero prospect of driving growth. The new government stumbled at the first jump. How bad will it get? What are the implications? Who is next for the Chancellor’s job?
morningporridge.com
And
But don’t worry there are plenty on SD who think everything is good and healthy and that nothing to worry about as the £ goes through parity and becomes worth less than a US$, although suspect many will clenching the butt cheeks.
I don’t think those who vote in Truss and KK will worry too much,
But for those of us who can remember the misery of the 1970’s - well we got through those, and the sun will keep rising.
KK is running the country like a tech stock - Uber, AirBnB, Brewdog or even Tesla etc - lots of spin, lots of jingoistic rhetoric and keep using cheap borrowings to fuel the company and lets not worry about actually having a business that makes money cos somebody else is out there who will pay silly money for secondary shares so everything is ok.
Heym SR20
Well-Known Member
In a nutshell what Truss and KK have done is
1) put a cap that we will all spend on energy prices.
2) and for doing so they have agreed that the government will pay the difference to the energy companies.
3) to do so they will add another £60bn on government borrowings so will be well above 100% of GDP. Taxpayers in the future will have to pay this.
4) energy companies now effectively have free extraordinary profits which they return to shareholders as special dividends, and their directors get massive bonuses
5) KK has reduced the tax take, so even more sovereign debt has to be sold.
6) this has pushed up the price of sovereign debt
7) this has crashed sterling. Given energy prices are in US$ this has made our energy even more expensive
8) so government spend on energy has just got even higher which will lead to increase in government debt at an even higher price
9) and repeat add infinitum.
It is this sort of fiscal policy that turns thriving countries into basket cases over night. Once countries loose the confidence of the markets it will happen very very quickly.
And markets don’t care - they just like to extract maximum pain.
1) put a cap that we will all spend on energy prices.
2) and for doing so they have agreed that the government will pay the difference to the energy companies.
3) to do so they will add another £60bn on government borrowings so will be well above 100% of GDP. Taxpayers in the future will have to pay this.
4) energy companies now effectively have free extraordinary profits which they return to shareholders as special dividends, and their directors get massive bonuses
5) KK has reduced the tax take, so even more sovereign debt has to be sold.
6) this has pushed up the price of sovereign debt
7) this has crashed sterling. Given energy prices are in US$ this has made our energy even more expensive
8) so government spend on energy has just got even higher which will lead to increase in government debt at an even higher price
9) and repeat add infinitum.
It is this sort of fiscal policy that turns thriving countries into basket cases over night. Once countries loose the confidence of the markets it will happen very very quickly.
And markets don’t care - they just like to extract maximum pain.
It's £1=$1.074 now, so the country must be 4% richer and your shooting parts 4% cheaper since you wrote that. I assume you now view this as an improvement.
Which reduces inflation by 5% at a stroke.
Current market projections are that there is a good chance that there will be no difference.
£60 billion does not get the national debt from here to over 100% of GDP. You are of course assuming that GDP is unaffected by energy prices. A false assumption.
To the extent that they do, the dividends are taxed at 20%, the directors are taxed at 40%, the shareholders are also taxed, the residual money left after this is also taxed, time and time again. The logical conclusion of your implicit argument is that it would be most desirable if all tax rates were 100% across the board, and the government distributed funds as it saw fit.
It remains to be seen whether that is true. There is plentiful evidence to suggest that it won't be true.
So too, to a greater extent, has the response to COVID, the response to the financial crisis, the everyday cost of the NHS and welfare, etc.etc. etc. It is peculiar to pick out a single and fairly minor change as being pivotal against an established pattern across all parties of excess public spending.
Given energy prices are also falling rapidly, the claimed effects of this are overstated.
Which places very great pressure on the government to reduce public spending, which would be a very healthy discipline and good for the long-term health of the country.
This isn't a thriving country. It, like the rest of Europe, is a stagnant country. You're right that once countries lose the confidence of the markets, things go downhill very very quickly. However, you do not recognise that market behaviour, in the short term, is often not rational. A rapid loss of confidence is not a rational reaction, which means that it moves the markets to a place which is not supported by the fundamentals and a reversion to the mean follows.
Either markets care or they don't. If you say markets don't care, then you can't say that they like to extract maximum pain. They don't care.
Sampo
Well-Known Member
Appears to beat Labour at their own game that they wouldn't want to win in the next election with all the debt. Maybe it might tempt people wanting to turn up on the shores of UK to turn back. I fail to see the point of how anyone with less than maybe £1mil in assets and no debt benefiting from this. Maybe I am naive.
norcan
Well-Known Member
Indeed, it’s very healthy to have crumbling infrastructure so that our ruling elite can hoard even more assets.
The state of our infrastructure has nothing to do with it. Hardly any public spending is used on infrastructure and most infrastructure spending is done by the private sector. The current path of reforms acting to increase not decrease infrastructure investment. The fact is that the state underinvests in infrastructure and overspends on staff and procurement - whoever is in power.
Pete1774
Well-Known Member
The stock markets like nothing more than a panic. Big changes in currency values provide opportunities to make lots of cash. The press love nothing better than a scare story to bump up their readership and increase their advertising revenue. Within a month or two it will all settle down and other factors, such as Russia's upcoming political turmoil, will provide the next stock market betting bonanza. 
I wouldn't worry about it. They've also decided to abandon any attempt to control immigration and have announced instead a plan to increase net immigration with visas. Essentially continuing and accelerating Boris Johnson's bankrupt policy of raising GDP, hammering productivity and per-capita income through unlimited population expansion as a way to deflate uncontrollable debt. So that's all their red wall seats gone and at least half of all natural Tory voters disenfranchised.
So it'll be a Labour government next time, who will do exactly the same with the addition of punitive taxation to drive business away. So it's back to the 1970 folks, only with double the population. Enjoy.
So it'll be a Labour government next time, who will do exactly the same with the addition of punitive taxation to drive business away. So it's back to the 1970 folks, only with double the population. Enjoy.
Yes, forgot about that. Back to the 1970's but with double the population and no shooting or gun ownership because it will be banned. Still, there'll be nowhere to shoot anyway as all available green space will be needed for housing estates and solar farms.
Leeroy7031
Active Member
Seem the Bank of England may be stepping into raise interest rates .... oh joy!!
norcan
Well-Known Member
I mean, what could go wrong? ¯\_(ツ)_/¯
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