The Premiership of Mary Elizabeth Truss.Sept 2022 - Oct 2022

[PsB]

Investors seem inclined to regard the UK Conservative Party as a doomsday cult, according to Paul Donovan, chief economist of UBS Global Wealth Management.

https://www.theguardian.com/busines...0891514fe7c5f9#block-63315ebc8f0891514fe7c5f9

and the original article:
https://www.ubs.com/global/en/wealt...s/paul-donovan/2022/mmt-takes-a-pounding.html
"Modern monetary theory has been taken into a corner by the bond markets and beaten up. Advanced economy bond yields are not supposed to soar the way UK gilt yields rose."
"Tax cuts are unlikely to give the UK a meaningful medium-term boost (the supply constraints in the UK economy are more about health and education). A short-term “sugar high” is likely but may be limited."

 

[Ponty]

My biggest contempt in all of this is for the argument that goes:

2008 QE and borrowing will be our doom any day now.
2009 QE and borrowing will be our doom any day now.
2010 QE and borrowing will be our doom any day now.
2011 QE and borrowing will be our doom any day now.
...
2021 QE and borrowing will be our doom any day now.
2022 See I was right all along!

It's just catastrophically stupid.

Are you seriously suggesting too much ultra cheap money for too long hasn’t brought us to where we are?!

 

[matthewr]

Are you seriously suggesting too much ultra cheap money for too long hasn’t brought us to where we are?!

Yes. Like I say you can't be wrong about something for over a decade and then say "At last I am right!". It's just dumb.

 

[NeilR]

This MMT lark is great isn’t it?


https://t.co/BY5xwZXz76

 

[Nero]

A short-term “sugar high” is likely but may be limited."

That's all that's needed. There's an election in 18 months

 

[Ponty]

Yes. Like I say you can't be wrong about something for over a decade and then say "At last I am right!". It's just dumb.

Doesn’t happen overnight though does it. The course was just plain wrong for too long.

 

[Seanm]

That's all that's needed. There's an election in 18 months

Yep.

 

[Nick_G]

“Sterling fell to an ALL TIME LOW against the dollar in early trading - lowest basically since the dollar was created… $1.035 recovered some of that in last hour, now at $1.06. But this is some slump after investors questioned the policy of massive tax cuts and borrowing…”

Faisal Islam (Twitter).

Puts it into perspective. The unhinged economic recklessness of this Tory government has crashed Sterling to the lowest level it has ever been since the US dollar was created with parity in 1792! There is no way a Tory government can ever sneer at any other party for anything economic ever again. They are the undisputed heavyweight champions of economic mismanagement. They own it.

As others have said this isn’t some academic Westminster political thing either. This is already crippling energy prices mirroring upwards at the exact speed of the £s hot brick-like descent down the shitter. It will impact us all hugely. Expect a lot of businesses to go under very fast as rapidly increasing materials costs etc make them entirely unviable. This will push unemployment, reduce tax take and the death spiral accelerates recursively. The Tories really have &***ed it up this time. They need to admit they have got it wrong and reverse out.

The Tories: the party of f-k business.

 

[Tony L]

This MMT lark is great isn’t it?


https://t.co/BY5xwZXz76

It is simply insane to pin the Tories reckless gambling onto MMT. Whatever this batshit crazy Tory policy is, it sure as hell isn’t MMT! I don’t know anything about UBS, but that statement suggests they are either clueless, or propagandists, or maybe both.

 

[sideshowbob]

It is simply insane to pin the Tories reckless gambling onto MMT. Whatever this batshit crazy Tory policy is, it sure as hell isn’t MMT! I don’t know anything about UBS, but that statement suggests they are either clueless, or propagandists, or maybe both.

His point is that Kwarteng's policy of massively increasing government debt - the collapse of the pound it has caused, and the inflation it is likely to stoke - undermines some of the central claims of MMT about the likely unimportant effects of rapid government debt increases. And on that he's probably completely correct. But I'm saying no more, as all the MMT people on here are evangelists and I don't want to poke them too much with a stick.

 

[Ponty]

Yes. Like I say you can't be wrong about something for over a decade and then say "At last I am right!". It's just dumb.

A year of ‘emergency’ ZIRP in 2008/9 wouldn’t have caused a big problem. Over a decade on the other hand? It’s the root cause of where we are IMHO. Where’s the next load of bail out cash coming from when people can’t even afford a ‘normal’ mortgage rate of 6 - 8%?

 

[TheDecameron]

I guess a devalued pound will at least make us more competitive in overseas pork markets.

Think of how much American tourists will be spending chez your local pub landlord though! Provided he’s not gone into the plastic test tube business full time.

 

[paulfromcamden]

But I'm saying no more, as all the MMT people on here are evangelists and I don't want to poke them too much with a stick.

 

[TheDecameron]

Now under 1.06 to the Swiss franc - how low can you go?

Tones, the relatives will be expecting full noblesse oblige when you’re back over.

 

[paulfromcamden]

I don’t know anything about UBS, but that statement suggests they are either clueless, or propagandists, or maybe both.

UBS are the largest private bank in the world. They may be many things but clueless isn't one of them.

 

[Ponty]

It is simply insane to pin the Tories reckless gambling onto MMT. Whatever this batshit crazy Tory policy is, it sure as hell isn’t MMT! I don’t know anything about UBS, but that statement suggests they are either clueless, or propagandists, or maybe both.

Suggesting UBS are clueless is clueless IMHO.

 

[Jim Audiomisc]

Incidentally, I understand that they are planning to update this graph with 'Kwarteng opens his mouth'.

Gives me a 403 Forbidden from a server.

 

[Tony L]

His point is that Kwarteng's policy of massively increasing government debt - the collapse of the pound it has caused, and the inflation it is likely to stoke - undermines some of the central claims of MMT about the likely unimportant effects of rapid government debt increases. And on that he's probably completely correct.

It is a totally incorrect point as MMT is running a deficit against a safe and predictable expenditure e.g. state infrastructure spending (e.g. roads, power stations etc) and factors both the employment it generates, and the long-term economic benefit such infrastructure clearly adds to a nation. It also factors-in the benefits to the private sector of such actions. Kwateng has borrowed a shit-ton for nothing but tax cuts for the very richest in the blind hope it brings some investment. As I said upthread it is the equivalent of selling your house to buy lottery tickets. It is just batshit crazy. The work of a chancellor who looked to be off his box on cocaine at a royal funeral of all places. MMT is a business plan. This is gambling. Nothing more.

 

[matthewr]

Doesn’t happen overnight though does it. The course was just plain wrong for too long.

But firstly the claim was always that inflation and disaster was imminent. Nobody ever said the imminent cheap money crisis will only actually arrive a decade from now when interest rates actually start to rise (!). You also have a decade long counterfactual to explain so "See! I was right!" is just not going to cut it.

Secondly, this crisis is caused by a terrible fiscal policy (borrowing money to pay for tax cuts for rich people which won't provide growth) and is likely to result in a significant tightening of monetary policy. The idea that it's finally (finally!) the result of loose monetary policy when a very obvious fiscal explanation is starting us in the face is just risible.

If it wasn't such a disaster for the UK I would be enjoying the irony of the the long heralded bond vigilantes finally arriving not to punish cheap money but to punish a bunch of clueless supply siders when they finally get to implement their derganged fantasies in a major economy.

 

[mandryka]

That's all that's needed. There's an election in 18 months

She's been pretty explicit about what she'll want to see before she calls an election -- so I guess part of the gamble is that her economic policies will produce these things in the next 18 months. This was in response to a question about the likely unpopularity of taxation which benefits the rich most:

I think working people will judge me and my government in the next election by: have I got a good job?, Are my wages going up? Have I seen improvements in my town or my city? Has the road been built? Can I get a mobile signal? Am I getting a GP appointment as quickly as I can? That's what people care about, and that's what I believe people will vote on.

In other words, an increase in the absolute wealth of each of us -- even if that's achieved at the cost of increasing inequality.

How does she expect to achieve this? She was explicit about this too, and it's a nonsense to stigmatise it as "trickle down"

What I know is that there are 10s of billions of investments which are ready to go into businesses right across the country . . .into manufacturing businesses in the North of England, life sciences. And what we need to do is get that investment from The City of London right across our country. . . the priority is getting investment into manufacturing industry . . .One of the reasons why we've had relatively low growth in this country is that we haven't had enough capital investment, and yet we have one of the world's best financial services centres. So what I want to see is that money, in the City of London, put to good use across our country.

It's not clear to me why this would be a sugar high, with all the implications of being short lived. But I'm not an economist, so maybe.

The key is charter cities! Let's hope she can get them up and running fast!

Prime Minister Liz Truss tells Sky News she's prepared to be unpopular - YouTube