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

Anyway, let us step away from MMT as it is not, and never was the story here. It has nothing to do with where we are.

“Historians will note that the sacking of Sir Tom Scholar was a signal to short the pound. It was a sign of weakness not strength, an unwillingness to listen to independent advice and a foretaste of what was to come. Plenty of leadership lessons here”

Lionel Barber, Editor, Financial Times (Twitter).
 
Tony L said:
Anyway, let us step away from MMT as it is not, and never was the story here. It has nothing to do with where we are.

“Historians will note that the sacking of Sir Tom Scholar was a signal to short the pound. It was a sign of weakness not strength, an unwillingness to listen to independent advice and a foretaste of what was to come. Plenty of leadership lessons here”

Lionel Barber, Editor, Financial Times (Twitter).
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Yes. MMT has nothing do do with the story here. It is also those on here who have complained loudest about “MMT being everywhere” who are the ones who keep bringing it up again and again.
 
Tony L said:
Anyway, let us step away from MMT as it is not, and never was the story here. It has nothing to do with where we are.

“Historians will note that the sacking of Sir Tom Scholar was a signal to short the pound. It was a sign of weakness not strength, an unwillingness to listen to independent advice and a foretaste of what was to come. Plenty of leadership lessons here”

Lionel Barber, Editor, Financial Times (Twitter).
Click to expand...
Our dear friend Dominic Cummings, the cloaca maxima of British politics, did predict that a hard rain would fall on Whitehall. This Party’s behaviour is to remove any Permanent Secretary or similar who has the temerity to challenge or expose them. It is a very bad indicator.
 
NeilR said:
my initial comment wasn’t 100% serious as this is not really MMT as the proponents on here advocate. However it does highlight the risks of rapidly increasing borrowing if the markets lose confidence in government policies or unforeseen external events take place.

this is where caution is needed in my view because in the end the bond holders will call the shots.
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The borrowing is not itself the problem. The problem is that most of that borrowing is going to the already wealthy. The speculators are betting that they will take that money out of the economy and put it into private savings. It is the money leaving the economy that is the problem, not the borrowing.
 
There's a lot of Europe-wide bad energy news wrapped into this morning's drop, as you can see from looking at the Euro/USD rate, which also suffered a major hit this morning (dropping to a 20-year low).

However, EUR/USD is now recovering back up to last week's levels, while GBP looks to have locked-in some of today's losses against USD.

This was a dramatic fall, but it's really only a blip on steady decline against the Euro that began at the end of August. There's no other factor at work there than the UK leadership change. (I compare with the Euro because the Eurozone and UK are both equally badly affected by the Ukraine situation and its knock-on energy price impacts, while the US is economically and geographically almost totally isolated from it)
 
Tony L said:
Anyway, let us step away from MMT as it is not, and never was the story here. It has nothing to do with where we are.

“Historians will note that the sacking of Sir Tom Scholar was a signal to short the pound. It was a sign of weakness not strength, an unwillingness to listen to independent advice and a foretaste of what was to come. Plenty of leadership lessons here”

Lionel Barber, Editor, Financial Times (Twitter).
Click to expand...
It was probably all of those things. But something like this - i.e. a challenge to Treasury orthodoxy - needed to happen and you wouldn't really expect the FT to like or understand it. They'll interpret it in a way that flatters their particular prejudices and preoccupations. It's going to be difficult to get a clear sense of what's going on here.
 
droodzilla said:
I'm still interested in exactly why the markets have reacted so badly to the mini-budget which, to some degree, looks like bog-standard right-wing liberatrian economics
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It's not bog-standard though in the sense that right wingers normally just talk about this sort of thing but don't actually do it because they are generally not idiots or are at least surrounded by people who will prevent them from being idiots. I think it's mostly a reaction to the *unexpected* size and scope of the tax changes coupled with the fact that Truss and Kwarteng appear to not just be idiots but reckless idiots who will actually do the idiotic thing and not just talk about it for political base reasons.

I do think talk of a currency crisis is a wrong though. The government needlessly damaged our economy and so the prices and implicit risk adjust to reflect that but the UK is still the 5th (ish) largest economy in the world, a large financial centre and with massive assets (both at home and abroad).

Although if the BoE decides to monetise this particular deficit increase then, oh boy, hang on to your hats (although I don't think they will).
 
tones said:
UBS is the world's biggest wealth manager, so clueless they are not.
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As someone who worked with their Fixed Income desk and nearly went into business with them I can only insert my <hollow laughter> here.
 
Cheerleader of doom, Kate Andrews (ex-IEA, now Spectator) reckons the market reaction only helps the government, who want higher rates anyway (Twitter):

"*Reminder*
The Truss government wants interest rates to rise faster. It's a key part of its new economic strategy.
So if market reaction to this mini-Budget forces the Bank of England's hand, that is a design feature, not a design flaw, of Truss's plan."

Meanwhile, Ed Conway notes (Twitter):

"Blimey. Investors are now bett[ing] on UK interest rates topping 6 per cent by the first half of next year. You can see the expectations rising literally by the minute…"

These Tories sure are clever, getting a panic-stricken market to do its work for them.o_O
 
ks.234 said:
The borrowing is not itself the problem. The problem is that most of that borrowing is going to the already wealthy. The speculators are betting that they will take that money out of the economy and put it into private savings. It is the money leaving the economy that is the problem, not the borrowing.
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I disagree that borrowing isn’t a problem, however, agree with you that people who can will save and not spend. I’ll save any cash I can as an insurance policy to prevent being forced to sell assets at a low price in order to live. Forget about foreign holidays, major purchases etc, I’d prefer to keep cash, even if it’s devaluing. The properly wealthy will carry on spending whatever they do regardless.
 
Seeker_UK said:
Can you define "properly wealthy"?
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I was going to ask KS what he thought wealthy meant? I’d say you’re properly wealthy when events of this year worry you not a jot. If your assets tumbled 50% and it made no difference to your lifestyle, spending or future plans. That sort of level of wealth. Of course, this will differ vastly depending on the individual.
 
Ponty said:
I disagree that borrowing isn’t a problem, however, agree with you that people who can will save and not spend. I’ll save any cash I can as an insurance policy to prevent being forced to sell assets at a low price in order to live. Forget about foreign holidays, major purchases etc, I’d prefer to keep cash, even if it’s devaluing. The properly wealthy will carry on spending whatever they do regardless.
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Forgive me, but people like you and me don’t matter, the savings I mean are the vast trunks of money being saved into off shore tax havens.
 
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