Rip pound sterling

[ron obvious 1,499]

10 minutes ago, Well b back said:

Because of the Yields that you are not prepared to factor in, if you are watching Question Time because of the turmoil caused by what you are defending a lady had her fixed rate of 4.5% pulled and her new rate will be 10.5 %.

I think your arguments fall down because you are talking about 6 months, a year & 5 years, whilst what has happened to England has happened in 6 days. We have borrowed 190 billion, and as yet will not or cannot tell anybody how we are going to repay it. All these other Countries you have mentioned have not just a plan, but a credible plan approved by the markets.

All we have to do to stop this is issue the plan and if the plan does not stack up, reverse last weeks budget. If it stacks up the problem goes away, our Yields reduce to the same as all other major Countries. Our Yields have almost trebled  ( slightly better since the BOE intervention ) in 5 days, I repeat 5 days, nothing to do with Pandemics, Wars or energy but all because 2 idiots have put our borrowing upto £190 billion and cannot or will not tell the markets how they are going to repay it, and more so how much more they are going to borrow on top of this. 

But the £310 -410,000,000,000 cost of lockdown, furlough etc. didn't matter? What's the scheme to repay that? What's the increase in debt due to the mini budget?

[horsefly 4,287]

7 hours ago, ron obvious said:

But the £310 -410,000,000,000 cost of lockdown, furlough etc. didn't matter? What's the scheme to repay that? What's the increase in debt due to the mini budget?

It's precisely BECAUSE those costs do matter that makes the "fiscal event" the utter reckless disaster that it is. To borrow money for tax cuts when the country is already massively in debt is complete lunacy, and as a result the markets have responded exactly as would be expected. It's hard not to conclude that the OBR was side-lined precisely because it would have described this as the height of irresponsibility.

[Barbe bleu 814]

1 hour ago, horsefly said:

It's precisely BECAUSE those costs do matter that makes the "fiscal event" the utter reckless disaster that it is. To borrow money for tax cuts when the country is already massively in debt is complete lunacy, and as a result the markets have responded exactly as would be expected. It's hard not to conclude that the OBR was side-lined precisely because it would have described this as the height of irresponsibility.

I agree with this approach.   There is an awful lot of white noise and excitement about performance on local radio shows, fx charts and the politics of the 45% cut  but this is what it should really be about: are we  borrowing too much and what would the other guys do differently.

 

Edited September 30, 2022 by Barbe bleu

[ricardo 7,347]

1 hour ago, horsefly said:

To borrow money for tax cuts when the country is already massively in debt is complete lunacy, and as a result the markets have responded exactly as would be expected. 

Yes, it was certainly an ill judged political move and a signal that the pendulum is swinging to Labour. All governments eventually run out of room. (Much like NCFC football managers in that respect).

 All currencies have dropped against the dollar, some a lot more than Sterling and some a little less. The progress of the war in Ukraine, Covid and supply chain disruption will have a far greater effect on our economy than badly targetted tax changes.

Low interest rates have had a good run for the past decade and a half but that was an aberration caused by unique events rather than any new reality. 

On a more positive note I see gas spot prices have dropped sharply recently so the Government  may have to borrow a lot less than expected. Also markets bouncing back this morning. We are a long way from R.I.P. pound Sterling.

 

[TheGunnShow 5,932]

Liz Truss might be becoming the Amelia Bedelia of UK Prime Ministers here. I'm guessing she misunderstood the meaning of the phrase "going for broke".

[keelansgrandad 6,679]

I think Richard Bacon got it spot on during QT last night. After 12 years, a Government has probably run its course. Of course, they aren't all the same types of Government but I believe he meant Party ideology runs out of steam and just the same as anything else, change is needed.

[Rock The Boat 1,325]

Three hot days in summer when everyone ran around like headless chickens now becomes three hot days in autumn where we see exactly the same response. 

So what we have learned is that traders like to be forewarned of policy changes so they can get their trades in early with minimal risk. What we just witnessed is traders fearful of losing money bleating about why weren't we told first. 

Traders like most people, fear change and the unknown despite the fact that we know we can't carry on just printing money to buy stuff made in China. We can't continue with dizzy levels of house prices creating the illusion of wealth for those on the inside of the drawbridge and despair for those on the outside. This stuff has to be dealt with as painful as it is for some to come to terms with it. 

[keelansgrandad 6,679]

12 minutes ago, Rock The Boat said:

Three hot days in summer when everyone ran around like headless chickens now becomes three hot days in autumn where we see exactly the same response. 

So what we have learned is that traders like to be forewarned of policy changes so they can get their trades in early with minimal risk. What we just witnessed is traders fearful of losing money bleating about why weren't we told first. 

Traders like most people, fear change and the unknown despite the fact that we know we can't carry on just printing money to buy stuff made in China. We can't continue with dizzy levels of house prices creating the illusion of wealth for those on the inside of the drawbridge and despair for those on the outside. This stuff has to be dealt with as painful as it is for some to come to terms with it. 

You are right about traders. They want win, win, win naturally. But they have to accept risk. They have to accept losses.

[PurpleCanary 5,554]

4 hours ago, horsefly said:

It's precisely BECAUSE those costs do matter that makes the "fiscal event" the utter reckless disaster that it is. To borrow money for tax cuts when the country is already massively in debt is complete lunacy, and as a result the markets have responded exactly as would be expected. It's hard not to conclude that the OBR was side-lined precisely because it would have described this as the height of irresponsibility.

Yes, and while those costs from the pandemic are indeed a reason why these tax cuts are so crazy they pale in significance to Brexit. I quoted Shrimsley in the FT making this point earlier this week. To emphasise it, some figures from a survey done this year by Investment Monitor.

The OBR estimates a 2 per cent hit to the economy from the pandemic, but a 4 per cent hit from Brexit, and I have seen estimates for that latter figure markedly worse than that. Foreign investment in the UK has fallen by 17 per cent.

There has been a 46 per cent fall in UK exports to the EU. From February 2020 to November 2021 overall UK exports fell 0.7 per cent while overall worldwide exports are estimated to have risen by 10.6 per cent.

This budget would have been reckless by itself, but in the context of Brexit was suicidal. It shouldn't need to be stressed that the ostensible rationale is that tax cuts - and almost certainly soon cuts in vital services - will provoke growth. No-one with a brain actually believes that. But for a governing party to try to boost growth in that fashion in the wake of having engineered the single most growth-destroying event in modern UK history is beyond mad.

[horsefly 4,287]

16 minutes ago, PurpleCanary said:

Yes, and while those costs from the pandemic are indeed a reason why these tax cuts are so crazy they pale in significance to Brexit. I quoted Shrimsley in the FT making this point earlier this week. To emphasise it, some figures from a survey done this year by Investment Monitor.

The OBR estimates a 2 per cent hit to the economy from the pandemic, but a 4 per cent hit from Brexit, and I have seen estimates for that latter figure markedly worse than that. Foreign investment in the UK has fallen by 17 per cent.

There has been a 46 per cent fall in UK exports to the EU. From February 2020 to November 2021 overall UK exports fell 0.7 per cent while overall worldwide exports are estimated to have risen by 10.6 per cent.

This budget would have been reckless by itself, but in the context of Brexit was suicidal. It shouldn't need to be stressed that the ostensible rationale is that tax cuts - and almost certainly soon cuts in vital services - will provoke growth. No-one with a brain actually believes that. But for a governing party to try to boost growth in that fashion in the wake of having engineered the single most growth-destroying event in modern UK history is beyond mad.

Spot on! Probably the single thing that would have a genuine impact on future growth would be for this government to show some humility and work to improve relations with the EU and stop sabre rattling over the NI protocol. 

 

[Yellow Fever 3,747]

Had a broker call again 30 mins ago. Pound must be on way down again if my theory is correct 😉

 

[horsefly 4,287]

1 hour ago, Rock The Boat said:

Three hot days in summer when everyone ran around like headless chickens now becomes three hot days in autumn where we see exactly the same response. 

So what we have learned is that traders like to be forewarned of policy changes so they can get their trades in early with minimal risk. What we just witnessed is traders fearful of losing money bleating about why weren't we told first. 

Traders like most people, fear change and the unknown despite the fact that we know we can't carry on just printing money to buy stuff made in China. We can't continue with dizzy levels of house prices creating the illusion of wealth for those on the inside of the drawbridge and despair for those on the outside. This stuff has to be dealt with as painful as it is for some to come to terms with it. 

What a pathetic comment. What we learned is that an irresponsible debt burdened government that announces it is going to borrow billions to fund tax cuts will inevitably send the world markets into spasm at a massive cost to its own economy. 

[Van wink 2,994]

3 hours ago, Yellow Fever said:

Had a broker call again 30 mins ago. Pound must be on way down again if my theory is correct 😉

 

Nope stable or up a bit, surprising considering the refusal again to make an early release of the OBR report. Funny old game isn't it?

[Yellow Fever 3,747]

36 minutes ago, Van wink said:

Nope stable or up a bit, surprising considering the refusal again to make an early release of the OBR report. Funny old game isn't it?

It's speculation. Pound  'in play'. Oddly it went down 1% when I had the call 😉

To Quote - "BoE doing all it can behind the scenes to drive up sterling".

The refusal for the early release of the OBR report strikes me as the Laurel & Hardy pair  (to coin you phrase) are allowing themselves six weeks for one last throw of the dice and hope it improves by the time of the (dated) report. If it doesn't and the report is right and they are clearly even more so chancers its GE time. 

"Another fine mess Stanley" is I think the phrase that sums up for Truss and Kwarteng.

Edited September 30, 2022 by Yellow Fever

[Van wink 2,994]

Stan was a pretty bright chap to be honest, think I may have done him a disservice😉

[Rock The Boat 1,325]

19 hours ago, ron obvious said:

But the £310 -410,000,000,000 cost of lockdown, furlough etc. didn't matter? What's the scheme to repay that? What's the increase in debt due to the mini budget?

From the Telegraph:

Douglas McWilliams, deputy chairman of the Centre for Economics and Business Research (CEBR), has an interesting comment on the ill-fated mini-Budget announced by Kwasi Kwarteng 

He says the Chancellor's failure to show the Government's workings to markets (with complete costings and independent analysis) made the plans look more spendthrift than they really are.

The CEBR's argument boils down to this:

• The Government's own costings are "on the high side". For example the cost of abolishing the top rate of tax and the reintroduction of VAT relief for tourists will raise revenue, rather than cost it, the think tank says.
• The estimates take no account of "fiscal drag". Fiscal drag occurs when tax thresholds do not rise in line with inflation and wages, meaning the Government pulls in more income tax simply by keeping rates the same.
• Growth of tax revenues from goods that are rising in price and rising wages will be faster than the growth of public expenditure, which is being frozen on current plans.
• The cost of the Government's energy support package will fall as the price of gas falls. The European benchmark price is about €193 per megawatt hour today, well below the high of €345 hit earlier this year. 

McWilliams says this means that CEBR's estimate for borrowing in 2023/24 falls from £154bn to £64bn after adjustments, with the figure for 2024/25 falling from £80bn to a "tiny surplus".

[Well b back 3,190]

1 minute ago, Rock The Boat said:

From the Telegraph:

Douglas McWilliams, deputy chairman of the Centre for Economics and Business Research (CEBR), has an interesting comment on the ill-fated mini-Budget announced by Kwasi Kwarteng 

He says the Chancellor's failure to show the Government's workings to markets (with complete costings and independent analysis) made the plans look more spendthrift than they really are.

The CEBR's argument boils down to this:

• The Government's own costings are "on the high side". For example the cost of abolishing the top rate of tax and the reintroduction of VAT relief for tourists will raise revenue, rather than cost it, the think tank says.
• The estimates take no account of "fiscal drag". Fiscal drag occurs when tax thresholds do not rise in line with inflation and wages, meaning the Government pulls in more income tax simply by keeping rates the same.
• Growth of tax revenues from goods that are rising in price and rising wages will be faster than the growth of public expenditure, which is being frozen on current plans.
• The cost of the Government's energy support package will fall as the price of gas falls. The European benchmark price is about €193 per megawatt hour today, well below the high of €345 hit earlier this year. 

McWilliams says this means that CEBR's estimate for borrowing in 2023/24 falls from £154bn to £64bn after adjustments, with the figure for 2024/25 falling from £80bn to a "tiny surplus".

Well done for catching up.

Had they have published the figures and the OBR reinforced them we would not have had the problems of the last week on the markets, assuming they stacked up. But in the words of your great leader Trump, if you don’t want to tell somebody something, it’s because you are guilty.

The bad news for this is that our 190 billion borrowing, would have been costed at yield rates of 2% they are now 4.5% for the U.K. 

Unfortunately they would have still lost the electorate but not necessarily the markets.

[Rock The Boat 1,325]

3 minutes ago, Well b back said:

Well done for catching up.

Had they have published the figures and the OBR reinforced them we would not have had the problems of the last week on the markets, assuming they stacked up. But in the words of your great leader Trump, if you don’t want to tell somebody something, it’s because you are guilty.

The bad news for this is that our 190 billion borrowing, would have been costed at yield rates of 2% they are now 4.5% for the U.K. 

Unfortunately they would have still lost the electorate but not necessarily the markets.

All the panicking was coming from you lefties (yeah I know you once voted tory), Remainers, NeoLib Commentariat, Channel 4 News, and the Twitterati. You couldn't help yourselves. Get a little bit of resilience, my friend, you'll find the world less stressful.

[Herman 9,714]

9 minutes ago, Rock The Boat said:

All the panicking was coming from you lefties (yeah I know you once voted tory), Remainers, NeoLib Commentariat, Channel 4 News, and the Twitterati. You couldn't help yourselves. Get a little bit of resilience, my friend, you'll find the world less stressful.

https://kamikwasi.tax/

[Well b back 3,190]

2 minutes ago, Rock The Boat said:

All the panicking was coming from you lefties (yeah I know you once voted tory), Remainers, NeoLib Commentariat, Channel 4 News, and the Twitterati. You couldn't help yourselves. Get a little bit of resilience, my friend, you'll find the world less stressful.

I’m completely unstressed thanks, the only stress I have is watching my pension pot ( took mine as cash rather than an annuity ) decrease on a daily basis over the last week, but not to worry, thanks to taxpayers funding the propping up of the markets and sterling it will come back.

Never looked at Twitter in my life, but from what I understand, people who put ridiculous conspiracy theories on there used to get believed, now they are just laughed at, as seen on QT last night.

[Well b back 3,190]

4 minutes ago, Herman said:

https://kamikwasi.tax/

That’s actually a fair way of explaining that the increase in the rates our government will be paying ( nothing to do with the interest rate to us ) will be costing such ridiculous sums.

[yellowrider120 761]

2 hours ago, Yellow Fever said:

It's speculation. Pound  'in play'. Oddly it went down 1% when I had the call 😉

To Quote - "BoE doing all it can behind the scenes to drive up sterling".

The refusal for the early release of the OBR report strikes me as the Laurel & Hardy pair  (to coin you phrase) are allowing themselves six weeks for one last throw of the dice and hope it improves by the time of the (dated) report. If it doesn't and the report is right and they are clearly even more so chancers its GE time. 

"Another fine mess Stanley" is I think the phrase that sums up for Truss and Kwarteng.

I do concur with your sentiments and despaired at the mini budget announcements in some major areas. To add to borrowing with the costs already rising and adding to the UK's already awful deficit and debt situations, was a serious error of judgement. That said, many criticisms stem purely from an inbuilt dislike (almost hatred in some quarters) of the Tories. For example all we hear on the media is that 'the £ has fallen because of the mini budget'. That's simply a gross distortion in order to play a political card.

If you bother to check the figures, the £ was at $1.3822 back on October 20th last year when the chances of the boy Truss becoming PM anytime soon were simply nowhere near anyone's agenda (including hers I would imagine!). By 22nd September 2022 the £ had fallen to $1.1263. This protracted decline had ZERO to do with the mini budget. Clearly the £ tanked after the announcements but has since rebounded quite sharply. Of course the Govt messed up (polite phrase!) very badly and have been bailed out by the BoE stepping in to buy Bonds (longer dates ones actually) but the weakening £ (v the $) has been going on for a long time.           

[littleyellowbirdie 2,510]

9 hours ago, Rock The Boat said:

Three hot days in summer when everyone ran around like headless chickens now becomes three hot days in autumn where we see exactly the same response. 

So what we have learned is that traders like to be forewarned of policy changes so they can get their trades in early with minimal risk. What we just witnessed is traders fearful of losing money bleating about why weren't we told first. 

Traders like most people, fear change and the unknown despite the fact that we know we can't carry on just printing money to buy stuff made in China. We can't continue with dizzy levels of house prices creating the illusion of wealth for those on the inside of the drawbridge and despair for those on the outside. This stuff has to be dealt with as painful as it is for some to come to terms with it. 

The real problem with house prices is a combination of demand outstripping supply and also sufficient wealth inequality that some people can buy property cash to rent out to others, further reducing supply to those wanting to buy. 

Ultimately, houses and land are the most solid asset out there to put your money into. The problem is that makes them a subject of speculation, which is why we should introduce land value tax on all second homes and business premises to negate the investment attraction, opening up opportunities for those looking to buy somewhere to live. 

 

Edited September 30, 2022 by littleyellowbirdie

[Van wink 2,994]

Appears they are getting advice that wholesale price of gas is likely to drop considerably more than expected, could make significant reduction in the cost of the bailout and hence overall cost of the "mini budget", maybe they are hoping for this to firm up before OBR report is published, could make significant difference to the opinion.

[horsefly 4,287]

9 hours ago, Rock The Boat said:

All the panicking was coming from you lefties (yeah I know you once voted tory), Remainers, NeoLib Commentariat, Channel 4 News, and the Twitterati. You couldn't help yourselves. Get a little bit of resilience, my friend, you'll find the world less stressful.

Of course! The world markets are well renowned for being a bastion of left-wing thinking.

Edited October 1, 2022 by horsefly

[littleyellowbirdie 2,510]

Just now, horsefly said:

Of course! The world markets are well renowned for being a bastion of left-wing thinking. ****!

To be fair, I think they kind of are becoming a little bit that way. Not in a sense they they want total equality, but there's an interest in inequality not getting so out of control that everything just gets to the point of social collapse and everything falls apart. 

[horsefly 4,287]

2 minutes ago, littleyellowbirdie said:

To be fair, I think they kind of are becoming a little bit that way. Not in a sense they they want total equality, but there's an interest in inequality not getting so out of control that everything just gets to the point of social collapse and everything falls apart. 

Not sure all those people shorting the pound had equality as a foremost concern.

[littleyellowbirdie 2,510]

Just now, horsefly said:

Not sure all those people shorting the pound had equality as a foremost concern.

No, but that's individuals looking to make a fast buck where they can. The likes of the IMF and so on were more what I was referring to, and those are the people the traders take their lead from. 

[horsefly 4,287]

Just now, littleyellowbirdie said:

No, but that's individuals looking to make a fast buck where they can. The likes of the IMF and so on were more what I was referring to, and those are the people the traders take their lead from. 

I think that's true of the IMF but their concerns are genuinely international and in favour of world order. They don't represent the organisations that constitute what we generally refer to as the world markets.

[keelansgrandad 6,679]

I can remember when revalueing currency was a normal thing. It was done by Governments for financial and political reasons.

Now its so a soulless trader can make a quick fortune for his clients and himself.