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Ask HN: What Is Happening in the UK?

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Re: Ask HN: What Is Happening in the UK?

#171

Post by cbeach »

Nursie wrote: post #167
cbeach wrote: post #161

Earlier quoted context omitted.

The BoE made another huge mistake by using QE during a period of temporary global inflation, and during a temporary blip in the value of the pound. QE is the worst possible strategy. And the IMF has consistently got it wrong about the UK economy. In the past it has actually made public apologies for doing so (IMF head: "do I have to go on my knees?" regarding incorrect warnings on UK economy): https://www.telegraph.c…

> We have to be careful to avoid the Argument from Authority fallacy Indeed, but we also have to be careful of writing off numerous opinions from multiple diverse sources in multiple countries, from politicians, economists, bankers and many other roles, as well as the actual actions of the people on the ground that have born out the criticisms, as the ill educated musings of a few 'pundits'. > When the most productiv…

> we also have to be careful of writing off numerous opinions from multiple diverse sources in multiple countries, from politicians

I fully expect politicians in other countries to HATE the fact that we have a competitive low-tax regime that will attract business and talent. And they'll also hate that we have a devalued currency, which makes our exported goods and services more competitive.

> I don't believe for a second that we're the most productive members of society, we've just figured out ways to get people to pay us a lot

You may well be right about your own situation. We're all different. My employers value what I did and paid me accordingly.

> There's a lot of argument about whether (for instance) the continuation of the lower corporation tax rate is even useful for that.

The case with corporation tax is cut-and-dried. When the Tories reduced it significantly (to 20%), revenue quickly went UP. It took barely any time to prove that we'd moved closer to the revenue-maximising point on the Laffer Curve

https://i.dailymail.co.uk/i/pix/2017/11/21/01/468DEAAA000005...

> These decisions are a kick in the pants to the people who actually need a tax break, your man on the street that you mentioned above

I'm losing count of the free cash grants this Tory govt is handing out to help working class people with their energy bills. And now they're using public money to freeze bills. It's unprecedented.

Re: Ask HN: What Is Happening in the UK?

#172

Post by bjornsing »

piva00 wrote: post #154
bjornsing wrote: post #131

Earlier quoted context omitted.

Not pegged no, but strongly correlated of course. SEK has depreciated significantly against the euro too over the last few weeks.

Matching a change of government that's unproven. Having SD in power has no historical precedence so there's a definite lack of confidence in what the new government can achieve.

I think it has more to do with the extreme trade deficit. But sure, political quasi-stability is not a positive.

Re: Ask HN: What Is Happening in the UK?

#173

Post by colinmhayes »

rvieira wrote: post #170
Brakenshire wrote: post #75

Earlier quoted context omitted.

Yes, at a moment of inflation, they announce significant tax cuts which will have a big inflationary impact. The Bank of England was already behind on interest rate rises, and now the government is relying on them to not only counter global trends (high rates in the US causing devaluations basically everywhere), and also the inflationary effect of energy cost increases, but also extra inflationary tax cuts. That will…

(Not an economist by any measure) Can you explain "tax cuts which will have a big inflationary impact". The 20% bracket went down to 19%. The 45% bracket disappeared (now included in the 40%) which is only for £150k+ earners, which is a tiny minority in the UK. I don't think the actual numbers move inflation. Isn't it more the conflicting policies (BoE and gov) in theory and the perception of them not being in the sa…

Increasing the money supply causes inflation. Rich people don't just put their money under their mattress. They invest it which means it's being given to other people who use it to buy things.

Re: Ask HN: What Is Happening in the UK?

#174

Post by colinmhayes »

IshKebab wrote: post #158
hcayless wrote: post #97

Earlier quoted context omitted.

They really had no choice about that part. The spike (beyond their control) in energy prices was set to bankrupt hundreds or even thousands of small businesses and put many people in a situation of deciding between heat and food. The tax breaks though, were totally an own goal.

They could have funded it by windfall taxes rather than borrowing.

No they couldn't have. The electricity companies aren't really making more money than normal, they're paying insane rates to import fossil fuels.

Re: Ask HN: What Is Happening in the UK?

#175

Post by rvieira »

colinmhayes wrote: post #173
rvieira wrote: post #170

Earlier quoted context omitted.

(Not an economist by any measure) Can you explain "tax cuts which will have a big inflationary impact". The 20% bracket went down to 19%. The 45% bracket disappeared (now included in the 40%) which is only for £150k+ earners, which is a tiny minority in the UK. I don't think the actual numbers move inflation. Isn't it more the conflicting policies (BoE and gov) in theory and the perception of them not being in the sa…

Increasing the money supply causes inflation. Rich people don't just put their money under their mattress. They invest it which means it's being given to other people who use it to buy things.

I understand why that might cause inflation. The projected cost is £55b, is this really enough to put the country in an inflationary meltdown?

IMHO the problem is that none of these measures actually guarantee (or even promote) economic growth and the realisation that the UK has economic illiterate leaders it's what's freaking the markets.

Re: Ask HN: What Is Happening in the UK?

#176

Post by colinmhayes »

hgdfhgfdfds wrote: post #142
pyb wrote: post #2

In a few words, PM Truss's first economic measures indicate that she's ideologically-driven and has no idea what she's doing. Namely, cutting taxes for the rich in hope that maybe some economic boost will "trickle-down" to the middle class and the poor. This idea is utterly discredited in economic circles. The UK central bank, the BoE, is forced to take measures to counteract what Truss and her government are doing !…

"This idea is utterly discredited in economic circles." I'm an economist and this is wrong. I usually see this line on on Reddit and not from any journal.

Here you go https://www.igmchicago.org/surveys/tax-reform-2/

Re: Ask HN: What Is Happening in the UK?

#177

Post by Nursie »

cbeach wrote: post #171
Nursie wrote: post #167

Earlier quoted context omitted.

> We have to be careful to avoid the Argument from Authority fallacy Indeed, but we also have to be careful of writing off numerous opinions from multiple diverse sources in multiple countries, from politicians, economists, bankers and many other roles, as well as the actual actions of the people on the ground that have born out the criticisms, as the ill educated musings of a few 'pundits'. > When the most productiv…

> we also have to be careful of writing off numerous opinions from multiple diverse sources in multiple countries, from politicians I fully expect politicians in other countries to HATE the fact that we have a competitive low-tax regime that will attract business and talent. And they'll also hate that we have a devalued currency, which makes our exported goods and services more competitive. > I don't believe for a se…

> I fully expect politicians in other countries

Most of the politicians comments I'm referring to are from British politicians, even within the conservative party. This isn't jealousy, it's marvelling at incompetence.

You still seek to play down both the comments of a range of people from a range of different viewpoints and the actual market movements. And you're doing it in a very disingenuous fashion. You know as well as I do she's come under criticism from her own party, some from those within her party that supported her leadership bid, as well as luminaries from all over the financial world in multiple countries.

> When the Tories reduced it significantly (to 20%), revenue quickly went UP

In an entirely different economic landscape to the spiraling inflationary one we're in today. I'm not sure a cartoonised graph from the daily mail is evidence of anything very much.

> You may well be right about your own situation. We're all different. My employers value what I did and paid me accordingly.

The point is that labelling high earners as the most productive class is a laugh. Far from all of them are. I like to think I earn my money too, but I've seen a lot of people that don't, who find and cling on to these posts though a combination of connections, grift and luck.

> I'm losing count of the free cash grants this Tory govt is handing out to help working class people with their energy bills. ... It's unprecedented.

Yes, that's the point, it's unprecedented, it's fucking awful for ordinary people on average incomes, huge inflation pushing up the prices of everything, interest rate rises making mortgages more expensive, rocketing energy costs (even if they are capped they are historically very high). In the midst of that, these policies make things worse. More expensive mortgages will knock on to the housing market falling, for example. This is not just "idealogically problematic" in some wishy-washy leftie way, it's not just something to be disagreed with because of your particular economic leaning, it's not just targetting the wrong people (though it certainly seems to be doing that) or the politics of envy - it's actually fucking stupid.

Re: Ask HN: What Is Happening in the UK?

#178

Post by alkonaut »

hunglee2 wrote: post #24

In simple terms, the Bank of England and UK Gov are pursuing conflicting economic policies, BoE trying to take money out of circulation through hiking up interest rates, whilst UK Gov is putting money into circulation by proposing massive debt funded tax cuts. The obvious incoherency of this then led to the markets losing confidence in the UK economy, crashing the value of the pound, which in turn makes the planned U…

Isn’t the simple option to simply reverse policies and do whatever returns confidence? No debt funded tax cuts, reduce excessive energy subsidies and so on?

Sure it might be disastrous for Truss, or Government, or The Conservative party. But for the UK as a whole it must be the reasonable way out?

Re: Ask HN: What Is Happening in the UK?

#179

Post by MattPalmer1086 »

hunglee2 wrote: post #24

In simple terms, the Bank of England and UK Gov are pursuing conflicting economic policies, BoE trying to take money out of circulation through hiking up interest rates, whilst UK Gov is putting money into circulation by proposing massive debt funded tax cuts. The obvious incoherency of this then led to the markets losing confidence in the UK economy, crashing the value of the pound, which in turn makes the planned U…

They also avoided costing any of it, and had no analysis by the Office of Budget Responsibility. Since they called it a "fiscal event" rather than a budget.

This avoidance of accountability is a repeated pattern in British politics recently. Turns out you can bend our political system that way, but the global markets really don't appreciate that behaviour.

One economist said that Britain is now paying the Moron Risk Premium.

Re: Ask HN: What Is Happening in the UK?

#180

Post by hunglee2 »

alkonaut wrote: post #178
hunglee2 wrote: post #24

In simple terms, the Bank of England and UK Gov are pursuing conflicting economic policies, BoE trying to take money out of circulation through hiking up interest rates, whilst UK Gov is putting money into circulation by proposing massive debt funded tax cuts. The obvious incoherency of this then led to the markets losing confidence in the UK economy, crashing the value of the pound, which in turn makes the planned U…

Isn’t the simple option to simply reverse policies and do whatever returns confidence? No debt funded tax cuts, reduce excessive energy subsidies and so on? Sure it might be disastrous for Truss, or Government, or The Conservative party. But for the UK as a whole it must be the reasonable way out?

this is probably what is going to happen - actually the least worst option. However, such a reversal will not fully restore confidence as any U-turn will not come at political cost to Truss / Kwarteng but also to UK Gov / Conservative party leadership as a whole - it would be admitting that they don't know what they are doing. There will be an economic price for that also
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