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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?

#71

Post by Someone »

ksaxena wrote: post #32
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 !…

The bigger problem is the energy-price guarantee that Truss has announced that will put a ceiling on fuel price for consumers, with the difference born by the UK treasury - estimated outflow is more than 100 Billion pounds. This outflow is planned to be funded by borrowing, which has resulted in a weaker pound.

Adding nuance: it’s not that they put a price cap on energy prices (many countries in Europe do that), but the amount of money allocated to it.

Reading https://www.bruegel.org/dataset/national-policies-shield-con..., the UK allocates about double of what France, Italy and Germany allocate to it.

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

#72

Post by icare_1er »

smt88 wrote: post #25
icare_1er wrote: post #8

Genuine question: why are markets disapproving of the economics policy decided by a ... right-wing governement ? I though markets reacted negatively to socialist governments getting into power, not the opposite.

You're starting with an assumption that right-wing governments are good for economies. Let's ignore that dubious assumption and instead look at the actual policy. Truss's administration is giving tax cuts to the wealthy and paying for it by borrowing. The markets know that trickle-down economics is nonsense and these tax cuts won't boost UK's economy enough to cover the enormous amount of debt required to pay for the…

"Good for economies" does not mean much, and that's what distinguishes the left and the right.

Usually, the right-wing, and the "markets", agree on what is good for the economy. It is quite unique to see the "markets" disagree so strongly with "the right".

And it is also worth noting that it is quite rare to see left people use the view of Wall Street as an argument ! I remember many cases in Europe where socialists governement almost used it as an electoral argument that they would ignore "the markets" (or rating agencies) and not dictated their policy by what they said

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

#73

Post by JonChesterfield »

doublesocket wrote: post #42
JonChesterfield wrote: post #27

Our government announced new economic policies that have been judged extremely harshly by everyone. The public perception of them is also severely negative which increases the risk of the alternative party gaining control next time around. I really hoped the new leader would be the one with an economics background instead of the friendly optimist. Navigating out of brexit and covid is difficult and the leader sets th…

> Hopefully the people who chose Truss have made enough of a loss this week to reconsider their priorities. Except Kwarteng's former boss Crispin Odey is making a killing shorting the pound. https://www.independent.co.uk/news/uk/politics/tory-donor-pr...

Well, yes, there's always the option of bringing a case for insider trading (or possibly treason) for things like that.

It's hard to make more from shorting the pound than the loss across your entire estate from sterling crashing though, unless it's now common for wealthy conservatives to hold most of their assets in dollars instead of UK real estate.

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

#74

Post by Al-Khwarizmi »

Related question: in what metrics is such a market meltdown visible? The FTSE 100 is down like 4% or so in the last two days, and the pound lost 2% to the euro, those don't look like scary figures to me compared to past volatility. I guess I'm looking at the wrong metrics, so what are the relevant ones?

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

#75

Post by Brakenshire »

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…

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 force rates high (apparently the market is pricing in an increase to 5%), which will then cause big reductions in housing, and negative equity.

The thing I am confused about is why this happened at the announcement. The big measures had already been announced, an energy price cap (£60bn or more depending on wholesale gas costs), and reversal of planned tax increases in National Insurance and Corporation tax (about £40bn). The additional unannounced tax cuts were small (for instance the cut in top rate tax was £2bn). So it seems that most of the drop should have happened before.

Apparently the PM wanted the announcement to feel radical to distance her from the previous government, so maybe the markets were responding to the feeling of the announcement, and the implication of future radical ideological action, as much as the numbers.

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

#76

Post by suction »

cbeach wrote: post #10
bscphil wrote: post #7

Earlier quoted context omitted.

> For that reason I chose to quit my job as a software team manager in an investment bank and instead went to work as a developer in a startup. > I decided there’s no point in working long hours in a responsible job helping other people advance their careers if I keep less than 40p of every pound I earn at that point. I may as well do less responsible work that I enjoy instead. This is an extremely funny takeaway in…

Oh yes, you're not wrong. Many people on the left see tax as an appropriate punishment for wealth. In their worldview, wealthy people are demonised and dehumanised. The left are convinced that wealthy people are parasitic on society. This leftwing ideology seems peculiar to me, having seen the data on who's funding public services, and who's benefiting from public services.

[dead]

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

#77

Post by orlp »

steve_gh wrote: post #20
cbeach wrote: post #3

The pound is low against the dollar, as is the Euro low against the dollar. The pound dropped in value a few days ago, but the price has recovered since then. The media chooses to focus on the drop rather than the recovery, because the drop coincided with a government announcement of some pro-growth economic policies that mainstream pundits disagree with. If you speak to people in the U.K. many would agree that payin…

Quite frankly, you are hugely privileged to be earning at that level. The median average salary in the UK is just under £26k. Also, when you are that income level, there are a number of tax benefits you can enjoy - for example the first £40k you put into your pension is before tax - so it effectively reduces your salary (for tax purposes) by £40k. SO if you are doing the sensible thing and putting money into a pensio…

> Also, when you are that income level, there are a number of tax benefits you can enjoy - for example the first £40k you put into your pension is before tax - so it effectively reduces your salary (for tax purposes) by £40k.

It also reduces your actual salary by £40k, not just for tax purposes, if you'll never end up using your full pension. Either because you've died before doing so, or because the pension fund can't pay you out (fully) since it is increasingly underfunded due to a rapidly aging society.

Answer this honestly for yourself: if you are fairly young, say 25-35, what are the odds you'll see more money in your lifespan from £40k put into a pension now that may or may not be fully available after retirement, versus £40k minus tax invested into an index fund and accessible/reroutable whenever?

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

#78

Post by bigfudge »

tikkabhuna wrote: post #51
cbeach wrote: post #23

Earlier quoted context omitted.

So you think 1% of people shouldering 28% of the cost of public services is fair?

Do you think inequality should increase or decrease? If we keep current spending the same. We could reduce the % the top 1% bare by reducing inequality and by having the 99% earning and paying more tax. Or we could reduce taxes for the 1% and reduce spending which would likely increase inequality.

I agree that equality is a desireable goal. But, this argument doesn’t persuade people who don’t care about equality.

Better is to focus on the benefits gained bu the wealthy from stable legal systems, public health, education etc. If you are Bezos your money is only possible because these expensive services are paid for. You gin more than most, and so must pay a greater share than most.

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

#79

Post by notahacker »

cbeach wrote: post #23
fnimick wrote: post #17

Earlier quoted context omitted.

> the wealthiest 1% are paying 28% of income tax receipts - and this percentage has increased over the last decade Without any information on how wealth inequality has increased, and the 1% have more income and assets now than they did last decade, this is misleading at best. If the top 1% are paying more taxes but are also making more money, this hardly seems unfair.

So you think 1% of people shouldering 28% of the cost of public services is fair?

Seems fair enough. They earn 14% of the income of the UK, and don't need marginal pounds nearly as much as people at the bottom end of the scale who need marginal pounds just to be fed and housed. They also pay lower percentages of their income on non-income taxes than most other British cohorts

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

#80

Post by [deleted] »

cbeach wrote: post #23
fnimick wrote: post #17

Earlier quoted context omitted.

> the wealthiest 1% are paying 28% of income tax receipts - and this percentage has increased over the last decade Without any information on how wealth inequality has increased, and the 1% have more income and assets now than they did last decade, this is misleading at best. If the top 1% are paying more taxes but are also making more money, this hardly seems unfair.

So you think 1% of people shouldering 28% of the cost of public services is fair?

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