271–280 of 379 posts
So the bigger news here imo is what's happening in the bond market. It's now expected that the BoE will increase rates above 6% by the middle of next year. Most people in the UK are on fixed rate mortgages, most of which are 2-3 year fixes. Those who brought a home during the pandemic or fixed at a low rate typically fixed at around 1-2%. I personally fixed for 2 years at a rate of 1.7% just over a year a go when I m…
Not really surprising that there's a lack of confidence in the untested combination of reducing tax (for high earners) and increasing borrowing. At first glance, that would seem to be a recipe for high inflation.
It's worth noting that there was an apparent real opportunity to resolve the Russia-Ukraine conflict in April 2022, via diplomatic negotiations, but UK's Boris Johnson reportedly disrupted those talks by threatening to withdraw UK/US support for Zelensky if he proceeded with negotiations. If the war had been resolved and sanctions on Russian export of gas to Europe had been lifted, this would have lowered gas prices…
> UK's Boris Johnson reportedly disrupted those talks by threatening to withdraw UK/US support for Zelensky if he proceeded with negotiations I would like some evidence for this, especially the idea that Johnson could dictate US foreign policy.
I'm not sure it's so much a story of the British pound, as of the US dollar, given that the pound-euro exchange rate is still well within it's range for the last 5 years: https://www.xe.com/currencycharts/?from=EUR&to=GBP&view=5Y The Chinese yuan and Japanease yen are also both at their lowest value vs the dollar in recent years, and moving faster than they normally do. For each of these (UK, EU, China, Japan) there…
If it's about the US dollar, what important US economic news landed early in the morning US time ? For the UK the consideration is that this basically happened as the Chancellor announced his intent to fund huge tax cuts for the wealthy by borrowing. You don't need a whole lot of specialist knowledge to figure out that means the government has to sell more bonds and isn't in a position to reject higher prices for tho…
Not really surprising that there's a lack of confidence in the untested combination of reducing tax (for high earners) and increasing borrowing. At first glance, that would seem to be a recipe for high inflation.
> untested combination of reducing tax (for high earners) and increasing borrowing Oh, it was tested: in 1972 the Conservative government tried this, and it didn't go well.
Earlier quoted context omitted.
If it's about the US dollar, what important US economic news landed early in the morning US time ? For the UK the consideration is that this basically happened as the Chancellor announced his intent to fund huge tax cuts for the wealthy by borrowing. You don't need a whole lot of specialist knowledge to figure out that means the government has to sell more bonds and isn't in a position to reject higher prices for tho…
> isn't in a position to reject higher prices for those bonds Not lower? Or am I misreading it?
Worth a read, from a respected US economist, who argues it's all an overreaction. https://www.bloomberg.com/opinion/articles/2022-09-26/truss-... Not necessarily saying I agree, but useful to have an alternative perspective
So the bigger news here imo is what's happening in the bond market. It's now expected that the BoE will increase rates above 6% by the middle of next year. Most people in the UK are on fixed rate mortgages, most of which are 2-3 year fixes. Those who brought a home during the pandemic or fixed at a low rate typically fixed at around 1-2%. I personally fixed for 2 years at a rate of 1.7% just over a year a go when I m…
House prices in the UK have been rising continuously for how many decades? And have doubled how many times in that time? I don’t think anyone would have predicted the next PM would be about as bright as used coffee grounds but, that’s what happens when you cough up the dregs of the Tory party and give it power.
Also if had brought my house several decades ago I'm sure I wouldn't be in this position right now. It's lose, lose for my generation. You either rent at stupid prices and own nothing, or you take a gamble and buy a house. I understand why people blame me for this, I just don't know what more I could have done. I didn't buy a house at the limits of my affordability unlike some do (and are basically forced to do). I'm also quite well read on financial markets so for me to make this mistake I think probably says something about how easy such a mistake was to make.
Not really surprising that there's a lack of confidence in the untested combination of reducing tax (for high earners) and increasing borrowing. At first glance, that would seem to be a recipe for high inflation.
It does seem like a recipe for high inflation. But I want to understand why they chose this combination? Why play such a big gamble? There has to be some logic behind making this choice. But what is it? Were there other safer alternatives that they could have gone with? What could be the reasons for choosing this combination over those safer alternatives?
My guess is scorched earth. BoJo is such a disaster that his own party had to remove him - and even that turned out to be a struggle (getting rid of leaders with challenged hair seems to have been a struggle lately on both sides of the pond). He became that unpopular.
The crew that have replaced him have no chance of winning the next General Election; Truss has even said that she knows she's unpopular, and doesn't care. So by running up the debts, they set a minefield for the next Labour government, which will have no alternative but more austerity. So I guess the Tories are planning to win an election in 7 years time.
The fact that the UK government are at odds with the UK central bank makes markets nervous. How much worse would it have been if there was no intervention in energy and we had riots on the freezing streets this winter? As Macron said 'we are at the end of abundance' To future readers; the last days of abundance were great! On Monday 26th September 2022 we could buy a £25.00 Raspberry Pi for only £49.00 on eBay. A 250…