Pound tanking

Lala said:
What I don’t understand is why she got a mandate to lead the party from the majority of the Tory MP’s when they knew this was the tax policy she was going to introduce ???

Riddle me that ( love that saying, only came onto my radar this year 😄)
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She didn`t, Lala.

She only polled 113 votes from the 350 odd MPs in the final round (against Sunak and Mordaunt) , which is less than a third of the votes.

She then won the party members vote.

Seems like a long time ago now....:)
 
spudgun said:
She didn`t, Lala.

She only polled 113 votes from the 350 odd MPs in the final round (against Sunak and Mordaunt) , which is less than a third of the votes.

She then won the party members vote.

Seems like a long time ago now....:)
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It’s still too many Spud when you think that they were aware of her tax policies. 😳
 
The markets and media are using the excuse of tax cuts as most haven't happened yet, but the reality is that the USA has set interest rates at over 5%, and the UK at 2.25%. Fuel and goods from China are bought in US dollars, so in order to curb inflation, especially with the volatile situation with Russia, we need the pound to hold up against the dollar. So the city knows that UK interest rates will have to rise, and are betting against the currency, just like they did when we were in ERM under Major. Expect at least a 1% rise on Thursday.
 
Danny Ocean said:
The markets and media are using the excuse of tax cuts as most haven't happened yet, but the reality is that the USA has set interest rates at over 5%, and the UK at 2.25%. Fuel and goods from China are bought in US dollars, so in order to curb inflation, especially with the volatile situation with Russia, we need the pound to hold up against the dollar. So the city knows that UK interest rates will have to rise, and are betting against the currency, just like they did when we were in ERM under Major. Expect at least a 1% rise on Thursday.
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Bob on. BoE not doing a proper job (again). European Systemic Risk Board just issued a GENERAL WARNING (their capitals). Anyone painting this as a phenomenon unique to the UK needs their bumps feeling. It's been baked into the system since we shut everything down.
 
Most of the defence of the government appears to be about the fact this is a global issue. Well, perhaps. But I'd expect our government (like any around the world) to take action to reduce the impact, not exacerbate it. That they're making it worse is the problem, which is most definitely not global.

As the Express put it I think - the UK central bank is having to take action to protect the UK from the actions of its own government. That is a shocking state of affairs and appointing Liz Truss as PM, with Kwarteng as Chancellor, will go down as the biggest own goal the Tory party membership have ever scored. I get why Rishi Sunak wasn't liked by all, but he would've been immeasurably better than Truss. But they've just had a leadership election so they're stuck with her, and she's never going to claw back the lead that Labour have over them in less than two years.

They've tried three PMs in six years and have run out of ideas. It's time for a change I think.
 
The pound is up to the highest level against the US dollar since the mini-budget at 1.12. It also returned to the same levels against the euro at 1.14. That unprecedented, unmitigated, irreversible political crisis didn't last long did it?
 
tommytwojags said:
The pound is up to the highest level against the US dollar since the mini-budget at 1.12. It also returned to the same levels against the euro at 1.14. That unprecedented, unmitigated, irreversible political crisis didn't last long did it?
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If you pledge to spend £65 BILLION over 13 days buying gilts I’d certainly hope it’d have some impact!!!!!

Temporary measure (costing us £5 billion a day!!!!! FFS!!!!!!) to give insurance companies a breathing space to unravel their LDIs.

So 2008 all over again except this time it’s been caused by our own PM and Chancellor; not junk bonds sold in the US.

And what’s going to happen in mid October?
 
tommytwojags said:
The pound is up to the highest level against the US dollar since the mini-budget at 1.12. It also returned to the same levels against the euro at 1.14. That unprecedented, unmitigated, irreversible political crisis didn't last long did it?
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So just to get back to the level we were two weeks ago it cost 65bn, everyone's mortgages are going up, and the cost of borrowing skyrocketed through the gilt markets right at the time we are about to borrow a lot of money.
 
Plenty of signs that a global crash is on its way so I wouldn't worry too much about that £65bn. Happy Saturday 😁

UTP
 
Bamber said:
You think this is all happening because of a relatively tame (compared to the monstrous lockdown spending) mini budget? The chickens are coming home to roost after we committed economic suicide during 2020-21.
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Yep, it's been baked in for a while now although the mini budget does appear to be the straw that broke the camel's back, domestically at least. Brace yourself for everyone becoming an expert in global finance after their little foray into epidemiology. Oh joy 😅
 
Am willing to keep an open mind on this budget, it obviously shocked the markets initially.

But whether it'll benefit in the longer term remains to be seen and no one on here know of it will or not.

If it works and attracts investment it could prove right. The tax cut to 19% has to be a positive.

There's too much jumping on the bandwagon and group think for me, becoming all too often these days with a range of subjects. Happened with covid too.

I'm not forming an opinion on it yet as its the equivalent of screaming for a manager to go after a few days.

Give it time, if its proved shit then that will show.

But of course far too many agendas on here to do that.
 
tommytwojags said:
The pound is up to the highest level against the US dollar since the mini-budget at 1.12. It also returned to the same levels against the euro at 1.14. That unprecedented, unmitigated, irreversible political crisis didn't last long did it?
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Sadly this isn't going to help much.

The major issue is the rise in yields on gilts ie the government is having to offer higher interest to get lenders to loan to them. Lenders are not convinced of the government's credibility eg no OBR forecast, no costings, no belief lower tax on higher incomes drives growth and hence demand higher interest. This is what Nobel laureate Paul Krugman termed the "moron premium".

The impact of the higher gilt yields is very large I'm afraid. Very conservatively in the period to 2026 we would be paying at least the cost of a year's government spending on pre-primary and primary education in higher interest payments compared to what we would have done pre this budget. To give you an idea pre-primary and primary education spending costs around £33 billion per year and some independent forecasts have put the extra interest in 2026/7 alone as £14 billion and others even higher. Obviously this extra interest is in effect money flushed down the drain.

Is this unprecedented? In the UK crashing the gilt market is unprecedented.
Is this unmitigated? Well it's an unmitigated disaster and it's also unmitigated in the sense the government hasn't reversed it...yet.
Is this irreversible? No. Change the policy and restore credibility and the moron premium will decline but morons are still morons so not sure what exactly would happen to gilt yields. Anybody with better knowledge or actually close to this?? Does Simon read this board or anyone in insurance, finance etc???

The government's proposed solution to restore credibility and not have continually and unsustainably rising government debt as a percentage of GDP is to cut spending, perhaps on capital projects ie the kinds of projects that drive growth hahahahhaha or on welfare. Those relying on public services ie everyone will suffer. In parts of the country the NHS is already falling over and people are dying waiting in ambulances so spending needs to be increased and not frozen there (which would also help growth eg get long covid sufferers back in the labour force). I struggle to believe cuts in government spending are considered viable by markets and certainly not by the electorate.

The pound strengthening is a sign investors expect interest rates to rise. For those with mortgages about to expire this is going to cause a lot of problems. It will also feed through into rents.

So yes it is very, very serious. One final point. What has always done my head in about Brexit was some remainers saying that it would cause GDP to drop by say 3-4%. This is a twisting of the truth which is that Brexit will likely cause GDP to be say 3-4% lower in 10 years than it would otherwise have been ie quite possible you wouldn't notice even though the impact is most definitely there. I say this to make the point it is not surprising people are sceptical about alarmist predictions.
 
Bamber said:
You think this is all happening because of a relatively tame (compared to the monstrous lockdown spending) mini budget? The chickens are coming home to roost after we committed economic suicide during 2020-21.
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rockontommy said:
Yep, it's been baked in for a while now although the mini budget does appear to be the straw that broke the camel's back, domestically at least. Brace yourself for everyone becoming an expert in global finance after their little foray into epidemiology. Oh joy 😅
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Yep, there are many factors at play but of course the mainstream don't really want to talk about the policy of lockdowns and massive quantitative easing they supported. What did people think would happen?

The banking system is broken.
 
JJpool said:
Am willing to keep an open mind on this budget, it obviously shocked the markets initially.

But whether it'll benefit in the longer term remains to be seen and no one on here know of it will or not.

If it works and attracts investment it could prove right. The tax cut to 19% has to be a positive.

There's too much jumping on the bandwagon and group think for me, becoming all too often these days with a range of subjects. Happened with covid too.

I'm not forming an opinion on it yet as its the equivalent of screaming for a manager to go after a few days.

Give it time, if its proved shit then that will show.

But of course far too many agendas on here to do that.
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JJpool said:
Yep, there are many factors at play but of course the mainstream don't really want to talk about the policy of lockdowns and massive quantitative easing they supported. What did people think would happen?

The banking system is broken.
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But the markets haven’t reacted the way they have because of the QE around Covid. They seem to have been quite comfortable with that because they knew it was needed and necessary.

They’ve reacted because of KK’s recent “fiscal event” and, amongst other things, the fact he’s borrowing money to fund tax cuts.
 
Mexboroseasider said:
But the markets haven’t reacted the way they have because of the QE around Covid. They seem to have been quite comfortable with that because they knew it was needed and necessary.

They’ve reacted because of KK’s recent “fiscal event” and, amongst other things, the fact he’s borrowing money to fund tax cuts.
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Speaking more of the inflation and issues which we've seen before this budget existed and the issues we face with debt that will never be paid, constant borrowing and kicking the can down the road to ruin future generations.
 
JJpool said:
Yep, there are many factors at play but of course the mainstream don't really want to talk about the policy of lockdowns and massive quantitative easing they supported. What did people think would happen?
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Well, I distinctly remember being told I only care about the economy and, "if it saves one life, it'll be worth it," so I have to assume that an economic hit was imagined. You'd have to ask your average Covidian how they actually envisaged it'd be paid - increased taxation, a brief recession maybe. Can't answer this question tbh.
JJpool said:
The banking system is broken.
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Right wing conspiracy theory 😉
 
Mexboroseasider said:
But the markets haven’t reacted the way they have because of the QE around Covid. They seem to have been quite comfortable with that because they knew it was needed and necessary.

They’ve reacted because of KK’s recent “fiscal event” and, amongst other things, the fact he’s borrowing money to fund tax cuts.
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An explanation (not mine):
The reason for the gilt yield melt up was NOT speculation or loss of confidence at all. It was because the extra billions forecast to be added to the national debt finally tipped the leveraged pensions into a state where they needed collateral (effectively hard cash) fast.

But to do that they needed to sell assets. As they were all leveraged up to the gills with LDIs, which are effectively gilt bundles, they had to see this to get cash. Thus driving the price down as it was a fire sale. This causes yields to rise and a vicious circle begins.

Until the BoE steps in and pays over the top for those very gilts. Well above the market price. This drives yields down again. The pensions get enough collateral and the market calms.

But it’s only a few days later after the dimwits in the media run a panic and blame the current incumbents that we hear it.

My view is that this is a global issue caused by unprecedented and dangerous levels of money printing and borrowing. Quite simple really and completely foreseeable. The actual mechanics of how the Jenga tower eventually tumbles and what will be the last piece removed are of minimal importance.
 
JJpool said:
Speaking more of the inflation and issues which we've seen before this budget existed and the issues we face with debt that will never be paid, constant borrowing and kicking the can down the road to ruin future generations.
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Well the inflation is largely being driven by events overseas (Ukraine being a major factor) which is why people struggled to understand why an increase in interest rates in the U.K. would have an impact. Putin is hardly going to end the war, or Saudi increase the supply of oil, because the BoE has increased interest rates. But basically on your point, I’m not convinced that Covid borrowing is fuelling inflation.

As for the debt well ironically the BoE was about to start selling bonds and gilts (so called quantitative tightening) just before the “mini budget” but that’s now been put on hold and instead they’ve had to pledge to spend £65bn on gilts to save the insurance companies.

Essentially I don’t think the current crisis has much (or anything) to do with Covid. It’s all down to the borrowing of money to pay for tax cuts. The markets aren’t persuaded it’s going to generate growth.
 
Not tanking now though.The Churchill's have been refuelled and are now ready to smash Guderian's Panzers.🇬🇧
 
rockontommy said:
An explanation (not mine):
The reason for the gilt yield melt up was NOT speculation or loss of confidence at all. It was because the extra billions forecast to be added to the national debt finally tipped the leveraged pensions into a state where they needed collateral (effectively hard cash) fast.

But to do that they needed to sell assets. As they were all leveraged up to the gills with LDIs, which are effectively gilt bundles, they had to see this to get cash. Thus driving the price down as it was a fire sale. This causes yields to rise and a vicious circle begins.

Until the BoE steps in and pays over the top for those very gilts. Well above the market price. This drives yields down again. The pensions get enough collateral and the market calms.

But it’s only a few days later after the dimwits in the media run a panic and blame the current incumbents that we hear it.

My view is that this is a global issue caused by unprecedented and dangerous levels of money printing and borrowing. Quite simple really and completely foreseeable. The actual mechanics of how the Jenga tower eventually tumbles and what will be the last piece removed are of minimal importance.
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Your first three paragraphs are correct and explain why the BoE had to pledge to spend £65bn buying gilts. Basically to save the insurance companies and the private pensions of millions of people.

Your fourth paragraph is nonsense. If you think the media caused the markets to panic then you don’t know how markets work.

I don’t agree with your fifth paragraph. The markets were quite relaxed about all the borrowing associated with Covid especially as they knew the BoE were about to start selling bonds and gilts aka quantative tightening. They were triggered by the mini budget and a lack of confidence in the new PM and Chancellor.
 
Mexboroseasider said:
Your first three paragraphs are correct and explain why the BoE had to pledge to spend £65bn buying gilts. Basically to save the insurance companies and the private pensions of millions of people.

Your fourth paragraph is nonsense. If you think the media caused the markets to panic then you don’t know how markets work.

I don’t agree with your fifth paragraph. The markets were quite relaxed about all the borrowing associated with Covid especially as they knew the BoE were about to start selling bonds and gilts aka quantative tightening. They were triggered by the mini budget and a lack of confidence in the new PM and Chancellor.
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I said it wasn't my opinion. How do you know the markets were relaxed when they were being pumped with imaginary cash btw? As soon as the pumps were turned off (or down) earlier this year, we've had issues. Seems quite plain to me.
 
rockontommy said:
I said it wasn't my opinion. How do you know the markets were relaxed when they were being pumped with imaginary cash btw? As soon as the pumps were turned off (or down) earlier this year, we've had issues. Seems quite plain to me.
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Well it seems quite plain to you as you see everything through the Covid prism.
 
Mexboroseasider said:
Well it seems quite plain to you as you see everything through the Covid prism.
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I guess we'll have to agree to disagree. How you so readily discount the major unprecedented 2+yr phenomenon is beyond me but I've taken my own steps to protect my position and I'm sure you've done the same.
 
Kwartang thrown under a bus by Truss in her interview this morning - he made the 45p tax rate cut decision 'on his own' apparently
Preparing the way for a sacking and a u-turn by the looks of it. It is also reported that Kwartang was called a 'useful idiot' by two of the bankers he was drinking champagne with on the day of the budget, they egged him on to double down on his budget pledges. Two days later he went on TV and promised more tax cuts causing market turmoil.
Michael Gove MP also on the Kuennsberg show says that he does not support the budget openly on TV. Civil war in the Conservative party brewing - Truss may offer Kwartang as a blood sacrifice to keep the rebels onside.
Crazy days.
 
ElBurroSinNombre said:
Kwartang thrown under a bus by Truss in her interview this morning - he made the 45p tax rate cut decision 'on his own' apparently
Preparing the way for a sacking and a u-turn by the looks of it. It is also reported that Kwartang was called a 'useful idiot' by two of the bankers he was drinking champagne with on the day of the budget, they egged him on to double down on his budget pledges. Two days later he went on TV and promised more tax cuts causing market turmoil.
Michael Gove MP also on the Kuennsberg show says that he does not support the budget openly on TV. Civil war in the Conservative party brewing - Truss may offer Kwartang as a blood sacrifice to keep the rebels onside.
Crazy days.
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Read a bit about him the last few days, sounds like an arrogant man with an inflated opinion of his own ability, these traits aren't uncommon in people at the top of any profession.
The thing that really bothers me is the meeting with the hedge fund managers last Friday. If it's legal it still feels a long way from ethically correct to me. When does this sort of thing become Insider trading?
 
rockontommy said:
I guess we'll have to agree to disagree. How you so readily discount the major unprecedented 2+yr phenomenon is beyond me but I've taken my own steps to protect my position and I'm sure you've done the same.
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Well for a start every other country borrowed shit loads of money to fund Covid. But it’s only the U.K. that’s being hammered by the markets.

What’s the difference between the U.K. and the rest of the world? The mini budget.
 
gjr69 said:
Read a bit about him the last few days, sounds like an arrogant man with an inflated opinion of his own ability, these traits aren't uncommon in people at the top of any profession.
The thing that really bothers me is the meeting with the hedge fund managers last Friday. If it's legal it still feels a long way from ethically correct to me. When does this sort of thing become Insider trading?
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Absolutely agree, Kwartang and Truss also had a dinner with hedge fund managers before the budget including Kwartang's old boss Crispin Odey.
Odey has apparently called his short position on the pound 'the gift that keeps giving'.
I'm not sure why it isn't a major scandal.
Disaster capitalists with direct access to the chancellor making a packet out of what will be a financial disaster for many ordinary people.
 
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