The Labour Government

Brewster's millions said:
If a key financial parameter like the 10 or 30 year gilt yield hits a 27-year high, then it’s going to be reported as such.

I haven’t seen many reports implying that the fact yields are at the highest level since the 2008 financial crisis - when yields were about to steadily decline for many years - means that we’re now in a financial crisis of a similar magnitude. I think that’s your own interpretation as much as anything.

As always, the significance of the current move depends on its causes and effect. Yields were almost as high last year because of concerns around wage growth and embedded inflation. These concerns eased, and now (to a degree) these concerns have returned while yields have risen in the US because of Trump.

The particular issue with the UK is the fact that this rise in yields has occurred while growth has been unusually weak and the pound has fallen. Not a common occurrence and one which suggests markets are concerned by the fiscal outlook, particularly given that the October Budget appears to have contributed to the slowdown and renewed inflationary concerns.

Which naturally brings us back to Reeves. It’s hardly a sign of competence to expand spending and borrowing very significantly in October, and then be forced into reverse in March because the market is concerned about excessive borrowing. And the risk of this happening was obvious back in October - borrowing costs are now much more sensitive to market sentiment thanks largely to QE - so it just appears to be a case of exceptionally bad judgement, politically and economically.
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We have 3 distinct regions in the global economy right now. The US has higher yields, decent growth and people think the government spends too much. China has lower yields, low growth and people think the government should spend more, whereas the UK has the worst of all worlds higher yields, no growth and people think the government spends too much.

The UK isn’t particularly different to much of Europe in that regard, however whilst the rest of Europe is at least pretending to get their debt under control the UK has spun the fuck-it wheel and is borrowing billions more to invest in infrastructure projects (in itself something I think is right if done sensibly). This isn’t orthodox government behaviour and sometimes it’s hard being the only one heading the other way down a street. Who knows it may end up being the blue print for how to do it in the future - Reeveonomics.

But that’s for the future. Now she needs to either hold her nerve or use the spring budget to reset the treasury strategy. What she can’t do is be bounced in to it by market sentiment - she’ll be toast then.

Labours rhetoric, a perception of them having too many self stated priorities (if you have too many you have none), and Reeve’s tax on employment hasn’t helped the general sentiment but for the moment she retains the markets confidence or at least they are prepared to wait - but there is a price to be paid for now in increased borrowing costs.

Interesting times ahead.
 
metalblue said:
We have 3 distinct regions in the global economy right now. The US has higher yields, decent growth and people think the government spends too much. China has lower yields, low growth and people think the government should spend more, whereas the UK has the worst of all worlds higher yields, no growth and people think the government spends too much.

The UK isn’t particularly different to much of Europe in that regard, however whilst the rest of Europe is at least pretending to get their debt under control the UK has spun the fuck-it wheel and is borrowing billions more to invest in infrastructure projects (in itself something I think is right if done sensibly). This isn’t orthodox government behaviour and sometimes it’s hard being the only one heading the other way down a street. Who knows it may end up being the blue print for how to do it in the future - Reeveonomics.

But that’s for the future. Now she needs to either hold her nerve or use the spring budget to reset the treasury strategy. What she can’t do is be bounced in to it by market sentiment - she’ll be toast then.

Labours rhetoric, a perception of them having too many self stated priorities (if you have too many you have none), and Reeve’s tax on employment hasn’t helped the general sentiment but for the moment she retains the markets confidence or at least they are prepared to wait - but there is a price to be paid for now in increased borrowing costs.

Interesting times ahead.
Click to expand...
 
metalblue said:
We have 3 distinct regions in the global economy right now. The US has higher yields, decent growth and people think the government spends too much. China has lower yields, low growth and people think the government should spend more, whereas the UK has the worst of all worlds higher yields, no growth and people think the government spends too much.

The UK isn’t particularly different to much of Europe in that regard, however whilst the rest of Europe is at least pretending to get their debt under control the UK has spun the fuck-it wheel and is borrowing billions more to invest in infrastructure projects (in itself something I think is right if done sensibly). This isn’t orthodox government behaviour and sometimes it’s hard being the only one heading the other way down a street. Who knows it may end up being the blue print for how to do it in the future - Reeveonomics.

But that’s for the future. Now she needs to either hold her nerve or use the spring budget to reset the treasury strategy. What she can’t do is be bounced in to it by market sentiment - she’ll be toast then.

Labours rhetoric, a perception of them having too many self stated priorities (if you have too many you have none), and Reeve’s tax on employment hasn’t helped the general sentiment but for the moment she retains the markets confidence or at least they are prepared to wait - but there is a price to be paid for now in increased borrowing costs.

Interesting times ahead.
Click to expand...
Upward curve on 10 year gilts mirrors 10 year US treasuries which leads the direction of the market and as Brewsters says that is being driven by anticipation of Trump's potentially inflationary policies so this situation is not entirely of her own making . That said I disagree that she retains the confidence of the markets, she has drained business and consumer confidence in 6 months , her direct actions are completely at odds with her stated agenda of growing the economy. Starmer will have to sacrifice her, sooner rather than later and she cannot complain if he does.
 
The Future’s Blue! said:
Interesting. Was listening to him on news the other day and he was for implementing the current recommendations and was content with localised inquiries, which he said he had pushed for in the GM area.

I wonder what’s changed?
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Wes Streeting openly canvassing for leader again?
 
Hertzblue said:
Upward curve on 10 year gilts mirrors 10 year US treasuries which leads the direction of the market and as Brewsters says that is being driven by anticipation of Trump's potentially inflationary policies so this situation is not entirely of her own making . That said I disagree that she retains the confidence of the markets, she has drained business and consumer confidence in 6 months , her direct actions are completely at odds with her stated agenda of growing the economy. Starmer will have to sacrifice her, sooner rather than later and she cannot complain if he does.
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Where's the meme?
 
The Future’s Blue! said:
Interesting. Was listening to him on news the other day and he was for implementing the current recommendations and was content with localised inquiries, which he said he had pushed for in the GM area.

I wonder what’s changed?
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Maybe he's just jumping on the Far Right Bandwagon ?
 
Hertzblue said:
Maybe he's just jumping on the Far Right Bandwagon ?
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Seems that anyone who disagrees with Far left Labour is classed as far right!I would be far happier if Andy was Labour leader/ PM. He generally speaks common sense! And I am definitely not a Labour Supporter! He also supports Everton ( after todays news he might be their manager?)
 
metalblue said:
We have 3 distinct regions in the global economy right now. The US has higher yields, decent growth and people think the government spends too much. China has lower yields, low growth and people think the government should spend more, whereas the UK has the worst of all worlds higher yields, no growth and people think the government spends too much.

The UK isn’t particularly different to much of Europe in that regard, however whilst the rest of Europe is at least pretending to get their debt under control the UK has spun the fuck-it wheel and is borrowing billions more to invest in infrastructure projects (in itself something I think is right if done sensibly). This isn’t orthodox government behaviour and sometimes it’s hard being the only one heading the other way down a street. Who knows it may end up being the blue print for how to do it in the future - Reeveonomics.

But that’s for the future. Now she needs to either hold her nerve or use the spring budget to reset the treasury strategy. What she can’t do is be bounced in to it by market sentiment - she’ll be toast then.

Labours rhetoric, a perception of them having too many self stated priorities (if you have too many you have none), and Reeve’s tax on employment hasn’t helped the general sentiment but for the moment she retains the markets confidence or at least they are prepared to wait - but there is a price to be paid for now in increased borrowing costs.

Interesting times ahead.
Click to expand...
The way you’ve phrased this post is helpful to me. Thanks.
But Reeves and Labour straightjacketed themselves with their in flexible financial rules. There’s plenty of money in the country but it’s all flowed upwards or in tax dodging or corruption, there’s no strategy to invest in jobs and to get the millions of inactive people back to work (or at least some) who can then pay tax etc. Taxing banks etc - there’s plenty of ways she could have brought more money into the economy
 
Stiff Little Wingers said:
The way you’ve phrased this post is helpful to me. Thanks.
But Reeves and Labour straightjacketed themselves with their in flexible financial rules. There’s plenty of money in the country but it’s all flowed upwards or in tax dodging or corruption, there’s no strategy to invest in jobs and to get the millions of inactive people back to work (or at least some) who can then pay tax etc. Taxing banks etc - there’s plenty of ways she could have brought more money into the economy
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Are the NHS reforms not a strategy for getting inactive people back to work?
 
Doesn’t help that the BoE had continued to progress with quantitative tightening at a rate much higher than other developed economies. They are selling bonds government bonds at the rate of £100Bn per year which increases the cost to the treasury by tens of billions each year. Basically all it’s doing is funnelling vast sums of money back to commercial banks to the detriment of investment in the uk and the tax payer.

Yes in the long run QT is needed, to reduce long term government borrowing but it doesn’t really need to be as hard or fast as what is currently being done.

Its akin to spending every penny you have paying off a loan which could be paid over a longer term and not having enough left over to feed your family.
 
Kompany Car said:
Doesn’t help that the BoE had continued to progress with quantitative tightening at a rate much higher than other developed economies. They are selling bonds government bonds at the rate of £100Bn per year which increases the cost to the treasury by tens of billions each year. Basically all it’s doing is funnelling vast sums of money back to commercial banks to the detriment of investment in the uk and the tax payer.

Yes in the long run QT is needed, to reduce long term government borrowing but it doesn’t really need to be as hard or fast as what is currently being done.

Its akin to spending every penny you have paying off a loan which could be paid over a longer term and not having enough left over to feed your family.
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How much of what is happening to the pound is due to what's happening here Vs what is happening across the Atlantic? For whatever reason the markets seem to have confidence in the US dollar.
 
Hertzblue said:
Upward curve on 10 year gilts mirrors 10 year US treasuries which leads the direction of the market and as Brewsters says that is being driven by anticipation of Trump's potentially inflationary policies so this situation is not entirely of her own making . That said I disagree that she retains the confidence of the markets, she has drained business and consumer confidence in 6 months , her direct actions are completely at odds with her stated agenda of growing the economy. Starmer will have to sacrifice her, sooner rather than later and she cannot complain if he does.
Click to expand...

Truss is what happens when markets lose confidence - they’re questioning her assumptions currently. Our CDS has moved about 4 basis points flagging a gnats hair of an increase in default risk.

You’re correct to say her budget has negatively impacted sentiment.
 
mosssideblue said:
Are the NHS reforms not a strategy for getting inactive people back
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metalblue said:
Truss is what happens when markets lose confidence - they’re questioning her assumptions currently. Our CDS has moved about 4 basis points flagging a gnats hair of an increase in default risk.

You’re correct to say her budget has negatively impacted sentiment.
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It's just such a shame, and pretty unforgiveable that Reeves and Starmer have not gone back into the single market or at least closer to the EU to try to cater for the billions lost through Brexit. But I suppose the immigration watchers will set themselves over Fred movement, although Eurooeans tend to be white.
 
Mazzarelli's Swiss Cheese said:
How much of what is happening to the pound is due to what's happening here Vs what is happening across the Atlantic? For whatever reason the markets seem to have confidence in the US dollar.
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The US economy has all the same problems as the UK / European economies but it has growth and there is a belief Trump is going to bring even more growth. Any trade war is going to affect the European economies far more.
 
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