Macroeconomics, the economy, inflation etc. *likely to be very dull*
Comments
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focuszing723 said:
Thank you Secretsqirrel. Come on, where's the rest of them?
Just for info, I’m not a phantom liker or flagger. I just couldn’t fault your enthusiasm.0 -
Thank you. Means a lot in these chaotic times.secretsqirrel said:focuszing723 said:Thank you Secretsqirrel. Come on, where's the rest of them?
Just for info, I’m not a phantom liker or flagger. I just couldn’t fault your enthusiasm.0 -
Where have you been focus, banged up for a couple of weeks.0
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Just really busy in the real World. I've only spent the night in a cell once, for being hideously drunk after a night out whilst at UNI, had to clean up my own sick and everything, bygones.webboo said:Where have you been focus, banged up for a couple of weeks.
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Can someone explain how it's good that the government is trying to give the economy a shot of adrenaline with free cash while the bank is trying to throttle it with interest rate rises?0
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To compete with the dollar. Apparently.kingstongraham said:Can someone explain how it's good that the government is trying to give the economy a shot of adrenaline with free cash while the bank is trying to throttle it with interest rate rises?
The above may be fact, or fiction, I may be serious, I may be jesting.
I am not sure. You have no chance.Veronese68 wrote:PB is the most sensible person on here.0 -
Not sure the unfunded tax cuts are popular with investors or the BoEkingstongraham said:Can someone explain how it's good that the government is trying to give the economy a shot of adrenaline with free cash while the bank is trying to throttle it with interest rate rises?
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Do you want Sterling to run at parity or less than parity with the dollar? You think that would benefit the worst off?pblakeney said:
To compete with the dollar. Apparently.kingstongraham said:Can someone explain how it's good that the government is trying to give the economy a shot of adrenaline with free cash while the bank is trying to throttle it with interest rate rises?
Both policies seem to be counter intuitive and going against each other. Can’t argue with that but without stabilising Sterling inflation is going to run completely out of control.
Odds of the IMF being involved by the end of 2023?
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My opinion is that neither the BoE or the government have the power that they, or the population think they have. IMF involvement? Very possibly.skyblueamateur said:
Do you want Sterling to run at parity or less than parity with the dollar? You think that would benefit the worst off?pblakeney said:
To compete with the dollar. Apparently.kingstongraham said:Can someone explain how it's good that the government is trying to give the economy a shot of adrenaline with free cash while the bank is trying to throttle it with interest rate rises?
Both policies seem to be counter intuitive and going against each other. Can’t argue with that but without stabilising Sterling inflation is going to run completely out of control.
Odds of the IMF being involved by the end of 2023?The above may be fact, or fiction, I may be serious, I may be jesting.
I am not sure. You have no chance.Veronese68 wrote:PB is the most sensible person on here.0 -
The problem is the borrowing is not really doing anything to advance the economy; it's just throwing money into a hole to stop the entire economy falling over over winter. It's not going to increase the capacity of the economy.
By doing that and then cutting a load of taxes that aren't going to generate much in return, there's nothing there to suggest the gov't can easily afford it down the road.
You can't just borrow for nothing; I know I have been very pro borrowing, but really only to invest.0 -
“The need to increase future borrowing coming alongside the ongoing tightening measures being undertaken by the central bank – this has the potential to continue to increase future borrowing costs,” Niall O’Sullivan, chief investment officer, multi-asset strategies, EMEA at Neuberger Berman, said.
Matthew Ryan, head of market strategy at global financial services firm Ebury, put those borrowing costs at an estimated £200 billion ($225 billion).
https://www.cnbc.com/2022/09/23/liz-truss-pursues-trickle-down-economics-despite-scorn-from-biden.html0 -
@surrey_commuter
Take a look at this article: https://www.ft.com/content/b4b1860e-ac02-4b9e-8770-ed9111208cfd
(have condensed the article below for you)
Basically a better written, researched, and thought out position that I have broadly taken.
It is all rather reckless. But there is one area where I think the carefree attitude displayed by the new stewards of the UK economy has something going for it, which is their lack of worry about the level of public debt.But what if Truss and Kwarteng are right on this one? To be precise, what if there is no good reason to think that any particular debt level is too high — and whatever it is, it should be treated with benign neglect?In 2015, an IMF discussion note, explicitly concluded that in countries not facing prohibitive interest rates, “policies to deliberately pay down debt are normatively undesirable”. The reason is that taxation over and above the amount needed to fund public spending causes more harm to the economy than the existence of legacy debt. Debt inherited from crises should instead simply be left where it has ended up, and allowed to be gradually eroded by growth...argued that the financial and welfare cost of public debt was likely to be small if not negative. That need not mean governments should borrow more, but it also entails that it may not be necessary to tighten the public budget for the purpose of bringing down debt. I would highlight that Blanchard’s analysis was conservative in that it accepts the premise that public borrowing could crowd out private investment. If public spending boosts private investment — by increasing confidence in strong demand or expectations of good infrastructure — that strengthens the case further....what can we say about what debt levels should be? It seems to me that the answer is “nothing”, because the implication of their analysis is that there is no “optimal” debt level. What these arguments point to, then, is what in technical terms is called to “be chill about public debt levels”.To be clear, there is certainly an issue of the financial stability of public debt. New debt has to be funded, and old debt has to be rolled over. The eurozone learnt from its sovereign debt crisis not to take these for granted. But market funding is a matter of interest rates and refinancing schedules, which only indirectly relate to the levels of debt outstanding. And that relation is something a government can influence through prudent maturity management (as Blanchard’s lecture also points out)Here is a yet more provocative thought: there may be types of inflation we should also treat with benign neglect....my view is that inflation in rich countries is not driven by excessive demand — which is near normal levels thanks to the strong policies to get us out of the pandemic shutdown of our economies — but by two or three other phenomena... ...In early 2021, it was the enormous sectoral shift in US consumer spending (from services to goods) that meant goods production could not keep up, especially with supply-chain disruption added in. Since late 2021, it has been Russian president Vladimir Putin’s bellicose squeeze on energy markets (which started by throttling gas reserve replenishments in Europe).
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Shouldn't the current exchange rate be making British products very attractive in the States and benefit the export market? If only we had a trade deal and didn't have to buy most of our raw materials from abroad industry could be thriving!skyblueamateur said:
Do you want Sterling to run at parity or less than parity with the dollar? You think that would benefit the worst off?pblakeney said:
To compete with the dollar. Apparently.kingstongraham said:Can someone explain how it's good that the government is trying to give the economy a shot of adrenaline with free cash while the bank is trying to throttle it with interest rate rises?
Both policies seem to be counter intuitive and going against each other. Can’t argue with that but without stabilising Sterling inflation is going to run completely out of control.
Odds of the IMF being involved by the end of 2023?0 -
Yes, that should be the case but unfortunately we manufacture very little from scratch.Pross said:
Shouldn't the current exchange rate be making British products very attractive in the States and benefit the export market? If only we had a trade deal and didn't have to buy most of our raw materials from abroad industry could be thriving!skyblueamateur said:
Do you want Sterling to run at parity or less than parity with the dollar? You think that would benefit the worst off?pblakeney said:
To compete with the dollar. Apparently.kingstongraham said:Can someone explain how it's good that the government is trying to give the economy a shot of adrenaline with free cash while the bank is trying to throttle it with interest rate rises?
Both policies seem to be counter intuitive and going against each other. Can’t argue with that but without stabilising Sterling inflation is going to run completely out of control.
Odds of the IMF being involved by the end of 2023?0 -
Sometimes you can just admit you were wrong. I do it all the time. It's very cathartic.rick_chasey said:The problem is the borrowing is not really doing anything to advance the economy; it's just throwing money into a hole to stop the entire economy falling over over winter. It's not going to increase the capacity of the economy.
By doing that and then cutting a load of taxes that aren't going to generate much in return, there's nothing there to suggest the gov't can easily afford it down the road.
You can't just borrow for nothing; I know I have been very pro borrowing, but really only to invest.0 -
The magic money tree government economic policy and it's example to the general public, does make me shudder with manic insanity, at the insanity.0
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I think you and I are interpreting his words in different ways. I read that as having strong public finances so that you can deal with crises. I obviously don't agree with the notion that you don't have to pay that crisis debt off but then I don't think any Govt will avoid piling up the debt in the good times for the forseeable future.rick_chasey said:@surrey_commuter
Take a look at this article: https://www.ft.com/content/b4b1860e-ac02-4b9e-8770-ed9111208cfd
(have condensed the article below for you)
Basically a better written, researched, and thought out position that I have broadly taken.
It is all rather reckless. But there is one area where I think the carefree attitude displayed by the new stewards of the UK economy has something going for it, which is their lack of worry about the level of public debt.But what if Truss and Kwarteng are right on this one? To be precise, what if there is no good reason to think that any particular debt level is too high — and whatever it is, it should be treated with benign neglect?In 2015, an IMF discussion note, explicitly concluded that in countries not facing prohibitive interest rates, “policies to deliberately pay down debt are normatively undesirable”. The reason is that taxation over and above the amount needed to fund public spending causes more harm to the economy than the existence of legacy debt. Debt inherited from crises should instead simply be left where it has ended up, and allowed to be gradually eroded by growth...argued that the financial and welfare cost of public debt was likely to be small if not negative. That need not mean governments should borrow more, but it also entails that it may not be necessary to tighten the public budget for the purpose of bringing down debt. I would highlight that Blanchard’s analysis was conservative in that it accepts the premise that public borrowing could crowd out private investment. If public spending boosts private investment — by increasing confidence in strong demand or expectations of good infrastructure — that strengthens the case further....what can we say about what debt levels should be? It seems to me that the answer is “nothing”, because the implication of their analysis is that there is no “optimal” debt level. What these arguments point to, then, is what in technical terms is called to “be chill about public debt levels”.To be clear, there is certainly an issue of the financial stability of public debt. New debt has to be funded, and old debt has to be rolled over. The eurozone learnt from its sovereign debt crisis not to take these for granted. But market funding is a matter of interest rates and refinancing schedules, which only indirectly relate to the levels of debt outstanding. And that relation is something a government can influence through prudent maturity management (as Blanchard’s lecture also points out)Here is a yet more provocative thought: there may be types of inflation we should also treat with benign neglect....my view is that inflation in rich countries is not driven by excessive demand — which is near normal levels thanks to the strong policies to get us out of the pandemic shutdown of our economies — but by two or three other phenomena... ...In early 2021, it was the enormous sectoral shift in US consumer spending (from services to goods) that meant goods production could not keep up, especially with supply-chain disruption added in. Since late 2021, it has been Russian president Vladimir Putin’s bellicose squeeze on energy markets (which started by throttling gas reserve replenishments in Europe).
With debt servicing costs about to go above £100bn pa and a couple of novices at the helm instilling no confidence in the markets I think we are about to test your theory that there you can't have too much debt.0 -
It's better to test the stuff to destruction on here (though i think it'll stand up, fwiw), and so in the real world you can be master of the argument.skyblueamateur said:
Sometimes you can just admit you were wrong. I do it all the time. It's very cathartic.rick_chasey said:The problem is the borrowing is not really doing anything to advance the economy; it's just throwing money into a hole to stop the entire economy falling over over winter. It's not going to increase the capacity of the economy.
By doing that and then cutting a load of taxes that aren't going to generate much in return, there's nothing there to suggest the gov't can easily afford it down the road.
You can't just borrow for nothing; I know I have been very pro borrowing, but really only to invest.0 -
He's making the point that it's not the absolute debt level that is an issue (and so austerity is unnecessary - that's a big disagreement we've had) as is worrying about certain types of common rich world inflation inflation (as the causes s are things that you can't control without big pain).
He's not arguing that bad governance is fine. Nor is he saying that fiscal incontinence is fine either. But that, in and of itself, the debt level isn't inherently a problem. It only becomes a problem with bad governance.0 -
you can't just ignore your previous arguments or it becomes pointless ad I will give up in frustration.rick_chasey said:He's making the point that it's not the absolute debt level that is an issue (and so austerity is unnecessary - that's a big disagreement we've had) as is worrying about certain types of common rich world inflation inflation (as the causes s are things that you can't control without big pain).
He's not arguing that bad governance is fine. Nor is he saying that fiscal incontinence is fine either. But that, in and of itself, the debt level isn't inherently a problem. It only becomes a problem with bad governance.
The basis for the debt level not being inherently bad was that debt servicing costs were more important and they were (conveniently) very low.
The common argument on here was that with that debt stretching into the never never it was inevitable that one day interest rate would return to their historic norms and at that point debt servicing costs would spiral out of control.
I see no way that the annual deficit will fall below £100bn for the forseeable future and that come the next crisis we will have no head room0 -
So that is covered in the article, specifically. I don't need to repeat that.surrey_commuter said:
you can't just ignore your previous arguments or it becomes pointless ad I will give up in frustration.rick_chasey said:He's making the point that it's not the absolute debt level that is an issue (and so austerity is unnecessary - that's a big disagreement we've had) as is worrying about certain types of common rich world inflation inflation (as the causes s are things that you can't control without big pain).
He's not arguing that bad governance is fine. Nor is he saying that fiscal incontinence is fine either. But that, in and of itself, the debt level isn't inherently a problem. It only becomes a problem with bad governance.
The basis for the debt level not being inherently bad was that debt servicing costs were more important and they were (conveniently) very low.
The common argument on here was that with that debt stretching into the never never it was inevitable that one day interest rate would return to their historic norms and at that point debt servicing costs would spiral out of control.
I see no way that the annual deficit will fall below £100bn for the forseeable future and that come the next crisis we will have no head room
And head room is entirely defined by growth.0 -
Just booked in a transaction at $1.10. Marvelous. Absolutely magic.0
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so we cross our fingers and hope for growth above 5%?rick_chasey said:
So that is covered in the article, specifically. I don't need to repeat that.surrey_commuter said:
you can't just ignore your previous arguments or it becomes pointless ad I will give up in frustration.rick_chasey said:He's making the point that it's not the absolute debt level that is an issue (and so austerity is unnecessary - that's a big disagreement we've had) as is worrying about certain types of common rich world inflation inflation (as the causes s are things that you can't control without big pain).
He's not arguing that bad governance is fine. Nor is he saying that fiscal incontinence is fine either. But that, in and of itself, the debt level isn't inherently a problem. It only becomes a problem with bad governance.
The basis for the debt level not being inherently bad was that debt servicing costs were more important and they were (conveniently) very low.
The common argument on here was that with that debt stretching into the never never it was inevitable that one day interest rate would return to their historic norms and at that point debt servicing costs would spiral out of control.
I see no way that the annual deficit will fall below £100bn for the forseeable future and that come the next crisis we will have no head room
And head room is entirely defined by growth.0 -
Like I said, the issue is not the size of the debt per se, it's the quality of the governance and the broader economic situation.surrey_commuter said:
so we cross our fingers and hope for growth above 5%?rick_chasey said:
So that is covered in the article, specifically. I don't need to repeat that.surrey_commuter said:
you can't just ignore your previous arguments or it becomes pointless ad I will give up in frustration.rick_chasey said:He's making the point that it's not the absolute debt level that is an issue (and so austerity is unnecessary - that's a big disagreement we've had) as is worrying about certain types of common rich world inflation inflation (as the causes s are things that you can't control without big pain).
He's not arguing that bad governance is fine. Nor is he saying that fiscal incontinence is fine either. But that, in and of itself, the debt level isn't inherently a problem. It only becomes a problem with bad governance.
The basis for the debt level not being inherently bad was that debt servicing costs were more important and they were (conveniently) very low.
The common argument on here was that with that debt stretching into the never never it was inevitable that one day interest rate would return to their historic norms and at that point debt servicing costs would spiral out of control.
I see no way that the annual deficit will fall below £100bn for the forseeable future and that come the next crisis we will have no head room
And head room is entirely defined by growth.
The way you say it, the tail (the debt) is wagging the economy ( the dog). I'm not saying that fiscal incontinence is the answer, i'm saying worrying about the absolute size of the debt is not right, and I'm saying you respond to the borrowing environments of the moment i.e. borrow when rates are low and don't when rates are high.
Instead, we have a situation where the gov't did austerity when rates were low and they're now borrowing like mad when rates are high to give....bankers bigger bonuses and tax breaks for the richest 630,000?
When i said back in the low interest dates when it was effectively negative, the market was telling the govt to go spend.
Now rates are rising sharply, the market is telling the govt to stop spending.
This gov't is doing the reverse.0 -
I think you are ignoring the term of the debt. Yes you may sell a 10 year bond at 0.5% but that will get rolled over at the prevailing market rate. This is why it is argued that they should be doing their affordability tests at 4%.rick_chasey said:
Like I said, the issue is not the size of the debt per se, it's the quality of the governance and the broader economic situation.surrey_commuter said:
so we cross our fingers and hope for growth above 5%?rick_chasey said:
So that is covered in the article, specifically. I don't need to repeat that.surrey_commuter said:
you can't just ignore your previous arguments or it becomes pointless ad I will give up in frustration.rick_chasey said:He's making the point that it's not the absolute debt level that is an issue (and so austerity is unnecessary - that's a big disagreement we've had) as is worrying about certain types of common rich world inflation inflation (as the causes s are things that you can't control without big pain).
He's not arguing that bad governance is fine. Nor is he saying that fiscal incontinence is fine either. But that, in and of itself, the debt level isn't inherently a problem. It only becomes a problem with bad governance.
The basis for the debt level not being inherently bad was that debt servicing costs were more important and they were (conveniently) very low.
The common argument on here was that with that debt stretching into the never never it was inevitable that one day interest rate would return to their historic norms and at that point debt servicing costs would spiral out of control.
I see no way that the annual deficit will fall below £100bn for the forseeable future and that come the next crisis we will have no head room
And head room is entirely defined by growth.
The way you say it, the tail (the debt) is wagging the economy ( the dog). I'm not saying that fiscal incontinence is the answer, i'm saying worrying about the absolute size of the debt is not right, and I'm saying you respond to the borrowing environments of the moment i.e. borrow when rates are low and don't when rates are high.
Instead, we have a situation where the gov't did austerity when rates were low and they're now borrowing like mad when rates are high to give....bankers bigger bonuses and tax breaks for the richest 630,000?
When i said back in the low interest dates when it was effectively negative, the market was telling the govt to go spend.
Now rates are rising sharply, the market is telling the govt to stop spending.
This gov't is doing the reverse.
Debt servicing costs are the second biggest item of Govt expenditure and is bumping up towards 10%.
I think we are in the death spiral
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TBF, the article (and I think I have) covered that. The financial stability is closer to how you manage the terms of the debt than the number.But market funding is a matter of interest rates and refinancing schedules, which only indirectly relate to the levels of debt outstanding. And that relation is something a government can influence through prudent maturity management (as Blanchard’s lecture also points out)0
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I can hear Sir John Harvey Jones saying that...surrey_commuter said:
I think you are ignoring the term of the debt. Yes you may sell a 10 year bond at 0.5% but that will get rolled over at the prevailing market rate. This is why it is argued that they should be doing their affordability tests at 4%.rick_chasey said:
Like I said, the issue is not the size of the debt per se, it's the quality of the governance and the broader economic situation.surrey_commuter said:
so we cross our fingers and hope for growth above 5%?rick_chasey said:
So that is covered in the article, specifically. I don't need to repeat that.surrey_commuter said:
you can't just ignore your previous arguments or it becomes pointless ad I will give up in frustration.rick_chasey said:He's making the point that it's not the absolute debt level that is an issue (and so austerity is unnecessary - that's a big disagreement we've had) as is worrying about certain types of common rich world inflation inflation (as the causes s are things that you can't control without big pain).
He's not arguing that bad governance is fine. Nor is he saying that fiscal incontinence is fine either. But that, in and of itself, the debt level isn't inherently a problem. It only becomes a problem with bad governance.
The basis for the debt level not being inherently bad was that debt servicing costs were more important and they were (conveniently) very low.
The common argument on here was that with that debt stretching into the never never it was inevitable that one day interest rate would return to their historic norms and at that point debt servicing costs would spiral out of control.
I see no way that the annual deficit will fall below £100bn for the forseeable future and that come the next crisis we will have no head room
And head room is entirely defined by growth.
The way you say it, the tail (the debt) is wagging the economy ( the dog). I'm not saying that fiscal incontinence is the answer, i'm saying worrying about the absolute size of the debt is not right, and I'm saying you respond to the borrowing environments of the moment i.e. borrow when rates are low and don't when rates are high.
Instead, we have a situation where the gov't did austerity when rates were low and they're now borrowing like mad when rates are high to give....bankers bigger bonuses and tax breaks for the richest 630,000?
When i said back in the low interest dates when it was effectively negative, the market was telling the govt to go spend.
Now rates are rising sharply, the market is telling the govt to stop spending.
This gov't is doing the reverse.
Debt servicing costs are the second biggest item of Govt expenditure and is bumping up towards 10%.
I think we are in the death spiral0 -
my whole point is that once you are past the tipping point there will be no "prudent maturity management"rick_chasey said:TBF, the article (and I think I have) covered that. The financial stability is closer to how you manage the terms of the debt than the number.
But market funding is a matter of interest rates and refinancing schedules, which only indirectly relate to the levels of debt outstanding. And that relation is something a government can influence through prudent maturity management (as Blanchard’s lecture also points out)0 -
I don't see why debt servicing costs is seen as some sort of completely different category of spending. It is just spending on the things we bought last year, the year before, etc. spread over a number of years rather than the spending on things bought this year. Yes, there is a marginal additional cost to spreading that spending, but it's still fundamentally paying for stuff.surrey_commuter said:
I think you are ignoring the term of the debt. Yes you may sell a 10 year bond at 0.5% but that will get rolled over at the prevailing market rate. This is why it is argued that they should be doing their affordability tests at 4%.rick_chasey said:
Like I said, the issue is not the size of the debt per se, it's the quality of the governance and the broader economic situation.surrey_commuter said:
so we cross our fingers and hope for growth above 5%?rick_chasey said:
So that is covered in the article, specifically. I don't need to repeat that.surrey_commuter said:
you can't just ignore your previous arguments or it becomes pointless ad I will give up in frustration.rick_chasey said:He's making the point that it's not the absolute debt level that is an issue (and so austerity is unnecessary - that's a big disagreement we've had) as is worrying about certain types of common rich world inflation inflation (as the causes s are things that you can't control without big pain).
He's not arguing that bad governance is fine. Nor is he saying that fiscal incontinence is fine either. But that, in and of itself, the debt level isn't inherently a problem. It only becomes a problem with bad governance.
The basis for the debt level not being inherently bad was that debt servicing costs were more important and they were (conveniently) very low.
The common argument on here was that with that debt stretching into the never never it was inevitable that one day interest rate would return to their historic norms and at that point debt servicing costs would spiral out of control.
I see no way that the annual deficit will fall below £100bn for the forseeable future and that come the next crisis we will have no head room
And head room is entirely defined by growth.
The way you say it, the tail (the debt) is wagging the economy ( the dog). I'm not saying that fiscal incontinence is the answer, i'm saying worrying about the absolute size of the debt is not right, and I'm saying you respond to the borrowing environments of the moment i.e. borrow when rates are low and don't when rates are high.
Instead, we have a situation where the gov't did austerity when rates were low and they're now borrowing like mad when rates are high to give....bankers bigger bonuses and tax breaks for the richest 630,000?
When i said back in the low interest dates when it was effectively negative, the market was telling the govt to go spend.
Now rates are rising sharply, the market is telling the govt to stop spending.
This gov't is doing the reverse.
Debt servicing costs are the second biggest item of Govt expenditure and is bumping up towards 10%.
I think we are in the death spiral1985 Mercian King of Mercia - work in progress (Hah! Who am I kidding?)
Pinnacle Monzonite
Part of the anti-growth coalition1
