2022 mini-budget discussion

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mid_gen said:
I do not have the same levels of confidence in the financial system.

The fact that a couple of percent increase in gilt yields caused a cascading situation where pension fund (supposedly the boring, safe, investors) were going to go insolvent in a matter of hours, required the BoE to abandon it's plans to drop QE and start printing money again.....this does not suggest to me that all is hunky dory under the surface.

But you know, apparently we need less financial regulation. Seemingly flying in the face of the fact that the financial markets failed again last week and had to be bailed out.
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You need to understand why pension funds hold government debt (gilts = bonds) and how they move with the market to understand why this happened, as hard and as quickly.

With bonds they are normally discounted, so instead of paying interest they are sold at a discount. Their current value is hence a perceived interest rate over the period of their length subtracted from their face value.
The "interest rate" being how safe they are considered to be. Typically UK government debt is very safe and inflation very predictable and hence they are not heavily discounted. In fact they have in the past at times been bought at above face value they are considered that safe (where better to put your money when all the banks are at risk of going bust...?)
So thats why pension funds in particular like them. Very safe low interest, a good balance to hold at let the other investments hold the risk factor. They are also historically highly liquid, in that as well as being safe they are sought after and ensure that the funds maintain liquidity needed to ensure they can meet their short term liabilities (normally payment of pensions)

Now suddenly the government basically took a massive chunk out of their value. So now the pension funds not only saw a big chunk of their value vanish, but they were deemed less liquid without a large discount to face value.
The funds faced a double whammy potentially with now a shortfall in total funds but also potentially in liquid or near liquids funds.

This affected the Db schemes mainly since they have a commitment to fund, where as DC schemes with typically less bonds would have seen some impact that was the individual DC members problem not the schemes actuaries and ultimately the trustees who in the case of DB schemes woudl be the ones who suddenly had a problem on their plate. Potentially having to say the scheme would have a shortfall impossible to see corrected.

I may be wrong, but I cannot remember a time when that has happened before. Normally gilts/bonds are seen as a safehaven and the go to place, not the opposite.

Failure of the actual markets would probably have the opposite effect to what happened here. IE it was a complete and utter stuff up that no right thinking government (probably even Corbyn 111!!!1! ;) ) would have managed to achieve.
 
Surely it’s about time for Truss to throw him under the bus and get rid? It’d give her another month at least..
 
Mrwong said:
www.thelocal.fr

How the historic strikes have damaged the French economy

France's longest continuous transport strike has shaved up to 0.1 percentage points off fourth-quarter growth in 2019, the central bank said on Wednesday, as the showdown entered its 42nd day.
www.thelocal.fr www.thelocal.fr
because of the French policies
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How is that even remotely similar to our situation? the two responses are absolutely light years apart.

With the greatest of respect, that’s a very weird answer to my question. What our government has done is several magnitudes more damaging.

Do you have an example of an equivalent? A government who has embarked upon a similarly damaging course of action to our own?
 
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GordyR said:
How is that even remotely similar to our situation? the two responses are absolutely light years apart.

With the greatest of respect, that’s a very weird answer to my question. What our government has done is several magnitudes more damaging.

Do you have an example of an equivalent? A government who has embarked upon a similarly damaging course of action to our own?
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I said this " there are many governments making it worse".
Plus, it depends if you are impacted or not, plus by what degree you are impacted.
Every individual is different, their exposure is different, so yes it will be the same for some, worse for others, and better for others.
 
Mrwong said:
I said this " there are many governments making it worse".
Plus, it depends if you are impacted or not, plus by what degree you are impacted.
Every individual is different, their exposure is different, so yes it will be the same for some, worse for others, and better for others.
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So you agree that our government has made the situation uniquely worse then?

Also, we’re all impacted negatively; even those of us who would have seemingly benefited the most from their tax cuts.
 
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GordyR said:
So you agree that our government has made the situation uniquely worse then?

Also, we’re all impacted negatively; even those of us who would have seemingly benefited the most from their tax cuts.
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Governments all over have made policies uniquely worse.
We all are not impacted negatively as you say.
 
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Mrwong said:
Governments all over have made policies uniquely worse.
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Which is it then? You’re either able to point to governments who have made things equally as bad as our own, or you agree that our government has made things uniquely worse.

The two positions are mutually exclusive, so I’ll ask again.

What government has made things as bad as our own?

Mrwong said:
We all are not impacted negatively as you say.
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I benefited greatly from the tax cuts that they were originally intending to implement, but I’m economically literate enough to understand that the net economic impact of that budget would have an overall negative impact on me, as it would all of us.

I firmly believe that there are only a tiny handful of individuals who stood to benefit even slightly from the mini budget as it was originally announced; and most of them benefited purely based upon their short positions, rather than as the result of the policies themselves.

As government policy goes, it really was that bad.
 
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Mercenary Keyboard Warrior said:
mid_gen said:
I do not have the same levels of confidence in the financial system.

The fact that a couple of percent increase in gilt yields caused a cascading situation where pension fund (supposedly the boring, safe, investors) were going to go insolvent in a matter of hours, required the BoE to abandon it's plans to drop QE and start printing money again.....this does not suggest to me that all is hunky dory under the surface.

But you know, apparently we need less financial regulation. Seemingly flying in the face of the fact that the financial markets failed again last week and had to be bailed out.
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The world financial markets are always hanging on a string. Everyone starts to shift across making the next product category unsafe. This may look like it was the fault of our government, really it was always there and about to explode, this was the best time for it to explode and blame it on the government.
 
GordyR said:
Which is it then? You’re either able to point to governments who have made things equally as bad as our own, or you agree that our government has made things uniquely worse.

The two positions are mutually exclusive, so I’ll ask again.

What government has made things as bad as our own?



I benefited greatly from the tax cuts that they were originally intending to implement, but I’m economically literate enough to understand that the net economic impact of that budget would have an overall negative impact on me, as it would all of us.

I firmly believe that there are only a tiny handful of individuals who stood to benefit even slightly from the mini budget as it was originally announced; and most of them benefited purely based upon their short positions, rather than as the result of the policies themselves.

It’s really was that bad.
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What government has made things as bad as our own?

As I said the impact is different for everyone, the impact might be greater for x than it is for y. This is not a difficult assumption to grasp.
 
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