A summary of Thursday front page headlines re economy...
base rate to increase by 75 bips - so following the fed; windfall tax on energy companies to be increased, scope widened and duration extended; tax rises and spending cuts to be more than expected.
Yep, that's definitely rolling the wicket.
Just for good measure, some senior bod at Nationwide is touting house price falls of c30% if we enter a prolonged recession.
Reasons to be cheerful...
windfall tax on energy companies to be increased, scope widened and duration extended
I'll put money on the fossil fuel companies keeping their loophole... and the "scope widening" being hitting the renewable electricity sector hard, and in addition not offering them the same "investing in future capabilities" loophole as the oil and gas extractors.
That loophole:
https://twitter.com/doug_parr/status/1587710170829840386?s=20&t=bSuNi9SyFDPcXyUVMKnDDg
Sunak created the loophole as Chancellor, to encourage more fossil fuel extraction operations in the North Sea longer term.
I note the comments but sunak definitely is for turning.
If he doesn't the political fallout will be massive and will be used against the tories every day until the next election.
sunak will take a pragmatic approach; if he wishes to continue parroting the line of fiscal responsibility he will have to u-turn.
Personal opinion only on a pointless internet forum - thanks for that one daz.
He's cunning though... as my example shows... the government "gave in" to calls for a windfall tax before, and he framed it so that Shell could avoid it... while setting back net zero plans with a tax break for increasing work on preparing for more future extraction. All his budget announcements were the same... he'd announce something in parliament, but do pretty much the opposite in the details. Yes, there will be an announcement on "extending" the windfall tax, presumably as part of the budget that is not a budget, or maybe hinted at before to have ready to bat off questions at COP28, but in the details, when they are eventually published, he'll screw the plans for renewables, and carry on encouraging fossil fuel extraction. Hope I'm wrong.
His duplicitous behaviour is well known; he knows that labour and the media understand the game he's played previously so that will influence his behaviours this time.
Only two weeks to wait.
It's still a pointless debate on an internet forum but periodically provides a little mental stimulation and entertainment.
Let’s apply that to MMT
Do some reading on the subject.
It's not an opinion piece.
Are you campaigning for the role of pedant-in-chief on here? The point was that the national debt is not a bad thing, because it represents the money people and businesses hold in banks and savings accounts. The relative amount compared to equities is irrelevant.
People still falling for the idea that public debt is a problem for them rather than a thing that governments use to batton the public with?
Listen up - without expansion of public debt you aren't getting a better economy or improved services.
Just not happening.
So get on the right side of real economics.
The more people align themselves with the debt/GBP narrative and our 'grandchildren' rubbish the more you will starve the country of money to spend for its own good.
Are you on the side of mythical balance sheets or government spending to correct everything we're deprived of?
It's not happening through taxation or windfall taxes despite what they tell you.
There's only one reason we made it through the pandemic economically and that is deficit spending.
I don't know how much more evidence you need. Also, LMAO at the government economics - 500bn (pandemic) spending no problem, but now we have an 40bn black hole - problem.
You can't make it up. But they did.
The government isn't a household and the Tories and Labour are in full on squeeze mode because balance sheets...
It's shockingly bad behaviour from those who's intentions should be to serve us.
Interest rates shooting up again still driving inflation - the idiots are in charge. Inflation is going to duck of its own accord whilst the rest of us pay more for mortgages.
rone - MMT is not the accepted economic orthodoxy and there are no signs that will change.
You, daz, richard murphy and others banging on about it won't change anything; it's like a dog barking at the moon.
Unless and until it's proponents can effect a policy change it will remain heterodox.
Pointless posts by people who, generally, don't know each othe on an internet forum.
Not exactly policy debate within or between Treasury and BoE supported by economic and monetary experts.
Surely if the Truss debacle taught us anything it is that it doesn’t matter how clever your economic theory is or how much you believe in it. If the markets don’t like it (and they don’t like defecit spending) then you are stuffed.
frankconway
Full Memberrone – MMT is not the accepted economic orthodoxy and there are no signs that will change.
Mmm. This is really complicated, though. MMT as an orthodoxy certainly isn't accepted or being implemented. And also, there's not really such a thing as the accepted economic orthodoxy, either in academia or in the real world or in the financial world or in politics and ideology (as if those things weren't all intertwined) And if you take all of that vague interaction and squash it together and say behold, the accepted economic orthodoxy, you soon realise that it doesn't represent or model the real world.
This is kind of a sliding scale, with "there is no magic money tree" at one end and full MMT at the other. Recent years have proved that we're waaaay over >>>> that way towards MMT and away from the tree deniers, both in reality and in policy. But the orthodoxy isn't, it's almost as far in the other direction. So we have an economy that for 15 years has been kept afloat only by a raft made out of magic money trees but which simultaneously doesn't want to admit that they exist.
As the man says, the problem with QE is that it works in practice but doesn't work in theory. The rational takeaway from that is to admit that the theory is wrong. But, that's not happening. There's a strong argument that it can't happen, because in the end it's all just theory that we pretend works in practice and it's the pretending that actually matters. The modern economy is made entirely out of about 500 years of fictions and numbers in spreadsheets and if we admit that the patchwork of theory that we've built to explain it and support it and drive it doesn't work in practice, then the whole thing falls apart. So there's very strong motivations for people to try and shape reality to the theory, or more often to just deny that they don't meet.
Like ork technology, modern economics only works if you believe in it really hard.
So, yes MMT is quite far from the status quo and that's not changing in a hurry. But at the same time, that doesn't mean it's not true. It also doesn't mean that core concepts of it aren't being used right now, or that major players aren't increasingly accepting of it. It's just that if they admit to it- even in private- then the suspension of disbelief fails and the financial world breaks, and one of the consequences of all this is that the financial world is now more important than the real one, perhaps because the real world just keeps going by itself and you can see it out the window, while the financial world needs constant imagination and belief and effort just to stop it from popping like a bubble
I haven't suggested that any economic or monetary theory isn't complicated; if it wasn't, we would all be experts.
Ah, scrub that - this is STW.
Interesting take on theory v reality and a belief system.
Ah, sorry, I didn't mean to imply that! I just led with "it's complicated" since I was blowing up a single line into an essay.
I used to be a bit brutal about the whole "what we believe" vs "what we observe" and "what we say we believe" thing but a post of Brad Delong's made me rethink it all... I've enough economics to know that much of it is horseshit and my instinct is to reject it completely, but I hadn't really thought about what the impact of that much horseshit is.
Enough of anything in one place has gravity, even horseflops, and there's no use stamping my feet about the fact that we're trapped in orbit round a pile of shit like I used to do, the point is the orbit.
I can't remember exactly what Brad said, it was something like the church exists independently of the god.
I was only clarifying my position and didn't take any of your post personally.
If the markets don’t like it (and they don’t like defecit spending)
They love deficit spending! If it wasn't for deficit spending 'the markets' would be a lot smaller and a lot poorer. What the markets don't like is uncertainty and instability. Deficit spending is perfectly sustainable as long as the govt is up front about how much of it they will do, and what they're going to spend it on. If the markets think that's a good investment, as they did during the banks bailout and covid then they won't worry about it.
Well put Daz.
REDFIELDANDWILTONSTRATEGIES.COM There appears to be a Sunak bounce among Tory supporters :
Among 2019 Conservative voters, 49% approve of Rishi Sunak’s job performance as Prime Minister. Only 8% disapprove.
I find it disappointing to see the Labour lead over the Tories reduced from over 30% to now 17%, in the latest Redfield & Wilton poll.
But nevertheless the Labour lead is still significantly higher now than it was in the first couple of weeks of Liz Truss's premiership.
Ten days after Liz Truss became Prime Minister a Redfield & Wilton poll put the Labour lead at 8%, that changed dramatically after the mini budget.
Rishi Sunak hasn't yet done a great deal apart from showing a remarkable lack of judgement over the rehabilitation of a disgraced Cabinet Minister, and preforming a spectacular U-turn over the decision not to attend Cop27 climate summit, when he discovered that he would be upstaged by Boris Johnson.
It remains to be seen how Tory support fares after Sunak's "difficult decisions" are eventually revealed.
Surely if the Truss debacle taught us anything it is that it doesn’t matter how clever your economic theory is or how much you believe in it. If the markets don’t like it (and they don’t like defecit spending) then you are stuffed.
If the last 40 years have taught us anything it's that the markets don't always know best. And it is precisely this staunch belief that the markets always know best that has led to crises after crises.
The interesting aspect of the Truss debacle is the sweet irony of a Tory Prime Minister with an impressive faith in the free market seeing her premiership destroyed by the free market.
Been busy today… not caught any media… but an interest rate rise resulting in a fall in the pound is a very, very worrying sign.
As a market trader, you would surely prefer instability. You can make money on each trade, regardless of the outcome. In this way, instability means lots of trading, so potential to make more money.
Anyone can see this shit show developing, markets only bet on two things..
1. Safe bets the £1 in £1.25 out but they bet big.
2. Unsafe bets the £1 in £1 million out but they only bet small amounts - money they can afford to loose.
Our economy appears to offer nether bet.
This is going to be a long drawn out process.. again.
However the employment market will fix itself, housing will become more affordable (for fewer people) wages will drop further (this is going to be very painful and bring real hardship particularly to the redwalls) Osborne and Thatcher may feel like the good old days
As a market trader, you would surely prefer instability.
Bull Market vs. Bear Market innit.
The interesting aspect of the Truss debacle is the sweet irony of a Tory Prime Minister with an impressive faith in the free market seeing her premiership destroyed by the free market
Neither Truss nor Kwatang had the remotest understanding of how this stuff actually works. They had their own Fisher Price version because economically they’re like toddlers. Tax cuts = economic growth. Simple
Well… no
‘The Markets’ soon showed them the cold harsh reality of that bollocks
No, a Bull market is where prices are rising. Bear markets; falling.
Tax cuts = economic growth. Simple
Well… no
Tax cuts can result in growth.
Tory Chancellors Reginald Maudling's tax cuts did result in growth in 1963-64, as did Anthony Barber's tax cuts result in growth in 1972-7, and Nigel Lawson's tax cuts growth in 1986-88.
The problem however is that the booms they all three created were followed by severe economic crisis.
Edit: And didn't Ronald Reagan also achieve significant growth through tax cuts, albeit with also massive defense spending, also a KK/Truss aim?
Bear markets; falling.
And are bear markets not highly volatile?
Tax cuts can result in growth
Not when they’re exclusively benefit the rich and are paid for by borrowing, Tory Boy
Maybe. Could fall slowly and steadily. Instability would suggest prices go up, down, down again, up a bit. One commodity goes up, a related one goes down but no one knows why...
Tory Boy
Is that how you see it - if someone points out historical facts they must be a "Tory Boy"?
GDP grew over one-third during Reagan's presidency, Federal debt held by the public nearly tripled, from $738 billion to $2.1 trillion. This led to the U.S. moving from the world's largest international creditor to the world's largest debtor nation.
You don't think that Reagan's tax cuts were exclusively for the benefit of the rich?
The dire negative consequences of Reaganomics was to come much later, but it did indisputably result in growth.
Same with Maudling’s dash for growth, Barber’s boom, and Lawson's boom, all led by tax cuts, all led to growth, but none were sustainable. Ultimately they all resulted, as I pointed out, in "severe economic crisis".
But you think that proper "anti-tories" deny historical facts.
Edit: Gordon Brown's mantra "no return to boom and bust" was in reference to the Tories boom and bust cycles. Do you think that Gordon Brown was a bit of a "Tory Boy" for accepting that booms occurred under Tory governments?
"Tax cuts can result in growth"
Trickle down economics eh...never worked in the past but these days it's not even trickle down, the ever increasing super rich tend to just sit on humongous piles or squirrel it away offshore.
I wonder what percentage of global wealth is completely separated from economic activity.
The dire negative consequences of Reaganomics was to come much later, but it did indisputably result in growth.
No it did not do so "indisputably". The question of whether it was just the cycle of economy vs the republicans policies is still a highly debated area and one without a easy answer.
Edit: Gordon Brown’s mantra “no return to boom and bust” was in reference to the Tories boom and bust cycles.
Again no. He was referring to a general pattern beyond the UK and tories. He was wrong but it was a common idea for the centrist ideologues that they had solved everything and now it would all be happy. See Fukuyama and the end of history for a particularly nutty take on the idea.
Ah the unelected Oligarch,gotta like a bit of Monbiot.
Surely if the Truss debacle taught us anything it is that it doesn’t matter how clever your economic theory is or how much you believe in it. If the markets don’t like it (and they don’t like defecit spending) then you are stuffed.
Not at all - simply put the markets can be controlled by government / BoE - especially the bond markets. Let's not confuse primary and secondary markets here either.
Government sets the price for a start.
Just because governments claim they don't tinker doesn't mean they can't like a whole host of other neoliberal 'hands-offs.'
BoE simply bought up 65Bn worth of bonds. A normal process.
Remember, all this stuff is political choice. We have been conditioned to accept it works one way when it could simply work another. And very much could work for the larger part of society. The spanner in the works was simply selling off the state to make it appear we were getting wealthy. This drives the illusion.
Q/E shows us the around the houses approach of the pretence that governments don't fund spending. They clearly do. The Tories will stop at nothing the make it appear the private sector funds the state.
A few years ago even the most moderate voter would probably accept trickle-down as an economic benefit - now look!
We absolutely shouldn't let markets dictate policy - With the Truss situation if the roles were reversed and we were trying to make progressive spending - and the markets reacted the same - and then the government backtracked - would thay be democratic or equitable?
We shouldn't be shooting for calming the neoliberal structure - it should be dismantled and replaced where it doesn't serve us.
Bill Mitchell:
So not a case of the bond markets “beating up” MMT, but rather a case of the currency issing capacity of the government to control yields if it so chooses, a core MMT proposition.
The Bank of England’s bond purchases also caught the short selling vultures who, knowing the pension funds were in trouble and needed to liquidate quickly, were speculating that bond prices would fall even further and their short selling positions would generate profits.
Their speculative hope is that the on-going panic and liquidation of bond holdings of the pension funds to get cash drives the spot price of the bonds in the secondary market down so that they could meet their short sale contracts by buying a price below the initial price agreed in the contract.
The Bank of England squeezed those speculators and forced them to quickly cover their exposures which further drove up bond prices and drove down yields.
One of the related problems is that pension funds are managed according to the greed principle rather than to exclusively ensure liabilities can be met.
The latter goal is relatively simple – just invest in risk-free assets that deliver a known principle at a known maturity.
So if you need $30 billion in 20 years time, the easiest way to guarantee you will have it is to buy a 20-year bond that has a face value of $30 billion.
Then whatever happens to bond prices in the secondary market is irrelevant – the pension fund just cashes in the bond in 20-years and gets the required cash.
But pension fund managers get greedy (probably because they devise salary packages that benefit from higher returns) and so they use these interest-rate swap arrangements that allow them to use the fund’ cash to pursue returns in more risky assets – like shares.
The financial market players who devise all these tricky and dangerous derivative products then prey on the greed of the pension fund managers to flog them products that seemingly will deliver massive returns.
Full article
Typo. 65Bn was ear-marked.
(should be purchased up to 65bn worth of bonds. Don't think they made that target in the end. Due to Q/T.)
Oh, excellent. Northern levelling up rail is going to be cancelled. But it doesn't really matter because I thought all we were getting was buses anyway. As long as the buses aren't electric.
BBC.CO.UK Level the North
Strong three word slogan.
With the Truss situation if the roles were reversed and we were trying to make progressive spending – and the markets reacted the same – and then the government backtracked – would thay be democratic or equitable?
No, but I suspect it would happen. It would appear that no government can survive if they lose the confidence of the markets. Not saying that’s a good thing, but it does seem to be the case. Economic theories are great until they crash into political realities.
I don’t have anything against MMT by the way. I view it a bit like quantum mechanics. Quite complicated, explains things that can’t be explained by other theories, but doesn’t explain everything.
Oh, excellent. Northern levelling up rail is going to be cancelled. But it doesn’t really matter because I thought all we were getting was buses anyway. As long as the buses aren’t electric.
I don't think anyone actually expected it to get built though did they?
No. No one that’s been paying attention. One of the reasons Tory support in North of England seats they gained in 2019 has fallen away. You have to have your head in a bag to still think that Northern infrastructure is really a priority for them. Level the North.
Again no. He was referring to a general pattern beyond the UK and tories.
So no short-lived booms occurred under Reginald Maudling, Anthony Barber, and Nigel Lawson, tenures as Tory Chancellors of the Exchequer following their tax cuts, which then resulted in the economy going bust?
Only a Tory would claim that the UK economy has ever experienced a boom under a Tory government?
When I use terms such as "indisputably" I am of course expressing my personal opinion. For example it is an indisputable fact that the UK has just experienced a novel coronavirus pandemic. However some people would dispute that, including on here.
The last week in Britain demonstrates key MMT propositions
But what about Zimbabwe (etc)? 😀
ohh are we sending people there now 🙂
The government has just come out and said that they’re definitely not scrapping the nuclear energy programme. It is just ‘under review’
So they’re definitely scrapping the nuclear energy programmer then
It’s a good job we’ve a cheap and plentiful supply of gas so that nuclear power wouldn’t have been required anyway
Oh…
"It’s a good job we’ve a cheap and plentiful supply of gas"
Plenty of hot air.
