Markets will continue to turn against the government if it remains in denial
Tej Parikh.
In less than a week, Chancellor Kwasi Kwarteng’s cavalier “mini” Budget has sent UK markets into a tailspin. The equally demoralising government reaction to the fallout means the reputation of the country will take a further beating. Excuses have been coming thick and fast, with alibis that range from half-truths to downright economic nonsense. This is a government in denial, and unlikely to go back to the drawing board — however critical that may be for the economy. It is not a good look.
A hitherto Awol Liz Truss resurfaced in radio interviews on Thursday morning only to double down on Kwarteng’s historic tax-cutting agenda. She attributed the market turmoil to the war in Ukraine and global factors. There is only a morsel of truth to this. The conflict has indeed driven a surge in energy prices which has stoked inflation and pushed interest rates higher. The US dollar’s safe haven status, and speedy rate hikes by the Fed Reserve, has meanwhile seen the dollar appreciate strongly against global currencies.
Yet, that is as far as the reasoning goes. Global factors may have helped set the scene for this week’s financial maelstrom but they are far from the driving factor. Above all, the market volatility was a damning reaction to the scale of Friday’s unfunded spendthrift announcements. Gilt yields surged as investors began pricing in higher terminal Bank of England rates, after Kwarteng unveiled his inflationary policies. The sharp fall in the pound against the dollar on Monday meanwhile reflected concerns over the fiscal and economic outlook. Truss’s own external economics adviser, Gerard Lyons, said the chancellor “overstepped the mark”.
A hapless Chris Philp, chief secretary to the Treasury, has also been parachuted in to defend the chancellor’s plans. Speaking on the radio this morning he drew odd comparisons between yesterday’s BoE bailout and Japan’s recent currency market intervention, as a sign that policymakers everywhere are taking extraordinary actions amid global forces.
The parallels are completely misguided. While the strength in the dollar has undoubtedly been part of the story, weakness in the yen is being driven by the Bank of Japan’s resolutely ultra-loose monetary policy, which is what ultimately led to interventions to temporarily support the currency.
Moreover, the BoJ’s wider bond-buying operations reflect its desire to stoke price pressures with annual inflation only at 3 per cent in Japan. Britain’s inflation is running at over three times that, and the BoE’s plan to begin purchasing long-dated gilts was a forced emergency measure to stop pension markets from falling down.
The market will continue to turn against the UK government if it remains in denial. It must accept the reality that this is a crisis of its own making.
The whole world’s knows that, except hard-core tory voters that will always vote tory no matter what
Obviously the Financial Times can be ignored since it is well known snake pit of left wing activists, woke campaigners and communists
*Forward with the 2022 Growth Plan!*
No idea. No plan. No clue. I wouldn’t invest in GB plc either.
They’re Tory-inflicted.
We get what we fucking deserve
No, the troubles are inflicted by tories and brexit voters on the rest of us.
THEY are not US.
When even the FT thinks your “business friendly” plan is a steaming pile of shit, maybe it’s time for some self-reflection?
Nah, who am I kidding, it’ll be more of the same and full steam ahead.
Leaked memo shows they are telling their mps to claim it’s a global issue, the plan is responsible and is also due to ukraine. When one lie isn’t enough, do three…
I never thought I would see the Financial Times, Economist, and Bloomberg all rallying against the Tories in a demeaning, critical fashion, whom their party supposedly selfishly represents, but here we go… The papers of the financial elite, professionals and experts they ardently admire, are absolutely condemning them. It begs to reason, then – who are they in cahoots with? Where are they serving?
Maybe this, however, simply reveals the level of their destructive ineptitude – it practically benefits nobody of any class. It’s wishful thinking, too, to think there’s some corrupt strategy for disaster capitalists and it’s not not mere incompetence defended in a resolute arrogance…
They are not “self inflicted”. They are “Tory Inflicted”.
Less “self-inflicted” and more “internally inflicted”
Ie inflicted on us by the political eliete for their own ends.
Everyone knows this. Well, except the media and the ultra right wing.
13 comments
Markets will continue to turn against the government if it remains in denial
Tej Parikh.
In less than a week, Chancellor Kwasi Kwarteng’s cavalier “mini” Budget has sent UK markets into a tailspin. The equally demoralising government reaction to the fallout means the reputation of the country will take a further beating. Excuses have been coming thick and fast, with alibis that range from half-truths to downright economic nonsense. This is a government in denial, and unlikely to go back to the drawing board — however critical that may be for the economy. It is not a good look.
A hitherto Awol Liz Truss resurfaced in radio interviews on Thursday morning only to double down on Kwarteng’s historic tax-cutting agenda. She attributed the market turmoil to the war in Ukraine and global factors. There is only a morsel of truth to this. The conflict has indeed driven a surge in energy prices which has stoked inflation and pushed interest rates higher. The US dollar’s safe haven status, and speedy rate hikes by the Fed Reserve, has meanwhile seen the dollar appreciate strongly against global currencies.
Yet, that is as far as the reasoning goes. Global factors may have helped set the scene for this week’s financial maelstrom but they are far from the driving factor. Above all, the market volatility was a damning reaction to the scale of Friday’s unfunded spendthrift announcements. Gilt yields surged as investors began pricing in higher terminal Bank of England rates, after Kwarteng unveiled his inflationary policies. The sharp fall in the pound against the dollar on Monday meanwhile reflected concerns over the fiscal and economic outlook. Truss’s own external economics adviser, Gerard Lyons, said the chancellor “overstepped the mark”.
A hapless Chris Philp, chief secretary to the Treasury, has also been parachuted in to defend the chancellor’s plans. Speaking on the radio this morning he drew odd comparisons between yesterday’s BoE bailout and Japan’s recent currency market intervention, as a sign that policymakers everywhere are taking extraordinary actions amid global forces.
The parallels are completely misguided. While the strength in the dollar has undoubtedly been part of the story, weakness in the yen is being driven by the Bank of Japan’s resolutely ultra-loose monetary policy, which is what ultimately led to interventions to temporarily support the currency.
Moreover, the BoJ’s wider bond-buying operations reflect its desire to stoke price pressures with annual inflation only at 3 per cent in Japan. Britain’s inflation is running at over three times that, and the BoE’s plan to begin purchasing long-dated gilts was a forced emergency measure to stop pension markets from falling down.
The market will continue to turn against the UK government if it remains in denial. It must accept the reality that this is a crisis of its own making.
The whole world’s knows that, except hard-core tory voters that will always vote tory no matter what
Obviously the Financial Times can be ignored since it is well known snake pit of left wing activists, woke campaigners and communists
*Forward with the 2022 Growth Plan!*
No idea. No plan. No clue. I wouldn’t invest in GB plc either.
They’re Tory-inflicted.
We get what we fucking deserve
No, the troubles are inflicted by tories and brexit voters on the rest of us.
THEY are not US.
When even the FT thinks your “business friendly” plan is a steaming pile of shit, maybe it’s time for some self-reflection?
Nah, who am I kidding, it’ll be more of the same and full steam ahead.
Leaked memo shows they are telling their mps to claim it’s a global issue, the plan is responsible and is also due to ukraine. When one lie isn’t enough, do three…
I never thought I would see the Financial Times, Economist, and Bloomberg all rallying against the Tories in a demeaning, critical fashion, whom their party supposedly selfishly represents, but here we go… The papers of the financial elite, professionals and experts they ardently admire, are absolutely condemning them. It begs to reason, then – who are they in cahoots with? Where are they serving?
Maybe this, however, simply reveals the level of their destructive ineptitude – it practically benefits nobody of any class. It’s wishful thinking, too, to think there’s some corrupt strategy for disaster capitalists and it’s not not mere incompetence defended in a resolute arrogance…
They are not “self inflicted”. They are “Tory Inflicted”.
Less “self-inflicted” and more “internally inflicted”
Ie inflicted on us by the political eliete for their own ends.
Everyone knows this. Well, except the media and the ultra right wing.