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October 06, 2009

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chrisg

That seems a bit unfair on the Tories! There's not much poor bashing in their specific proposals, is there? If so I quake to think what the Lib Dems would do given Vince Cable has called their proposals 'Lib Dem Lite'.

Also, the proposals seem designed to kick in in 2011 at the earliest (the pensions change won't have an impact until much later), so not particularly quickly. If the UK economy is still up sh** creek come 2011, we can hope the Tories would delay their fiscal retrenchment.

For all their many faults, the Tories have been pretty consistent over time in their view that the current government ran too high a structural fiscal deficit ('they didn't mend the roof while the sun shined'). Unless you disagree with that view it seems fair for them to be coming up with more or less sensible and equitable ways of trimming that deficit back over time.

The Great Simpleton

Serious question: Have they already priced in a Tory victory?

Guido Fawkes

Chris, would you rather be long or short of gilts?

Yields are low soley because of QE bond buying. This is not sustainable economics.

chris

Guido - I'm a passive investor. If anything, I'd expect yields to rise over the longer-term. This isn't just because QE will end (QE is only a minor cause of low yields), but because the global economic upturn could raise yields around the world.
Had Osborne said: "there's a danger that investors will lose confidence in gilts. To prevent this, we need contingency plans to cut the deficit", I'd have no problem.
But to pretend that markets are worrying about the deficit now is plain wrong.

Alistair Darling

So am I okay to keep borrowing large sums then?

Alen Mattich

Chris,

If investors are so sanguine about government finances (not just in the UK, by the way) and bonds are warning about low growth, then why are other markets - equities, corporate bonds, commodities - signalling the exact opposite, including an added dose of high inflation. I suspect the distortions caused by QE are considerably greater than you credit. As someone pointed out recently, central banks don't just control official interest rates any more, they control all interest rates. The only thing they can't control in flexible currency regimes are relative exchange rates. And here sterling has taken a beating.

Alex

"Serious question: Have they already priced in a Tory victory?"

Gilts up - Jock McBottler's ZaNuLiebour and the EUSSR are bankrupting the country!

Gilts down - It's because they're looking forward to a Tory future.

Unfalsifiable, and therefore worthless.

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