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September 27, 2022



«"Never mind the public finances. Look after the economy and the deficit will look after itself."»

IIRC that was about wages, rather than "the economy", which in contemporary terms means "investors". The rationale is that most taxes come from wages.

«And for yet another, high demand now is less likely to lead to a big influx of migrant labour»

Looking at the recent past, in 2021 (absolute) immigration was the highest for several decades, at around 1m immigrants in one year, mostly from poor Africa and Asia countries (but also 200,000-300,000 relatively affluent immigrants came from Hong-Kong many to become landlords). The tonic effect on house prices and rents has been marvellous.

While most immigrants were poor, many were skilled, so around 60% of new medical doctors were immigrants, also because the government does not want to fund expensive medicine degrees, prefers for UK doctors to be trained at the expense of foreign taxpayers.


«It's likely, therefore, that a fiscal stimulus today will be more inflationary»

I find it very strange that so many authors have been commenting on fiscal policy when monetary/credit policy is even more exceptionally expansionary than usual: with RPI at 12% (for now), the BoE rate is just 2.25%, and typical mortgage rate are at 4-5%, that is real interest rates are deeply negative, signaling the markets that the BoE is more determined than ever to push up asset prices, in particular property (Truss/Kwarteng have cut in half again stamp duty).

Even the fall in the pound is easier to attribute to deeply negative real interest rates than to higher deficits. Anybody who can is dumping the pound, also because how inflation is cutting the real value of debt by 12% per year (so far); cash-is-trash, and anybody who can is borrowing as much as they can grasp to buy assets, like property, that are expected to increase in valuation faster than inflation.


For those more interested in understanding why a government of extremist libertarians is instead heavily intervening in the markets with massive price subsidies, huge tax cuts, and extremely expansive credit policy:

“Truss’s conversion to action on energy prices is not motivated by a sudden concern for poverty or the needs of ordinary people. I learnt of it on Sunday night, before her U turn was briefed, from senior Foreign Office (FCDO) sources. Government polling has indicated a substantial fall in public support for NATO’s proxy war in Ukraine, due to unsustainable energy prices at home.”

Trebles all round (for tory voters), the "home front morale" must be kept high.


There's also the question of how more 'permanent' jobs are affecting the market.
We can talk lots about retail/hospitality/care workers/customer service or whatever, where things like zero-hour-contracts may be the norm and the Chancellor likes to ask why folk working 15-hours a week don't do more (without listening to the actual answer, mind.)
But what about the full-time professional jobs? If we are close to full employment there then how is the job market handling that? (For reference, this is both a rhetorical question and also, I don't know. But I think that the renewed focus on immigration is clearly a part of it.)


"Never mind the public finances. Look after the economy and the deficit will look after itself."


"Look after the unemployment and the Budget will look after itself.
radio broadcast, 4 January 1933, in Listener 11 January 1933"

Ah the original quotation was about "unemployment", as the given link to "rortybomb" quotes.

The same logic appears in "The General Theory": that as long as the wages are doing well, taxes will be plentiful and welfare costs will be small.


"There's a big difference between the 2010s and now."

A very major difference is that the the US is not flooding global markets with dollar liquidity. Those days are over. Countries who have external deficits and are dependent on international capital markets for funding are the most exposed to this returned reality.

(The exception is the US which is the world's reserve and safe haven currency. Yes Sterling is an official reserve currency (one of six) but it is not in quite the same league.)

There has been a lot of American eccentric theories thrown around (Market Monetarism, New Keynesianism and its ZIRB) that have ignored the balance of payments constraint. The linkage between the trade deficit and government deficit is subtle and nuanced, but in the UK's case is as we have just seen, obviously there.

"The message of financial markets is that there's a limit to unfunded spending and unfunded tax cuts"(Mark Carney, today).

In other words, the UK economy is not completely unlike a household. That will be news for some. And also news for some: the UK is exposed even though it issues debt in its own currency. The emergency measures the BOE has been forced into to prop up the bond market are actually inflationary when we have an inflation problem and pressures on Sterling.



Government polling has indicated a substantial fall in public support for NATO’s proxy war in Ukraine, due to unsustainable energy prices at home.”

I think people also are not entirely convinced by the warmongering. There seems to be very little effort made into trying to find a peaceful solution and people would suspect that this government would be cynical enough to use the war in Ukraine to suit their own ends.


I said "American eccentric" above, should read "American-centric".


Unfortunately there is a paywall on this, but I am sure it would be very funny:




But that is indeed quite correct, high inflation with much lower interest rates is "sound economics" indeed:

* Pursued for a couple of year it reduces the real burden of wages by 20-30%, making them much more competitive, especially if the exchange rates falls too, at the same time that it greatly increases margins too.

* It reduces the real burden of mortgages by the same 20-30%, and with real interest rates of nearly -8%, it means that it is possible to buy on deeply negative real rates property where prices and rents are rising by 3% in real terms, and the falling pound is going to stimulate purchases of english property from those with ample availability of funds abroad.

No surprise that the "Telegraph" calls that "sound economics", for their "our own", tory voters, it is pretty good.

«but I am sure it would be very funny»

The "Telegraph" and their readers have just a notion of "our own" that is is likely different from yours.

I cannot see anything funny or illegitimate about that: for most of the people in the UK that are not part of the notion of "our own" of the typical reader of the "Telegraph", around 99% of people, those outside these islands, are not "our own"; their instinctive notion of "our own" is just a differently defined group from that of readers of the "Telegraph".

As it clear when they claim that free health care, low cost social housing, well paying jobs, generous social insurance and good public services are a human right (but only for that "our own" that excludes 99% of humanity).



As to the "terrible communication":

* The right-wing globalist "whigs", who want to take back control of the Conservative Party (having already taken over the New, New Labour Party), have eliminated nationalist "kipper" Johnson thanks to control of most media speaking to Conservative voters.

* They are now running a similar campaign using the same media against nationalist "kipper" Truss, which would not have happened if nationalist "kipper" Conservative association member had chosen globalist "whig" Sunak as leader.

I guess that the globalist "whig" factions of "The Establishment" is even prepared to throw the elections to New, New Labour to take back the Conservative Party, just as the globalist "whig" faction of Labour tried worked to throw the 2019 election to the Conservatives take back the Labour Party.


Government polling has indicated a substantial fall in public support for NATO’s proxy war in Ukraine...

[ Is there any meaningful public advocacy for negotiation? Would there be any Labour MP who would advocate negotiation? ]



September 30, 2022

‘You Can Feel the Fear’: U.K. Borrowers Face Up to a Broken Mortgage Market
The financial turmoil in Britain has led to soaring interest rates, prompting many lenders to withdraw products and stoking worry among homeowners about rising costs.
By Isabella Kwai


September 30, 2022

Sleepy Corner of U.K.’s Pension Industry Forced the Bank of England’s Hand
Complex financial instruments that pension funds use to minimize the impact of interest rate changes led to the bond market rout.
By Joe Rennison

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