Should we trust Sunak or the next PM to fix the Country's problems? (title revised 24/10/22)

[theoldrouge]

Received this morning a regular update I receive from an fx trading desk

 

 

The UK continues to act like a totally normal economy – not! 

  

Gilts are now being described by market participants as “untradeable”, after an incredibly messy open on Wednesday morning, while we have Chancellor Kwarteng reportedly meeting bankers and “asking them not to bet against the pound” (I wish I was making this up!).

  

Having to ask traders nicely not to do something is hardly a reassuring sign. It also, almost certainly, ensures that said traders will do exactly the opposite, likely upping their short positions against the quid. 

  

And, who can blame them? The dollar continues to march higher, risk appetite remains incredibly fragile, and the UK’s ballooning twin deficit problem can only be resolved through a weaker currency. Cable at, or below, parity remains my base case before the year is out.

I’ve harped on enough about the pound recently, though, I do need to mention one more thing on the UK this morning. That is the fact that ‘Yield Curve Control’ appears to have arrived on these shores, with the Bank of England having pledged, via an emergency announcement, to resume long-end gilt purchases at an “urgent pace” in order to restore “orderly market conditions”, amid warnings that continued volatility would pose a "material risk to financial stability”. 

  

The announcement had the desired effect, seeing 10-year gilts rally by around 30bps, and 30-years rally by over 100bps. However, this came at the expense of another >1% fall in the value of the quid.

There’s a couple of important implications here. Firstly, the MPC are now engaged in a game with financial markets; markets which, inevitably, will now want them to do more and more in terms of intervention, and which now price >175bps of hikes between now and the November meeting. An inter-meeting hike now seems like something the 'Old Lady’ will almost inevitably be forced into.

 

Secondly, we are now in a situation where the two primary monetary policy levers in the UK are being pulled in opposite directions. Via rate hikes, the BoE are tightening financial conditions, in an attempt to bring inflation under some semblance of control. Meanwhile, in recommencing bond purchases, we will see the balance sheet expand rather significantly once more.

[tobyjugg2]

it was interesting watching dedwood misrepresent what has been happening

He was claiming it was all the BoE's fault and that the BoE caused it by selling 'bonds into a crashing market.

- which was and is Complete Horsesh*t, with capitals.

 

The BoE was selling bonds to support the pound into a crashing market caused by Truss and Kwack as pension funds were among the first hit - and severely.

No it wasn't an ideal market to sell government bonds into - but they had little choice - as defined by ALL the financial authorities, from the IMF down, with the exception of Redwood and Kwack.

The bond price (cost) had soared to 5% BEFORE the BoE intervened to stabalise it.

 

 

and as predicted here, Kwazi the Kwack is doubling down ...

 

"Chancellor Kwasi Kwarteng has insisted that he is “sticking with” his mini-Budget, also dubbed the “right plan” by prime minister Liz Truss – despite it spooking markets and forcing an emergency Bank of England intervention."

 

 

Kwarteng ‘sticking with’ unpopular mini-Budget – latest

WWW.INDEPENDENT.CO.UK

---

UK Economic Crisis - live updates

 

 

I wont bother linking the many many sources of the real facts as pretty much every news and financial service across the planet  is detailing them.

[tobyjugg2]

and Truss on Fracking from Graham Liver at Radio Lancashire interview

 

"After she (Truss) had stuttered her way through not being able to explain what a new “local consent” mechanism would involve,

he (Graham Oliver) told her:  “Our local MPs don’t want it. All Conservative. In the past the county council have said they didn’t want it. Yet your government overturned it. The science hasn’t changed. Why can’t you tell us this morning there won’t be a return to fracking in Lancashire.”

 

The reply from Truss?

“I don’t accept the premise of your question.”

 

 

Edited September 29, 2022 by tobyjugg2

[honeybee13]

Secondly, we are now in a situation where the two primary monetary policy levers in the UK are being pulled in opposite directions.

 

Other people have made the same point. The Bank are there to control inflation and it's thought that the 'growth package' will increase it.

[tobyjugg2]

On a dark lighter note for a moment - you gotta larf or you'd scream and go on a rampage

 

"That was the worst provincial campaign of any of our leaders since autumn 1216 when King John marched about dealing with a rebellion & two invasions, caught dysentery in Norfolk, lost the Crown Jewels in The Wash and died in Nottinghamshire"

 

- Dan Snow

 

 

Back to reality (one hopes) .. Even with the buffer of a couple of years before a GE

- I really can't see even the pitiful remnants of the Tory party allowing this to continue ...

 

[tobyjugg2]

On the reporting of this, I have found it quite interesting that

 

Sky has as i watched it offered a relatively 'balanced view describing the stated albeit unsupported claims of truss and Kwack alongside high quality experts stating what they see as the realities of the utter wrongness of the actions and claims

 

BBC has shown brief articles with a balancedish view with the unsupported Truss/Kwack claims and countered by brief but entirely supported counter claims, BUT then had the rolling tickers which are constantly rolling the unsupported dog whistle 'quotes' from Truss and Kwack with absolutely zero balance.

 

International news services state that the claims of Truss and Kwack are unsupported and fly in the face of all sense and system, and support that with the expert opinions and detail.

 

 

The BBC may still be somewhat more credible (IMO) regarding reporting UK gov action than is RT on reporting Putins actions, but that really isnt saying much.

 

 

Edited September 29, 2022 by tobyjugg2

[tobyjugg2]

As truss and Kwasi apparently try to strong arm the OBR ...

... after the BoE had to launch a £65B rescue of the economy after Truss' debt funded multi billion gifts to the Energy companies and the Uk's richest .... drove up the cost of that debt and a chunk of other debt markedly

 

In latest yougov poll just 37% of 2019 Tory voters said they would now vote for the Conservatives.

Veteran Tory MP Sir Charles Walker said if the poll lead was repeated at an election, the Conservatives will “cease to exist as a political party”.

 

Other estimates based on the poll translating into election results would put the Tory party with around 50 seats.

Edited September 29, 2022 by tobyjugg2

[unclebulgaria67]

There is talk that so many senior Tories will give the party conference a miss, that it won't go ahead.

 

And the amount of criticism from so many different former senior politicians and respected journalists might be difficult to ignore.

 

 

[honeybee13]

Andrew Marr was right that they should have been out there reassuring the markets but after yesterday's car crash with local radio, some people are saying maybe Truss should have kept quiet after all. Wee Nicola is one.

 

I don't remember a party conference being boycotted before. Could the temptation be to carry on for the party faithful and members and hope that nobody outspoken turns up to ask difficult questions?

[honeybee13]

UB, I think the jury's out, to coin a phrase, on your thread title.  

 

So she and KK are meeting the chairman of the OBR which has called them out on saying a forecast couldn't have been made available for last Friday. At least one journo is saying they didn't want any negative - realistic? - views of their pet project.

 

I wonder if they think they can talk the OBR round to their way of thinking?

 

 

 

[honeybee13]

Simon Nixon in the Times on restoring confidence.

 

'Yet there is no guarantee that the government will succeed in resolving the governance crisis. This undermining of institutions is best understood as part of a six-year, Brexit-driven flight from reality in which any individual or institution that provides unwelcome advice is dismissed as part of some giant left-wing, woke Remoaner plot, a conspiracy that now apparently includes the world’s dealing desks. Kwarteng’s budgetary gamble was driven by an urgent need to demonstrate some economic benefit from a Brexit that so far has led only to slower growth, weaker public finances and higher taxes.'

archive.ph

ARCHIVE.PH

 

[tobyjugg2]

Corrected headline and the link

 

UK minister says government will work ON OBR economic forecasts

"want them to have the right level of detail"

.. 'plebs cant be trusted with undoctored forecast'

 

UK minister says government will work with OBR on economic forecasts

WWW.REUTERS.COM

---

Britain's City minister Andrew Griffith said on Friday that Prime Minister Liz Truss and finance minister Kwasi Kwarteng would meet the independent...

 

Edited September 30, 2022 by tobyjugg2

[honeybee13]

I can't access the article atm, TJ.

 

Are you saying they want to massage the detail, perhaps?

[tobyjugg2]

Yes

Andrew Griffith seems to be the front man (potential sacrificial lamb for a chunk of the flak) to be thrown under the bus of the Truss/Kwacky carry on regardless team.

 

Google him with day time limit on search

 

Hers a good brief one

 

UK minister says that government will work with OBR on economic forecasts | Forexlive

WWW.FOREXLIVE.COM

---

Remarks by Britain's City minister, Andrew Griffith

 

Edited September 30, 2022 by tobyjugg2

[tobyjugg2]

1 hour ago, honeybee13 said:

'Yet there is no guarantee that the government will succeed in resolving the governance crisis.

 

Not when they are sending their handful of remaining (sic) shills out saying the BoE caused the crisis and its settling now,

rather than the reality (as stated all over the market sites) that the BoE pumping £65B in to calm the markets is what is actually preventing a total collapse that would make the last financial collapse and the ERM debacle seem a minor annoyance.

 

Lie and obfuscate through it - the now clearly standard populist policy

 

so for starters add a further $65 billion to the cost of that fiscal event,

- although in reality - that BoE intervention has probably already paid for itself in UK financial crash prevention - unlike most if not all of the rest (the possible exception support for energy bills of the not 1% although even that should have been funded by a windfall tax on energy co profits)

Edited September 30, 2022 by tobyjugg2

[honeybee13]

My concern is for the gilt market after 14th October when the BoE gets through the £65bn. Will the markets have been reassured by then?

[tobyjugg2]

Although the further future gilts etc seem to be showing signs of recovery - undoubtedly on the basis of Truss and her Quack gone, no doubt the diabolic duo will try to claim it

 

So, do we think that kwack will try to blame the problems on the matrkets not liking giving support to the little people,

rather than it being mostly everything but, plus the way the giving was entirely based on borrowing to give to the rich and effectively billing the little folk?

I think its very possible.

Edited September 30, 2022 by tobyjugg2

[honeybee13]

They're trying to blame everyone but themselves. Someone pointed out that we just passed from blaming the last Labour government to blaming the next one.

[tobyjugg2]

and they blamed the BoE who actually dragged their asses out of a furnace

they've even blamed a remainer conspiracy

 

Everything except the real causes - their own incompetence, rank policies and rampant idiotology

 

 

Latest

 

Treasury will not publish OBR forecast delivered to them on 7 October until 23 November

The Treasury said that Liz Truss, Kwasi Kwarteng and the OBR discussed the “economic and fiscal outlook” as well as the process for growth forecasts.

However, they said the forecast – which they will receive on 7 October – won’t be published until 23 November. The government also said it “values” the OBR’s scrutiny.

The official readout from the Treasury said:

• This morning the prime minister, Liz Truss, and chancellor, Kwasi Kwarteng, met with the OBR’s budget responsibility committee, including the chair, Richard Hughes, at No 10 Downing Street.

• They discussed the process for the upcoming economic and fiscal forecast, which will be published on 23 November, and the economic and fiscal outlook.

• They agreed, as is usual, to work closely together throughout the forecast process and beyond.

• The prime minister and chancellor reaffirmed their commitment to the independent OBR and made clear that they value its scrutiny.

 

 

 

I foresee a leak appearing in their plans ...

 

It is of course just a pitiful transparent attempt to kick the severe problems being further confirmed into the longest grass they can .. which aint far - and likely wont reach even that far.

Edited September 30, 2022 by tobyjugg2

[tobyjugg2]

 

 

Why is anyone astonished?

 

Astonishment as fracking companies may be placed in charge of testing public support

WWW.INDEPENDENT.CO.UK

---

Firms like Cuadrilla could be asked to show they have local consent for causing earthquakes - but residents sceptical they would be entirely...

 

[tobyjugg2]

So, Truss' fiscal event, of which about half of 50 billion  will be given to the Richest 5% in the country,

and about a hundred billion given to the profits of the energy companies,

and which has already cost the BoE about £65b just to prevent a crash in markets and pension funds ...

... will keep on taking with a trip back into deepest austerity for everyone else in the uk with 37-46B in cuts required every year ...

'Starving the Beast' as the yanks call it.

 

Almost £50bn of cuts needed to fund tax breaks for rich, experts warn

WWW.INDEPENDENT.CO.UK

---

Huge ‘unforced error’ set to push Britain back to George Osborne-era cuts, says think tank

 

[honeybee13]

Depressing stuff, TJ.

 

Here's some more, Truss is pushing ahead with investment zones despite concerns over costs. It sounds to me as if it could reduce the overall tax take just when the UK needs more.

 

They seem to be in an awful hurry to bring in all these policies.

 

Liz Truss to push ahead with unlimited ‘investment zones’ despite costs row | Economic policy | The Guardian

WWW.THEGUARDIAN.COM

---

Exclusive: Concerns about not capping number of areas allowed to get favourable tax and planning treatment

 

[tobyjugg2]

and the Torys are unlikely to get rid any time soon and confirm what prats they are unless Johnson wheedles it somehow to get himself back (which actually seems most likely change),

 

and also seems unlikely we'll get a general election unless she really is a stupid and deluded as she seems.

as the Torys dont want to lose their seats - and with that their second and third main incomes

[tobyjugg2]

• OBR confirms Chancellor refused to publish its forecast – Daily Express
• Kwarteng’s ex-boss bet big on falling pound weeks after lunch with him – The Times
• Welfare payments to fall in real terms – Daily Telegraph
• Spectre of return to austerity raises alarm in Whitehall – FT

reported in conservativehome

 

Newslinks for Friday 30th September 2022 | Conservative Home

CONSERVATIVEHOME.COM

---

Labour surges to 33-point poll lead over Tories in wake of market turmoil | Defiant Truss set to curb benefits to fund budget | Prime Minister to hold...

 

[unclebulgaria67]

Government faced with demands for more spending and no easy targets for cuts, is going to face a challenge in honouring tax cuts just announced.

 

What we are seeing at the moment could be start of biggest crisis UK has seen for a very long time. A Government with a majority, but without much support, could be forced out, as Tory MP's decide they cannot continue supporting Government with their votes in Parliament.

 

The following request for a bailout of one industry is going to be the followed by others.

 

British Steel's Chinese owner seeks huge government aid package

NEWS.SKY.COM

---

Jingye Group has indicated that British Steel's two blast furnaces will not be commercially viable without hundreds of millions of pounds...