Uh-oh ... investors abandoning gilts.

dopester

And those logical measures might be very very painful - including massive cuts in the public sectors, for NHS, schools, highways.

The only way out of this is for debtors and governments to pay their obligations... to an extent which satisfies creditors. Things have gone way too far. You can't reinflate out of this.

The time is soon approaching where politicians will be forced to rid themselves of their cheesy smiles and their fake friendly auras wanting to be everybody's best friend. Some very difficult decisions will need to be taken.

dopester wrote: »

There are reasons in understanding the magnitude and persistence of post WW2 inflation [the footprint of war] - and it is not just that more paper money is circulating) - and there are good reasons to assume this period of inflation is coming to an end.

Keep in mind the British Government will not be able to beat the markets and kiss goodbye to its obligations and debt with the printing presses or by nationalising everything on to its balance sheet. Debt cannot indefinitely compound faster than income.

And like G said in another post elsewhere, the UK might lose access to the credit markets (to borrow) if it begins implementing policies which are destructive to the markets interest.

The printing press was an invention of the fifteenth century, yet time and time again Governments have had to yield to deflation because the costs of wild inflation are too great. Financial stability requires "sound money, secure credit and regular payment of debt".

Spain was bankrupted in 1596 when interest on its national debt took a large fraction of its national reserves (forcing it to withdraw from wars it could no longer afford. France similar in the 1700s. When Britain allowed its creditworthiness to decline during the American Revolution, the Dutch (at the time strongest finance centre) withdrew their credit line support. Our current Government can not wish away the debts and obligations else it will be crippled and schooled by the market.

kennyboy66_2

!!!!!!? wrote: »

"According to research by Bank of New York Mellon (BNYM), the pattern of relatively stable inflows of foreign capital into UK fixed-income instruments reversed sharply in September"
.

Didn't you post this yesterday ? - the poor old Independent is so poorly staffed they generally are a day behind the times.

I expect a regular flow of new bad news.

Pal

Fixed interest Gilt yeilds have remained fairly steady and index linked Gilt yields rose slightly in September and are now falling again, with the gap between the two reducing again.

That doesn't suggest a massive drop in demand to me.

kennyboy66_2

Pal wrote: »

Fixed interest Gilt yeilds have remained fairly steady and index linked Gilt yields rose slightly in September and are now falling again, with the gap between the two reducing again.

That doesn't suggest a massive drop in demand to me.

Don't let facts & evidence get in the way of the argument.

purch

That doesn't suggest a massive drop in demand to me

What does a 1.37 cover on the latest auction suggest to you ?

WTF?_2

kennyboy66 wrote: »

Don't let facts & evidence get in the way of the argument.

So, we won't be hearing any more news about gilt problems and the FT were making it up then? Pull the other one, this is big news and something anyone with a whit of concern for the economy would do well to keep an eye on.

When they start having uncovered auctions as a matter of routine you can kiss the pound goodbye and say hello to price hikes, irrespective of the global situation. It will make a lot of people very much worse off even if they have an income and savings. Once the pound gives way, time to get into hard assets to protect your wealth. Maybe even property - thought that would cheer you up?

This is one mechanism by which we could see our way of life 'equalising' with the situation experienced by other nations on the other side of the global divide.

It's not going to be pretty and people need to be aware it could happen so they can plan accordingly. Glibly dismissing it as 'doom and gloom' does no-one any favours.

WTF?_2

Pound swirling round the bowl in ever decreasing circles.


Vs Euro (all time low)




vs Dollar (not looking too good)


.


Still, look on the bright side. Should help our awful balance of trade deficit.....

Balance of trade deficit:

Pal

purch wrote: »

What does a 1.37 cover on the latest auction suggest to you ?

That the level of Gilt issuance and their pricing is a bit more sensible than it has been in the past? A slight easing in demand for Gilts from UK pension schemes? Limited interest from banks and insurers due to lack of cash and limited current lending levels that warrant significant investment? Reduced levels of buyout transactions being undertaken by pension schemes?

It could any of a number of things. Or all of them.

The suggestion that anything published in the FT is gospel is daft. Journalists have limited knowledge on many of the subjects that they write about and guess at things all the time.

How often do you read phrases like "the FT100 fell 1% today on fears that blah blah blah"? You never hear "the FT100 fell by 1% today but it isn't significant because it is completely random." It is the latter that is almost always correct, but journos always have to put a story on past events. Classic "narrative fallacy".

Note that I am not siding with anyone here (I am a house owner who wants to see property prices fall significantly, but do not believe that they will fall anywhere near as significantly as some people seem to believe). I just have a problem with newspaper reporting and that so many people believe what they read in papers, a condition easily cured by speaking to a few journalists!

kennyboy66_2

!!!!!!? wrote: »

Glibly dismissing it as 'doom and gloom' does no-one any favours.

When have I dismissed something as doom & gloom ?

What you utterly fail to see is that it is the state of the economy that is driving Sterling down. You could put interest rates up to 6% and I doubt if it would make any difference.

The latest BoE report states that they believe that inflation is likely to be below 1%.
The current yield on gilts an any maturity from 2 years to 30 years would suggest that the market does not believe the biggest issue at present is inflation.

The structural deficit that the UK has run is a big issue (as is the unfunded state pensions liability) - you won't find a post by me saying anything different & I am sure they will have some problems covering some gilt issues in the future.

You seem to be reverting to your usual use of sarcasm, changing the subject and throwing up 'straw men'.

Sir_Humphrey

As I said before, the effect of currency on inflation is extremely complicated.In a nutshell, the govt can either try to save the economy or save the £. Thankfully, they have tried to do the former. Can they do either successfully?: well IMO they can limit the damage at least, but only for one of those.I am unable to join in the full cut and thrust as I have changed position at work into a job that I cannot do in my sleep, so my energies are refocussed now. Also, emoticons are now blocked on my new work PC, so they "entertaining" (sic) ad hominen attacks that pass for 90% of the "debate"; on internet forums is now closed to me. I cannot even dish out "thanks" now!I have just finished The Black Swan (the book was a bit of a mess philosophically IMHO, but had some good points relating to finance). One good point made by Taleb is that an ad hominen attack is a sign of having little of intelligence to say on a subject.EDIT: I notice that I cannot even format my posts properly!