Interest rates - impact of 45% u turn

MarkCarnage

As others have said, in economic terms, the reversal of the 45p rate abolition is a complete sideshow. 
However, in political terms it's big. She's now lost many of her MPs and the markets. It's no good trying to deflect or externalise it either....the energy price cap is an expensive shambles, no evidence that CT cuts will work. UK problems are much deeper rooted. It is also symptomatic of the rotten and corrupt process that governance of the UK has become in the last 5-6 years. The lack of a half way decent centre right party is a big gap though since the Tories became the English Nationalist Party. 

The interest rate cycle had already turned, Tweedletum and Tweedledee speeded it up a lot though! One positive thing that might come out it would be a meaningful fall in real house prices and some consequent redirection of income in a more productive direction, like retirement savings. 

Thumbs_Up

MarkCarnage said:

 It is also symptomatic of the rotten and corrupt process that governance of the UK has become in the last 5-6 years.

When Labour was last in power, some of that mob were up to their necks in sleaze with snouts in the troughs. Or have you forgotten because it was a very long time ago, take a hint Guardian readers.

MarkCarnage said:

The lack of a half way decent centre right party is a big gap though since the Tories became the English Nationalist Party. 

This is a joke, all they do all is bark like a poodle, not bite like an attack dog.

MarkCarnage said:

The interest rate cycle had already turned, Tweedletum and Tweedledee speeded it up a lot though!

It's Tweedledum and Tweedledee.

MarkCarnage said:

some consequent redirection of income in a more productive direction, like retirement savings. 

So rich pickings for a future Chancellor of the Exchequer. Well, someone has to pay the bills.

  

Malthusian

hallmark said:

I'm (genuinely) not sure if I'm misreading or missing a joke, but the chances of every household that reverts to (what will be a way higher) variable rate being able to afford it, is zero.  

I am defining "able to afford" as "able to pay", not "able to pay without cutting any other expenditure".
If someone is convinced that they can't possibly cut any expenditure then they will be right. Nobody else is going to do it for them. But sticking their head in the sand and hoping that the Government will magically solve their issues isn't going to help.  
Remember how hundreds of thousands of people were going to stop paying their energy bills from last weekend? Whatever happened to that? *crickets*
The idea that millions of people will default on their mortgages because interest rates have gone back to historically normal levels falls into the same category. Most will respond by cutting other expenditure or increasing income. 
I'm not disputing that a minority of people with very low financial resilience will be unable to do that; only that there's enough of them to have a significant economic effect. Or guarantee a house price crash.

Altior

Arguably all the manufactured hysteria about elements of the mini budget did was expedite the changes in economic conditions that are on their way anyway.

Canning this element of it is irrelevant. The developed world is on a path to a more realistic cost of borrowing, after a decade of ridiculous loose monetary policy. If a consumer wants a new mortgage in the US, it is now over 6%. UK consumers, much as mainstream media and social media would wish it different, are not cocooned from this.

As many people have stated, for many many months, the BoE have been asleep at the wheel. Sticking to the Fed propaganda lines about transitory inflation, pivoting too late after the Fed have. Rates were always heading up, but it should have been managed, along with expectations. 

Altior

It's also a flaw of democracy. Politicians will do whatever they can to retain the levers of power. When it all falls apart, they can run for the hills, with devastation in their wake.

Many of them will see QE as the only answer. Which is the root of many of the issues in the first place. The only reason that the west was able to pay hundreds of millions of healthy people to stay at home and be unproductive for months/years was because we could pay them with made up money.

It of course is now being replicated with the energy dilemma, only a year later. 

I don't see a viable route out personally. If western governments did what they actually should do, and only spend tax receipts/revenues, they wouldn't be in power for very long. It far easier to turn on the borrowing and QE taps, as they won't have to deal with the long term consequences.

MiserlyMartin

The ishares long dated index linked INXG fund finished the day 3.5% down. I would say the government now look even weaker as they U turn in response to socialist pressure from the media and also running scared from the Labour party's socialist agenda. The market didn't like this and it looks like they will ultimately increase spending to fund more handouts and are further demonstrating a complete loss of control of government spending.

MiserlyMartin

Altior said:

It's also a flaw of democracy. Politicians will do whatever they can to retain the levers of power. When it all falls apart, they can run for the hills, with devastation in their wake.

Many of them will see QE as the only answer. Which is the root of many of the issues in the first place. The only reason that the west was able to pay hundreds of millions of healthy people to stay at home and be unproductive for months/years was because we could pay them with made up money.

It of course is now being replicated with the energy dilemma, only a year later. 

I don't see a viable route out personally. If western governments did what they actually should do, and only spend tax receipts/revenues, they wouldn't be in power for very long. It far easier to turn on the borrowing and QE taps, as they won't have to deal with the long term consequences.

We seem to have a situation where so called poorer countries, are in a better position than the UK. They have an interest rate to deal with inflation, ie postive real rates. Never mind the housing market, unfortunately it has been overvalued for far too long and is weighing on the economy because the UK is an expensive place to do business as workers demand high wages to pay high rents and mortgages on high house prices. A reset is needed. I and many others have been warning people for YEARS that interest rates at near 0% would have to return to normal and people should account for an increase in rates when they work out what they can afford to borrow.

The way we are going the country should now ask for a bailout from the countries who have been in receipt of our foriegn aid money for all this time. They certainly have better healthcare and infrastucture eg roads than the UK does. At least you can access a doctor and dentist there.

talexuser

NedS said:

Had the threshold for BRT not been frozen, it would have been around £14,256 next April (3.1% + assumed 10%), and worth far more than the 1% reduction in the basic rate to 19%

This is the problem with the economic illiteracy of most people. They are able to be bamboozled by a headline about a future 1% Income Tax cut, when their standard of living has been reduced far more by other less headline friendly means because have to be explained with some attention span time of more than 30 seconds and a basic grasp of numerancy.

However not seeing in advance how the present circumstances giving millionaires thousands back in top rate tax reduction somehow will be seen to contribute to "levelling up" and solving the countries problems is pretty impresive. Particularly if soon after that you are going to come up with new austerity measures for the majority, presumably to be described as neccesary to balance the books!

I'm now off to a champagne dinner with my hedge fund manager friends to discuss how much to short the pound 

Altior

It's what I'm referencing though, many of the Tory MP's undermining the new administration are thinking of their own skins. When they waved through billions of wastage on lockdown and covid related policies, most of them didn't care. There was zero analysis of the damage these policies would cause. Gove was one of the lockdown drivers in chief, in fact. Now we're expected to believe he supposedly cares about fiscal discipline. 

Altior

MiserlyMartin said:

Altior said:

It's also a flaw of democracy. Politicians will do whatever they can to retain the levers of power. When it all falls apart, they can run for the hills, with devastation in their wake.

Many of them will see QE as the only answer. Which is the root of many of the issues in the first place. The only reason that the west was able to pay hundreds of millions of healthy people to stay at home and be unproductive for months/years was because we could pay them with made up money.

It of course is now being replicated with the energy dilemma, only a year later. 

I don't see a viable route out personally. If western governments did what they actually should do, and only spend tax receipts/revenues, they wouldn't be in power for very long. It far easier to turn on the borrowing and QE taps, as they won't have to deal with the long term consequences.

We seem to have a situation where so called poorer countries, are in a better position than the UK. They have an interest rate to deal with inflation, ie postive real rates. Never mind the housing market, unfortunately it has been overvalued for far too long and is weighing on the economy because the UK is an expensive place to do business as workers demand high wages to pay high rents and mortgages on high house prices. A reset is needed. I and many others have been warning people for YEARS that interest rates at near 0% would have to return to normal and people should account for an increase in rates when they work out what they can afford to borrow.

The way we are going the country should now ask for a bailout from the countries who have been in receipt of our foriegn aid money for all this time. They certainly have better healthcare and infrastucture eg roads than the UK does. At least you can access a doctor and dentist there.

We aren't a rich country, but it is a line peddled repeatedly by people who want more and more public spending. Including borrowing billions to flush down the toilet on foreign aid. The Tory wets were moaning about that too, when a reduction was proposed at the height of lockdown, I seem to recall. 

Obviously you could have a whole new thread about the NHS black hole, there is a reason why no other country follows this model. But this topic is predominately about the postponement of the 45% top rate abolition. 

Public services have not kept pace with the increase in population, that is certainly true.