wtf economy

[plodder]

Here's what looks to me like a nice explainer of the current roller coaster

https://twitter.com/EdConwaySky/status/ ... 3203914753

[dyqik]

It's all about confidence. Once consumers and investors lose confidence in the government and then the economy, it craters hard.

[plodder]

It's all about confidence. Once consumers and investors lose confidence in the government and then the economy, it craters hard.

yes, that's the thrust of it. The wobbles get a life of their own and all of a sudden the actors are reacting to the thing they made.

[dyqik]

It's all about confidence. Once consumers and investors lose confidence in the government and then the economy, it craters hard.

yes, that's the thrust of it. The wobbles get a life of their own and all of a sudden the actors are reacting to the thing they made.

With the government effectively saying it intends to cut the real terms income of 40% or more of the population, there's no confidence in future economic activity. With the government saying it intends to reduce government income by cutting taxes on the rich, there's no confidence in the government's ability to pay back bonds, or in the government spending money to provide services that keep the economy moving. With the government's frequent U-turns and back tracking, there's also no confidence in the government's ability to stick to any particular plan to reverse the above.

[plodder]

The thread also highlights the BoE's flip flopping as being important.

This bit is silly though: "with the government effectively saying it intends to cut the real terms income of 40% or more of the population, there's no confidence in future economic activity"

[EACLucifer]

The thread also highlights the BoE's flip flopping as being important.

This bit is silly though: "with the government effectively saying it intends to cut the real terms income of 40% or more of the population, there's no confidence in future economic activity"

No, it's so obvious only people like you aren't going to get it. If you want to invest in businesses with customers in those sections of the population, them having less money to spend with those businesses is going to make you a lot less confident in investing.

[dyqik]

The thread also highlights the BoE's flip flopping as being important.

This bit is silly though: "with the government effectively saying it intends to cut the real terms income of 40% or more of the population, there's no confidence in future economic activity"

Economic activity is significantly driven by consumer activity and consumer confidence. Cut the spending power of a large chunk of the population, and economic activity declines - not just because they spend less, but those sitting a bit above them in the economy also spend less, because they can see what's happening to those a bit less fortunate than themselves.

And that's what the government statements about real term benefits cuts were saying. Of course, they've U-turned today, but it still looks like that's what they are thinking about doing, and they've demonstrated that they are likely U-turn again and again.

[plodder]

Are you saying global pension funds are nervous about uk bond yields because large numbers of people on benefits will have slightly less no disposable income?

Do you not think they’re probably more worried about the big numbers?

@EAC what do you mean, people like me? Answers in the pit please.

[dyqik]

Are you saying global pension funds are nervous about uk bond yields because large numbers of people on benefits will have slightly less no disposable income?

They're nervous about bond yields mostly because of the other factors. And how much worse those other factors would get in a general recession, particularly one caused by a collapse in consumer confidence.

Most people on benefits aren't in extreme poverty with zero disposable income. Most are in moderate relative poverty with little disposable income, but enough discretionary spending to be an active factor in the economy. Remember that we are talking about everyone from pensioners, to the disabled, parents who get child support, or housing benefit, to those who have zero non-benefit income.

[Opti]

Oh this is glorious.

Watch to the very end.

[plodder]

Oh this is glorious.

Watch to the very end.

Just came here to post that

[plodder]

Are you saying global pension funds are nervous about uk bond yields because large numbers of people on benefits will have slightly less no disposable income?

They're nervous about bond yields mostly because of the other factors. And how much worse those other factors would get in a general recession, particularly one caused by a collapse in consumer confidence.

Most people on benefits aren't in extreme poverty with zero disposable income. Most are in moderate relative poverty with little disposable income, but enough discretionary spending to be an active factor in the economy. Remember that we are talking about everyone from pensioners, to the disabled, parents who get child support, or housing benefit, to those who have zero non-benefit income.

Yeah but a few % reduction in their disposable income is not the big ticking time bomb that sets off government bonds and almost brings down the pension sector forcing the BoE to flip flop between ending (and restarting, and ending, and restarting) £Bns of money printing to keep prices down. The thread in the OP is worth a read.

[WFJ]

The thread also highlights the BoE's flip flopping as being important.

This bit is silly though: "with the government effectively saying it intends to cut the real terms income of 40% or more of the population, there's no confidence in future economic activity"

Economic activity is significantly driven by consumer activity and consumer confidence. Cut the spending power of a large chunk of the population, and economic activity declines - not just because they spend less, but those sitting a bit above them in the economy also spend less, because they can see what's happening to those a bit less fortunate than themselves.

And that's what the government statements about real term benefits cuts were saying. Of course, they've U-turned today, but it still looks like that's what they are thinking about doing, and they've demonstrated that they are likely U-turn again and again.

That's responsible only a minuscule fraction of the gilts/currency issues Truss caused though, isn't it? It was the borrowing to fund tax cuts that kicked everything off. The benefits U-turn was for backbencher revolt/reelection reasons, rather than any market effects.

[dyqik]

Yes, but borrowing to pay for tax cuts also means less leeway to borrow to counter recessions in the near future, so this part is still probably a factor.

[Martin_B]

Are you saying global pension funds are nervous about uk bond yields because large numbers of people on benefits will have slightly less no disposable income?

They're nervous about bond yields mostly because of the other factors. And how much worse those other factors would get in a general recession, particularly one caused by a collapse in consumer confidence.

Most people on benefits aren't in extreme poverty with zero disposable income. Most are in moderate relative poverty with little disposable income, but enough discretionary spending to be an active factor in the economy. Remember that we are talking about everyone from pensioners, to the disabled, parents who get child support, or housing benefit, to those who have zero non-benefit income.

Yeah but a few % reduction in their disposable income is not the big ticking time bomb that sets off government bonds and almost brings down the pension sector forcing the BoE to flip flop between ending (and restarting, and ending, and restarting) £Bns of money printing to keep prices down. The thread in the OP is worth a read.

I'm reminded of the line from David Copperfield:

Annual income twenty pounds, annual expenditure nineteen nineteen and six, result happiness.
Annual income twenty pounds, annual expenditure twenty pounds ought and six, result misery.

Those who are on benefits but, as you say, with some disposable income sufficient to be an active factor in the economy, don't necessarily need their income cut by much to move into the group where they don't have any discretionary spending.

[nekomatic]

a bit about why the tax cuts are more significant than the energy bailout

[Opti]

Well, if Patrick Minford says everything's alright with 'the plan' it must be so.

He would know.