I rarely click on something from the FT front page... but if you're giving me this what's a girl to do?!
Pretty neat title and graphics too.
We all know Britain is (fiscally) fuckedWe all know Britain is (fiscally) fucked
...and here's a long-read article by three could-be James Bonds moonlighting as tradfi journalists (Ian "Smith," Sam "Fleming" and George "Parker"). Shouldn't joke about people's names... but with "Book" I sort of have a free pass...
background: there's some current political trouble in the old world, ministers resigning, yields blowing out, budgets impossible:
Hours before Britain’s government was rocked by resignation on Thursday, Chancellor Rachel Reeves stepped in front of the Downing Street cameras to warn that a Labour leadership battle risked “plunging the country into chaos”. Investors saw her comments not just as a reprimand to prime ministerial aspirants such as Wes Streeting, who quit as health secretary in the course of the day, but as the UK government’s latest attempt to use the threat of a bond sell-off to stave off internal rebellion.
"whoever runs the government will be in thrall to a bond market that holds growing sway over debt-laden major economies.""whoever runs the government will be in thrall to a bond market that holds growing sway over debt-laden major economies."
It is a constraint that has bound the UK for years but one growing tighter almost every day that Sir Keir Starmer’s role as prime minister — and the future course of the country’s politics — is up for grabs. The restive market for UK government bonds, or gilts, is ready to punish any deviation from fiscal discipline by increasing borrowing costs.
If I said "weak economy," "political instability," "populist uprising," and "bond market troubles" you'd assume I was talking about PIIGS or some third-world country (and with the UK, you'd be sort of correct #1480864). Add to those new-ish troubles the background disasters affecting every major Western economy (ageing population, lower growth, rising welfare spending, new and excessive -- read: stupid and unnecessary -- defence spending).
Oh, not just me drawing that comparison:
Robert Dishner, senior portfolio manager at Neuberger Berman, says the UK’s growth struggles and faltering fiscal policies mean markets have a “delicate balancing act”. He says it all reminds him of another European country once renowned for its own debt problems and near-permanent political crises: Italy.
gilts, once deemed one of the safest harbours for investor capital, have become unnervingly volatile, driving up what are already the highest borrowing costs in the G7. This week, as leadership intrigues deepened and investors grew worried about Labour shifting to the left, the 10-year benchmark hit a post-financial crisis peak, at more than 5.1 per cent.
While most investors would not view the UK as on the precipice of a debt crisis, they say that the market has moved into a damaging new phase.
Maybe, you know: reassess.
This is as good a summary as the political->fiscal troubles as it gets:
Centrist politicians are trapped between managing this debt inheritance and answering the growing pressure from populists to the left and right to spend more. Investors respond by demanding a greater premium against a shift towards policies that will push up borrowing or inflation further, and the rise in yields makes the public finances picture yet worse.
"Ratcheting ever upward""Ratcheting ever upward"
The OBR, the British fiscal watchdog institution similar to the US Congressional Budget Office, made that "ratcheting" comment for UK during the last 25 years. Anyone who read Robert Higgs on the ratchet effect in bloody 1987 could have told you the same thing.
It's not news, it's not emergency circumstances; it's the inevitable outcome of oversized, democratic Western economies. Solution = aaaab-oooooo-liiiiiiish. (Or at least, you know, stop spending -- especially on the boomers, who can go fuck themselves #1468968)... Of course, nobody would stay in power long enough to make that happen... a testimony to the broken, messed-up, democratic, Boomer-parasitic welfare-sucking system you have. En-fucking-joy.
This subtle assessment is beautiful:
While past governments could take out debt at ultra-low rates, particularly in the aftermath of the financial crisis, today’s politicians face a frightening cost of borrowing. Other markets have hit similar milestones to the high borrowing costs experienced by the UK. The US sold 30-year debt this week at a 5 per cent yield for the first time since 2007. Inflation and interest rates have risen across the world since the Covid pandemic. Many central banks are no longer buying debt; the BoE is actively reducing the size of its balance sheet. But, with increasing commitments and limited resources, governments are selling ever more bonds and paying more for the privilege.
If oooonly there was a way out of this...If oooonly there was a way out of this...
Smashing this in Politics territory because it's basically a political mismanagement story, with econ/financial fallouts
archive: https://archive.md/i8rvK
I am but a young girl, unschooled in economics and politics, but I see these horrible situations in which the governments of the world wallow -- mountains of debt, interest rates getting higher, liabilities out the wazoo -- and yet, I can't help noticing that nothing seems to change. Japan?
Once, I had the idea that I would remodel an old house. Part of that job was removing a large beam that supported a bunch of joists. This beam was maybe 3 meters long and 15 cm square. This beam had nothing holding it up other than some nails from the joists. I was trying to pry it off and it just would budge. Even after removing more than half the nails, this darn beam was just kinda hanging there. In the end, I couldn't get it to drop until I had removed all but one or two nails.
I guess what I'm saying is that structures (especially those that have been in existence for a long time) are surprisingly durable -- even when they seem entirely broken. I suspect that the unsustainable fiscal situation of places like Japan, the UK, and the US will fail to produce a circumstance requiring urgent change any time soon.
I like the analogy because the status quo persists longer than you think it should and you can clearly see why it should be changing, but also when it fails it will be rapid and dramatic.
This is a good time for a reminder that the Soviet Union collapsed suddenly and unexpectedly after decades of people being right about it being unsustainable.
...and kind of proves the point: our current Boomer-infused parasiting welfare states are less obviously bad and unsustainable than the Soviet experiment, yet it still lingered on for decades. We. Are. So. Fucked.
yup. It's all fucked
The UK, like the EU, Japan, S.Korea, Australasia, Canada and many others are militarily and monetarily subservient tribute states to the USA.
Western civilisation is in decline.
Our democracies have come to be dysfunctional.
Populations have come to be entitled and demand more and offer less.
This disease goes across the board from people demanding 'rights' to the corporates who own most politicians pushing their own rentseeking agendas ahead of what is best for the nation/s as a whole.
Neoliberalism codified this now morally, fiscally and politically corrupt system.
The problem is systemic and will not be fixed until the system breaks.
It is a civilisation in decline.
The over symplistic neoliberal prescription of cutting government expenditure does not work because it does not solve the underlying problem of over entitled populations and under performing productivity.
The greater ability of emerging economies to implement more productive systems has overwhelmed the traditional industrialised nations.
Yes, China has won the trade war - by not adopting democracy and instead by implementing a comprehensive and determined program of state capitalism combined with free enterprise...much in the way the west once did.
The problem for the west was that as affluence grew the demands from the voters for 'nice to have' 'rights' at the same time as corporate sponsors of politics demanded ever more policies that enabled and increased rentseeking parasitic wealth extraction for private gain.
The biggest but certainly not only example of this corporate parasitism was the removal of restriction upon what commercial banks could fund with fiat debt issuance. The requirement that they fund only projects which could be reasonably expected to produce increased productivity was removed. And so began decades of fiat debt funded price pumping speculation in assets- both productive assets that already existed and housing.
Libertarians are so mired in the simplistic mythology of neoliberalism that they cannot see its toxic effect.
The west today is intellectually disabled by the loss of a sense of collective purpose and responsibility, drowning in the me me me amoral neoliberal paradigm of 'there is no society'.