Bank of England, which is supposed to be fighting inflation, restarts money printing to stabilise markets so £1.5t of pension funds don't get stung with massive margin calls from BlackRock et al
Defined benefit pensions are the gift that never stops giving. My sweet mum is on a DB teacher’s pension that gives her 47% of her final salary until death. 🫣
My grandfather was on a defined benefit pension. He worked for the Post Office as a telegrapher from the 1930s until the early 70's. On this he was able to support a wife and disabled son very comfortably until his death in his 90's in 2011. He worked 35 years and was on the pension for 40! He would lament the unfairness of it while his kids and grandkids worked minimum wage horticulture jobs through the 90's. It was only the inheritance that he left that rescued my parents from asset rich, cash poor that they had been most of their lives. My parents acknowledge that you never have money when you need it (ie raising kids) and have plenty when you don't (ie retirement). But I've yet to hear a retiree willing to share their unneeded wealth with successive generations or the population at large. The crime, disorder and lack of social cohesion that retirees complain about is caused by inequality but no one wants to talk about addressing this by taxing capital gains or means testing pensions or lifting benefits. Feels like we are running down the country maintaining an unaffordable status quo and our kids are going to be furious about it.
'So why the sudden run on the pound? One answer I liked came from the City of London economist Dario Perkins, who declared that the problem with the budget wasn’t that it was inflationary but that it was “moronic,” and that an economy run by morons has to pay a risk premium.'
The fundamentals need addressing the sovereign issuance of currency secured by the nations tax and resource wealth is just not a problem. The problem lies when it isn’t used directly for that nations wealth and well-being but to fund private banks, wars, tax breaks for the wealthy or business and not on promoting health, education, incomes and infrastructure. Most of this is contracted out with tax avoidance or profits going offshore. Which is the problem. It’s all upside down and inside out with hidden profit taking middlemen and processes to ensure the wealth is not shared with those doing the low paid or unpaid labour (often in circumstances of not even being housed or treated properly and children removed to make them more efficient and available slaves and sex slaves for men so they’re happier working for less…their own little kingdom) and all at a massive cost to most of us. Gloriavale is really a microcosm of what the big picture design is.
What on Earth would Sir Frank Gordon, Treasury Secretary in Yes Minister be making of all this? He only appeared in a couple of episodes but was a memorable character.
Please open this one up :) Not that you need my / our permission, I guess :)
I almost need a page of "the Bernard Hickey TL;DR" I can refer people to. A short version of "why are house prices so high in NZ" with some 90's history and the whole borrowing limits stuff. Tried to explain it to someone, and I think I got about 75% of it out....
I was, also, trying to think who benefits from the gas pipeline "incident" on Nordstream 1/2.
Russia: sort of. Big middle finger to Germany et al. But also not: they lose a bargaining chip, big time.
EU(DE) or US: yeah, maybe. They are already getting 0 gas from it, and now Putin can't hold that over them.... makes it easy to decide to stockpile the gas, cos it's not coming back on for a few years now...
If only you had some kind of foreign affairs expert on, on The Hoon....
At which point do these schemes/banks/the wealthy become too big to save? (instead of too big to fail). It feels awfully like the consequences for these continued bail outs are just piling up and will come crashing down on everyone sooner or later.
In your original reporting, when you talked about financial markets needing to support the bond float, I was thinking, nah, no they don't. The BoE will buy it as needed. It's an ironic day, when the QE of USA looks strong beside the QE of BoE, BoJ, and all the rest.
Excellent newsletter today, Bernard. Some of us policy economists have two left feet when it comes to understanding financial markets. Your expertise and fluency on bond markets is very welcome.
How does the 68 Billion compare in size to BoE QE during Covid and GFC?
Defined benefit pensions are the gift that never stops giving. My sweet mum is on a DB teacher’s pension that gives her 47% of her final salary until death. 🫣
My grandfather was on a defined benefit pension. He worked for the Post Office as a telegrapher from the 1930s until the early 70's. On this he was able to support a wife and disabled son very comfortably until his death in his 90's in 2011. He worked 35 years and was on the pension for 40! He would lament the unfairness of it while his kids and grandkids worked minimum wage horticulture jobs through the 90's. It was only the inheritance that he left that rescued my parents from asset rich, cash poor that they had been most of their lives. My parents acknowledge that you never have money when you need it (ie raising kids) and have plenty when you don't (ie retirement). But I've yet to hear a retiree willing to share their unneeded wealth with successive generations or the population at large. The crime, disorder and lack of social cohesion that retirees complain about is caused by inequality but no one wants to talk about addressing this by taxing capital gains or means testing pensions or lifting benefits. Feels like we are running down the country maintaining an unaffordable status quo and our kids are going to be furious about it.
Paul Krugman in the New York Times:
'So why the sudden run on the pound? One answer I liked came from the City of London economist Dario Perkins, who declared that the problem with the budget wasn’t that it was inflationary but that it was “moronic,” and that an economy run by morons has to pay a risk premium.'
The fundamentals need addressing the sovereign issuance of currency secured by the nations tax and resource wealth is just not a problem. The problem lies when it isn’t used directly for that nations wealth and well-being but to fund private banks, wars, tax breaks for the wealthy or business and not on promoting health, education, incomes and infrastructure. Most of this is contracted out with tax avoidance or profits going offshore. Which is the problem. It’s all upside down and inside out with hidden profit taking middlemen and processes to ensure the wealth is not shared with those doing the low paid or unpaid labour (often in circumstances of not even being housed or treated properly and children removed to make them more efficient and available slaves and sex slaves for men so they’re happier working for less…their own little kingdom) and all at a massive cost to most of us. Gloriavale is really a microcosm of what the big picture design is.
Adam Tooze has a good assessment here, too:
https://www.theguardian.com/commentisfree/2022/sep/27/kwasi-kwarteng-cut-taxes-austerity
What on Earth would Sir Frank Gordon, Treasury Secretary in Yes Minister be making of all this? He only appeared in a couple of episodes but was a memorable character.
I am very happy for your Kaka to be heard by as many as possible. Glad for you to open it up.
Please open this one up :) Not that you need my / our permission, I guess :)
I almost need a page of "the Bernard Hickey TL;DR" I can refer people to. A short version of "why are house prices so high in NZ" with some 90's history and the whole borrowing limits stuff. Tried to explain it to someone, and I think I got about 75% of it out....
I was, also, trying to think who benefits from the gas pipeline "incident" on Nordstream 1/2.
Russia: sort of. Big middle finger to Germany et al. But also not: they lose a bargaining chip, big time.
EU(DE) or US: yeah, maybe. They are already getting 0 gas from it, and now Putin can't hold that over them.... makes it easy to decide to stockpile the gas, cos it's not coming back on for a few years now...
If only you had some kind of foreign affairs expert on, on The Hoon....
Interesting report on townhousing out by Salvation Army, curious to ear your thoughts - https://www.newshub.co.nz/home/money/2022/09/housing-intensification-is-bringing-overcorwing-gangs-and-transport-issues-salvation-army-report.html?fbclid=IwAR3oj8a3IHLu4bHppvjcVfeAfiYZPkZ9LHuH2kUfA2lehlaxBtabXAAox9Y
So Russia blew up its own gas pipeline 🤭. Whatever happened to critical thinking?
https://twitter.com/faceplantt44/status/1574894612224671744?s=46&t=GWYzOEwPOHpLSHKH9I9v8A
At which point do these schemes/banks/the wealthy become too big to save? (instead of too big to fail). It feels awfully like the consequences for these continued bail outs are just piling up and will come crashing down on everyone sooner or later.
I asked Mme Google why on earth the Brits keep on voting Tory. I should have been able to work it out. Unable to let go of empire. Like Putin but with better manners. https://www.opendemocracy.net/en/opendemocracyuk/why-does-england-vote-tory/
You could smell the QE coming.
In your original reporting, when you talked about financial markets needing to support the bond float, I was thinking, nah, no they don't. The BoE will buy it as needed. It's an ironic day, when the QE of USA looks strong beside the QE of BoE, BoJ, and all the rest.
Excellent newsletter today, Bernard. Some of us policy economists have two left feet when it comes to understanding financial markets. Your expertise and fluency on bond markets is very welcome.
Just read this, a real kick in the teeth after reading about the BoE and its QE this morning https://www.oxfam.org/en/press-releases/85-worlds-population-will-live-grip-stringent-austerity-measures-next-year