The obsession with how the 'markets' will react to the budget is ridiculous and unhelpful

[Aliceisagooddog]

Headline after Headline about the bond markets etc. Government is meant to serve the people and the markets are just a small part of our economy. They are meant to serve the economy. This obsession with not upsetting the markets is the tail wagging the dog.

But the markets prop up much of the economy including billions in pension funds so it is natural to get twitchy about how they will react.
Watching my pension fund drop £12k overnight is not great, and I suspect it will be worse again come tomorrow.

I mean it’s important for investments. And that impacts all of us with pensions.

The markets do not prop up the economy. They are there to serve the economy and ensure the free movement of money. Their lobby has way too much power.

Sorry, but I think you are being naïve. I would love for government to operate the way that you say, but it just doesn't.

Sadly it’s not. It impacts the interest rate on government debt, which in turn means that all the extra tax raised goes to repaying that debt at a worse interest rate, instead of being available for public services. It also means that money isn’t in the real economy for people to spend and generate jobs and tax revenue. It’s a strong indication that the budget is going to harm the economy.

Financial markets are not ‘a small part of our economy’

How do you think the economy operates?

It’s not.

it is not - it impacts the interest rate the government borrows money at massively.

Liz Truss tried ignoring the bond markets, and that went well didn't it... 😂

But in case you are actually being serious, the UK government has around £2.9 Trillion of debt, of which £300 billion or so needs to be refinanced every year. Refinanced means borrow. The Government also need to borrow the amount spending exceeds tax revenue by - that's another £140 billion or so. When you want to borrow £440 billion - which soon becomes half a trillion pounds - you need to make sure someone will lend it to you!!

OP, do you remember what happened after the Truss/Kwarteng mini budget in September 2022? Things like the pound falling to its lowest ever level against the dollar.

They do whether you like it or not.

I think you don't understand economics.

No one was saying this when it was Liz Truss, were they? Now it’s Labour, we’re all supposed to turn a blind eye

What economic background do you have?

I do. Our mortgage went up by over £500 a month and we’ve wasted/lost many many thousands of pounds we’d have spent on improving the house, holidays, food, kids activities, a better car. It had a massive impact on millions of people and the OP has her head firmly in the sand.

The government spends more than it takes in tax revenue. If it was unable to borrow from the markets, it would have to slash public spending.

To be honest, given the Labour backbenchers, the only way the country may be able to take the sensible long-term decisions it needs (scrap the triple-lock, reduce welfare spending) is if the markets refuse to lend more money to fund unsustainable and out of control spending.

I was just coming on to say this.

Kwasi Kwarteng ignored the markets and the markets responded - and all the mortgage rates surged along with the interest on government debt that is paid by us, the taxpayers

This is a very naive post. The reaction of the bonds market directly impacts how
much of our tax has to be paid in interest and how much is left to spend on everything else.

I don't even support Labour. My point is that if the markets had this control in the 40s and 50s we would never have built council houses or the NHS.

The government will always be able to borrow and print money.

And devalue the money already in circulation, that's just stupid. It doesn't work that way hence why lots of people are concerned about the reaction.

You’re a hiding until nothing OP. I really don’t think you understand how the financial markets work.

It must be lovely in your world of simplicity

The bond markets determine the cost of government borrowing so unfortunately they matter a lot when you have £2.9 TRILLION (£2,900,000,000,000)
in debt as the UK does.

But at what price can it borrow? the UK government already has the highest borrowing costs in the G7, and interest payments are already half the NHS budget.

As for printing money, all that does is make the poor worse off.