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.

This is the problem with the UK population. Mostly economically and financially uneducated.

You need to do some research. "Printing money" results in inflation!

The financial markets have the UK by the short and curlies because of the massive (almost 3 TRILLION debt) caused by decades of over-spending. We spend more on paying interest on that debt than we do on education and it's getting worse.

If the financial markets lose confidence in the UK (as they have due to Rachel's incompetence), the only way the UK can borrow is at higher interest rates due to the risk factor. We're no longer regarded as a "safe" country for lenders!

Printing money increases inflation and affects imports/exchange rates etc. We had massive "quantitative easing" (i.e. similar to printing money) during covid to pay for the hundreds of billions the lockdowns costs us, and that caused higher interest rates, inflation, etc.

That’s simply not true. They would create a junk currency like Argentina or Zimbabwe have done.

OP, please stop. Just stop.

This country’s debt is as much our annual output. We borrow £20b a month to pay people’s benefits and debt interest.

Markets are not your friend. They don’t serve anyone. You have the attitude of ‘well I don’t need to worry about by liquidity and what the bank thinks, after they only provide my mortgage and are there to serve me’. Until your house gets re possessed.

Now do you understand why markets are important?

Someone said it on a thread the other day, it’s no wonder this country’s is in such a state. When you see this level of understanding about how the economy works. It’s unfortunate that Labour MPs also seem to have to gone to the same school of civic knowledge and citizenship as OP.

The governments don't serve the people though do they ?

They pretty much lie to get elected and then do what they want, and hope they can spin their way out of it by the time the next election turns up.

This is why when they actually ask the public a direct question (such as Brexit) they get their ass handed to them.

Until recently people haven't had much choice on who they elect. But now alternatives are starting to get stronger.

The markets are pretty much the only thing that can keep governments accountable (and to some degree the media) outside of the electoral cycle.

If governments don't want to be beholden to the markets and having to keep them happy, probably best not to run your country off the back of loads of debt that the markets supply.

The governments can ignore the markets. But to do so they have to stop borrowing money.

After Liz Truss/Kwasi Kwarteng's fiscal event, who can blame them? Even before you consider the level of government debt, which even if the pandemic had been well managed would still be very large.

I had to do a Google for this but in 1950's the government debt was around £25-26 MILLION - compared to £2.6-2.7 TRILLION now.

Also in £1950 you would of been paying 9 shillings in the pound income tax if your earnings were £2k or above.

NO wonder the "markets" had less of an influence as you call it. Also I would imagine there was far less of the population relying on private pensions

The current debt situation simply can't be compared to back then.

There, I'll say it - Tell me you don't understand Economics without saying you don't understand Economics.

@Aliceisagooddog Financial markets can support economic growth by facilitating investment, but the overall health of the economy also influences market performance. It's a complex relationship but economies and markets tend to move in the same directionn.

If a budget drives the market down, it will also tend to result in a falling economy and all that means for the population. The government therefore has to find a midpoint between borrowing and spending to stimulate economic growth, hence the concerns over the burget.
Printing more money just devalues money, thereby driving inflation, and increases borrowing costs.

Indeed from the end of 2019 to 2023, the effect of the pandemic, together with the energy price shock, led to debt rising by 12.6 per cent of GDP.

Though this is dwarfed by the effect of the 2008 financial crisis. Between 2008 and 2010 debt rose by close to 35 per cent of GDP.

Figures: OBR

Absolutely this. It's all wishful thinking and completely unrealistic. I think people should have to pass tests on the economy before they are allowed to vote so that they understand that actually the government can't just go around printing money willy nilly or ignoring the markets when you have an astronomical debt.

Yup, or they need to spend more time teaching kids about this in school so that they actually better understand how these things work and how they contribute to the 'pot'.

Tbf to the op Burnham also did the markets what markets line recently. I agree with you.

When the Government is in debt by £2.9 trillion and runs an annual deficit of £116 billion then yes the Bond markets do get a say in how the Government taxes and spends money. Or more accurately they can either refuse to lend or charge higher interest for it.

The only way around this is to get rid of the annual deficit by cutting spending and ideally reduce the £2.9 trillion debt. Both of which I would very much support.

“It is well enough that people of the nation do not understand our banking and monetary system, for if they did, I believe there would be a revolution before tomorrow morning”

Attributed to Henry Ford.

Maybe that wouldn't be such a bad thing, or at least hold the useless politicians to account to do the right thing for the country longer term instead of doing whats right for their careers now and bugger what happens when they are out of power.....

MPs should also have to pass tests on the economy and basic intelligence before being allowed to stand for election.

Absolutely!

It's like saying that you should ignore the banks when you have a massive credit card debt. Ultimately unless you can repay the loan then you need someone somewhere to lend you the money otherwise you will be bankrupt and in a terrible financial mess. Of course you would rather spend your money elsewhere rather than on debt repayments for things that you have already enjoyed but we need to learn this lesson now and wean ourselves off the high public spending that leads to these extortionate debt repayments and losing control of our politics for fear the markets will punish us.

Yep I agree. Andy 'what markets' Burnham wouldn't be able to stand for a starter.

Oooh OP, you seem to have thought Zack Polanski was talking sense! Little tip. Everything that came from his mouth was unadulterated horse shit. My (long dead) grandmother knows more about economics thsb you or him. We’re spending £1.6k on interest for every man woman and child in this country this year. Just much higher would you like it to be? Jeez!

Who will lend them money if they can't repay? It's the same if you as a person want to borrow money, if you can't prove that you can repay (with interest) no one will lend you any. And the less credit worthy you are the higher interest rate you have to pay whether a person or a country.

Printing money just reduces the purchasing power of money, ie, inflation that makes everything more expensive.

Breathtakingly naive OP. Basic economics should be a requirement in school as well as for all MPs; I also think they should have had a private sector job before they can be an MP or if a minister have actually worked in the sector they are put in charge of as a teacher/ soldier/ doctor etc.

Yes the Government should be able to always borrow money but the question is at what interest rate.

As for "just printing money" this simply doesn't work or everyone would do it. If you double the amount of money in circulation then stuff just costs double or more as there is more money chasing the same assets.

Suggest you have a look at 1920s Germany or more recently Argentina.

"The market" is where the government borrows money. It is also where the major industries such as the vital utilities borrow money. The government and these industries owe the bond holders billions of pounds, so in effect they have the country by the short and curlies.

"They are there to serve the economy and ensure the free movement of money" is naïve nonsense. The players in the financial markets exist solely to make a profit, and if they deem investing in the UK to be too risky or not attractive enough in terms of earnings they will either demand a higher rate of return or quit the UK and invest their money elsewhere.

The government cannot just print money - this just leads to inflation and the devaluation of the money already in circulation. For an example of what happens when this gets out of control, read about what happened to Germany in 1922 and 1923, where money ceased to have any value and people were paid in billions; a loaf of bread in Berlin that cost around 160 marks at the end of 1922 cost 200 billion marks by late 1923.

Still teaching economics is a good idea don’t you think? I don’t think it would lead to this quote being true anyway.