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.

It's OK though, because they've cancelled most local elections haven't they?

Eh?

I think your right OP and there are more than a few economist who think the same thing. If the UK had been as in hock to the markets as they are now then the huge economic boom in the post war era would never have happened and back then our level of debt was almost three times what it is now in relation to GDP.

Standard rate of income tax in the post war period.

• 1945–46: 50%
• 1946–47 to 1950–51: 45%
• 1951–52 to 1952–53: 47.5%
• 1953–54 to 1954–55: 45%
• 1955–56 to 1958–59: 42.5%

The world was very different then though.

The markets were nowhere near as deep (in an international sense) and as liquid. Each country had more influence over it's own economy, and national borrowing was undertaken on a country to country level so borrowing in the bad old days was very much about the UK government doing a deal with the US one rather than the UK going to the world and asking a huge variety of different sources for money. There wasn't so much opportunity for real time feedback either, much less complexity and far less opportunities to get things horribly wrong.

Limits on government borrowing tend to be very much in the context of what the rest of the world is doing. If the rest of the world prints 25% of its GDP then if the UK prints that as well then the markets will hardly flicker. If the UK prints 25% of GDP isolation that could be ruinous.

So what countries do in response to economic events such as war, covid has to be viewed in the context of what other countries are doing at the same time, and comparing say what happened at the end of WW2 and covid in terms of debt to GDP in terms of what the markets might view as acceptable limits now doesn't really work.

I’m not suggesting we copy the 1950s tax system, but there is room for targeted tax increases in the UK. Our overall tax burden is moderate compared with many similar advanced economies. After WWII, the UK carried far higher debt than today and still achieved strong growth through large-scale public investment. While today’s economic conditions are different and markets matter more, sustained, well-targeted investment remains one of the most reliable ways to raise productivity and living standards. Too much fear around spooking the markets is preventing this much needed investment.

It’s not Labour though, is it?

The FTSE dropped to about 6500 after the Truss budget. It is currently at 9679 which is slightly below the record high. The markets don’t seem fazed at all by the budget.

Thank goodness the markets have responded well. I'm not happy with Labour at the moment but I don't want the Telegraph columnists prophesying a return to the '70s and a cap-in-hand call on the IMF to be proved right.

Typo

The press are insane. The Mail was screaming yesterday about the markets being “in turmoil”, which was actually a slight dip and rebound within an hour at 11am.

I lost a quarter of my entire pension pot after the Truss budget, but I’ve made more this year under Labour than I did in the previous decade.

There are so many issues that the papers could legitimately scream about. God knows why they have to make up crap like “Evil Reed planing tax raid on your goldfish!” Cue hundreds of Mumsnetters who don’t even have a goldfish accepting the ‘goldfish tax’ as fact, and becoming hysterical.

I think the Liz Truss budget showed it does matter what the markets think.

Was it worse? Mine bounced right back and is now slightly up again.

Not worse but it hasn't recovered the £12k, its about £5k down.

So we should follow the Liz Truss model?

What's it invested in? Mine hasn't been affected by the budget at all. It's up about 20% overall this year.

I'm not a fan of Labour, Reeves or the budget but it's hard to argue it had a significant effect in market terms yesterday. £ to USD, FTSE and the 10 year did not do much at all.

I suppose some could argue that the economy was a shitshow before the budget and the budget has done little to change that appraisal.

That's maybe the most negative spin you could put on it. It doesn't appear to have made things worse.

Yes same - been an amazing year for growth in my pension and stocks and shares ISA.

Late stage capitalism ain’t it?

although I am 😭 that posters think a load of 15 year olds in uk secondary skills could understand the world financial markets as part of their pgse or something

Same- on paper I’ve made a fucking fortune on my pension in the last 2 years - it’s grown about 25%.

it hasn’t moved last night but i suspect it’s not very common for people to get instant valuations of their pension fund?! Mine is only valued once a year. Maybe if you manage it yourself

People seemed to have moved off topic.

The original complaint was why there was focus on how the market would react to the budget, not saying that there had been a reaction.

I don't manage it myself it but I can log in and look at the value anytime - it's just Standard Life.

You can look at the value whenever you like but it’s not live constantly updated data? IMe pension funds are valued annually.

my standard life pension is valued annually, but I don’t have very much in it 😂

They don’t care if people are taxed to their eyeballs. This year or next. It’s pretty much carte Blanche to say no more tax hikes and do it anyway. Voters will though.

Especially if it’s for unpopular stuff like higher welfare.

Yeah I just checked now as I was doubting myself! It's showing the value as at today. I check it once a month normally.

I just checked mine and I think mine might’ve changed too! It does say updated as at the 26/11 (and has gone up 7% since August WOO HOO)

Does anyone know the answer to this?

So I get that our bonds fall due for repayment all the time and the goverment just reborrows the same amount effectively to refinance it. However my question is - will the bonds falling due for repayment be carrying a much lower interest rate (reflective of the UK when they were taken out) and thus the new bonds will have a higher interest rate (reflective of the rates today)

So paying back a 10mill pound bond and then reborrowing 10mill will actually cost us alot more in interest.

if that is what happens then surely the interest bill is going to go up and up just by virtue of this. Never mind the new borrowing every month.

Mine's live prices. Just checked it now and it's up 24% since YTD. I'm 100% equity, no bonds as they scare me!