Actual economic effects...

[Spinflight]

FTSE closed on Wednesday at 6138. Closed on Friday at 6138.

Long term borrowing rates have come down as brexit appeared more likely, 10yr ones from 2% down to 1.09% post brexit. Similarly all the European long term borrowing rates rose sharply. Lesson? We are a less risky and more credit worthy outside the EU than in.

One ratings agency did drop our credit worthiness, though oddly the last time they did was out of fear of Eurozone contagion. Seems completely at odds with the long term borrowing rates, which matter quite a great deal given our debts.

The pound dropped, quite significantly. It appears however that there was some 'unusual' activity in the market which forced it down whenever the Leave campaign polled well. To the extent of trying to sell it when there were no buyers.

Some people lost a great deal of money, probably dwarfing the millions contributed to the remain campaign, lets hope it was Goldman Sachs and JP Morgan. :)

[Peregrina]

I recall that initially there was a Family Allowance usually paid to the mother, and a Tax allowance for children, which in the 1950, 60s ,70s, when all income was regarded as the mans, was paid to the father. These were replaced by Child Benefits, again usually paid to the mother.

There were debates at the time about how this was often the only money the woman had, and how it would effectively cause men a pay cut. However, times had changed since the 1945 Family Allowances, many more women worked, for example, and I for one don't recall it causing any riots when men lost this allowance.

[caroldecker]

The child tax allowance was withdrawn in 1979, child tax credits were introduced in 2003 - not a replacement at all ( unless you have very unusual children). It as paid until you earned £58k a year (2003 values)

[daphnedill]

I disagree with you about higher rate tax payers and tax credits. When they were introduced, tax payers had been receiving tax allowance for children. Higher rate tax payers received more. This was abolished when tax credits were introduced and the small amount of tax credits which higher rate tax payers received was a compensation for their loss. I was one of the people affected and I received slightly less with the new system than when I had been receiving tax allowance for my children. The process of merging tax allowance and what had been known as supplementary benefit had been started by the Tory chancellors.

[prettybird]

It pains me to agree with caroldecker but, I agree with caroldecker

[caroldecker]

It is the type of regulation that is important, not the amount. SOX was a complete joke (andthe only regulation I am aware the Tories wnated removed), but residential mortgage lending, ie max LTV ratios, affordability checks, 'liar' loans not for the employed etc would have been seen as sensible.
Most of the increased NHS spending went on wage increases with no reform of behaviour, working practices, pensions etc.
The worst thing was tax credits for all, even higher rate tax payers received money - it was a transparent attempt to make everyone a client of the state and thus try and prevent people voting Conservative.
The Labour party also initially blocked any lottery money going to health or education as they said that this would be used by the Tories to reduce spending in those areas - they changed the rules in 1998 and now 40% goes to those areas.

[ManonLescaut]

If Brown had tried to regulate prior to the crisis, he would have been decried as a socialist lunatic. The Tories were lobbying for less regulation as usual.

The BoE warned about excess leverage and lax credit standards but there wasn't consensus pre-crisis that more regulation was necessary.

In hindsight of course it seems very naïve.

[topsy777]

And now the lovely FTSE250 now stands at 17412, over the 23rd of June close of 17333 as Larry correctly predicted a few weeks ago.

[topsy777]

QEheadache

In modern administrations, they pretend that the Central Bank is independent and is not part of the government. The UK national debt is currently 1.7T (now I bother to look it up) and that includes the £375bn (Soon to be £435bn) that is 'owned' by BoE. The remaining 1.4T is owed to pension funds, people, foreign institutions, UK councils and quasi government bodies etc who hold gilts.

RBS also hold gilts and so again the UK government owes some money to itself. Nice.

[QEheadache]

Thanks topsy, I was making the mistake of thinking of BoE assets as Government assets. It makes more sense now that misconception's been cleared up.

So when we say that the country is £1T in debt does that include say £400bn of Government debt which is held by the BoE or does that £1T allow for the net assets of the BoE as well, i.e. is the debt to the Bank cancelled out by the assets held by the Bank?

[prettybird]

Actually, gold is not the reason why I have such antipathy towards don't like Gordon Brown. It was just a half joking comment that was relevant to the previous post.

My issues with Brown include his raid on the pension funds, his lack of regulation in the banking sector, the introduction of tax credits to simultaneously subsidise big companies' profits and create a generation of people dependant on the welfare budget, PPPs (just re-branded PFI where we've not shared the risk and ended up paying way over the odds during the lifetime of a project), the waste of all the "positive" years of North Sea Oil with only an over-inflated financial sector and an overheated South East driving the economy of the UK and no Sovereign Wealth Fund to show for it

It's easy to spend during the good years - but not so easy to have the discipline to save, especially if you think that the good times are going to last forever as you've been so brilliant that you've banished boom & bust.

I was happy that Labour won in 1997: I am - or rather was - a natural Labour voter. I don't have a clue what I'd vote if I lived in England. Fortunately, I don't but I still get impacted by what England chooses

And I've not even started on Brown's hubris of taking credit for the "good" years, not taking any responsibility for the crash and then taking the credit for "saving the world" in the aftermath

[topsy777]

QEheadache

Yes, it is all smoke and mirror.

The BoE buys UK government gilts, receive interest from the UK government and then pays the UK government the interest back in the form of a dividend.

This FY budget deficit projected to be £67bn

BoE held debt is not consolidated/written off, so if the government debt is now £1T, buying 60bn of it and it is still £1T (approximately). So by the end of the year it would be £1T + 67bn.

However, BoE with the help of the primary gilt dealer will always fund the government, the debt will always get rolled over and the government cannot go bankrupt. The consequences is that if most of the new money keep going to a group of people, this group of people will have more and more £ compared to other people.

If it is put to good use, then we all benefit.

[Globetrotter100]

Gold is generally held as part of a diversified portfolio of asset classes; investment decisions would be a function of the state of the other elements...not in isolation. If the UK government "knew" it would continue to significantly devalue GBP (or any other scenarios mentioned in the article linked above), then gold would hedge against that effect and could be worth considering. If we're already at the bottom of the barrel, then there would be zero value to be gained, of course. I hope that's the case.

But of course, buy low sell high will also work

[nauticant]

To put it another way, if gold is a great asset to hold, should the government now spend money (presumably by using QE printed-off money) to build up a huge holding of gold?

If it would not be such a wise idea now then the argument in favour of gold would seem to be that it's a great asset if you can use hindsight to buy low and sell high.

[larrygrylls]

Seems Warren Buffett has a similar view.

www.telegraph.co.uk/finance/personalfinance/investing/gold/9074670/Warren-Buffett-gold-has-no-value.html

[larrygrylls]

Globetrotter,

I just read the reasons...they are distinctly mediaeval!

Basically, as long as central banks don't sell too much and Indians keep wanting gold jewellery, it is a great investment.

Investments need to ultimately have a yield. Otherwise they are a leap of faith that someone will want to buy them off you at a higher value than you bought them for.

[smallfox2002]

Sounds about right.

[QEheadache]

I was reading the BoE monetary policy summary issued yesterday and trying to make sense of this "an expansion of the asset purchase scheme for UK government bonds of £60 billion".

So I think I understand the concept of this but it's making my head spin a bit so I wonder if somebody could explain it in simple terms for me?

The BoE is printing money buying back £60 billion of UK Government debt, is that right? But surely at the same time the Government is spending more than it receives and so creating more debt? So the BoE is creating £60bn of new money to buy back debt in the same year as the UK Government is borrowing another £50bn from the same people? That can't be right can it?

I really can't quite get my head around that. Help please?

[Globetrotter100]

www.investopedia.com/articles/basics/08/reasons-to-own-gold.asp

As of this morning, gold denominated in GBP (say in a physically backed ETF) has increased in value by about 22% since 23rd June for these reasons. The yield is not relevant in this case.

Brown apparently conducted the sale in spite of direct warnings by the Bank of England. www.telegraph.co.uk/finance/personalfinance/investing/gold/7511589/Explain-why-you-sold-Britains-gold-Gordon-Brown-told.html

Anyway, I'm hoping OP returns to this thread before it maxes out so they can tell me how well everything is going

[larrygrylls]

Selling gold was one of the few sensible things Brown did. I can never understand the rationality, in a modern scientific age, of holding a heavy metal with no real practical use. It strikes me as something very mediaeval.

Ex post facto it turned out to be a poor decision but gold has zero yield (and even needs to be paid to be stored) and will turn out to be right long term.

the worst thing that Brown did (and the most cynical) was to force pension funds into gilt investment at a time of vanishingly low yields. It effectively made pensioners subsidise Labour's pet projects.

[nauticant]

I'm always sceptical when I hear someone say "Brown sold our gold". The gold was sold off over mid-1999 to mid-2002. By coincidence I was following discussions on the Internet about investing in gold over that particular period and the consensus was that gold was a poor asset to hold and was only for monomaniacs expecting financial Armageddon. (It turns out they were right but mainly because they had adopted a deeply contrarian position rather than because of great foresight, so think Private Fraser rather than the Warren Buffett.) The reason for that was that anyone looking at the gold chart around that time would have seen gold having a generally flat price over 20 years with a decline over the several years preceding 1999.

Brown's thinking was very much in the mainstream of the time. It wasn't some reckless act that he did in the face of a storm of complaint.

[pourmeanotherdrink]

UK labour market in "freefall", permanent hiring has dropped to 2009 levels: uk.reuters.com/article/uk-britain-economy-jobs-idUKKCN10F2SL

[smallfox2002]

Hmmm, the regulation point does stand, but I don't think that at the time imposing more regulations would have been possible. The Tories were clamouring for lighter touch regulation as was the city.

[prettybird]

I do disagree. He contributed towards precipitating it, by declaring the Icelandic bank (only one initially but by implication the others) "terrorist organisations" (and no, I'm not going to say that was just Darling - he wouldn't have done it without Brown's approval )

The British banks were already in a parlous state in early 2008 - thanks to the regulation that Brown hadn't put in place. He was happy to ride the crest of the wave of the boom - but put in no safeguards against that wave crashing down.

Sticking your finger in the dyke after destabilising it is not something to be proud of.

[smallfox2002]

You disagree with the fact the it was GB who led the western world.response to the credit crunch ?

I think overall.history will be kinder to brown than Blair, anything good that Blair did was.tainted by Iraq. Although aeronautical and Osborne will be remembered as cronyiest bunglers.

[topsy777]

^ I think history will be far more complimentary to brown, he managed the economic crash very well and was the one who focused the international response to it. ^

I totally disagree although he probably will not be crowned the worse PM. At least he is not going around the world using his exPM credential to making millions.