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Well, the markets have responded and UK bonds are now sold at higher interest rates than Greece and Italy, due to the risk. So there is that, which is nice.
Judging any of this after a couple of days is silly.
I seem to recall, in the 80s, the poundwas like 70c/US. Americans went and bought almost every Rolls Royce and shipped them stateside.
Right about the time busted oil-men in Midland TX were selling their Rolex for $500 to get enough gas money to drive back east. It's a tough game.
In the mid '80s the Pound fell to just over a buck then Lady Thatcher's magic happened and the Pound strengthened nicely for decades. They are in equally bad shape now.
You are thinking about the Euro which fell into the $0.65 range about the same time.
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In the mid '80s the Pound fell to just over a buck then Lady Thatcher's magic happened and the Pound strengthened nicely for decades. They are in equally bad shape now.
You are thinking about the Euro which fell into the $0.65 range about the same time.
It has to be remembered that the UK was on the edge of bankruptcy in the 70's and years of Keynesian economics has led to stagflation, and this was coupled with other socialist policies, with nationalised industries constantly calling strikes, wage spirals and the so called winter of discontent. This was why Labour was voted out in 1979, and why Thatcher was elected.
In terms of Keynesian economics, it was named after British economist John Maynard Keynes.
It's Keynesian economics that is most linked to high inflation, as it uses demand to stimulate economies, and this can include large Government schemes and an increase in public spending and borrowing, and can lead to the printing of money and devaluing of currency.
It was American Economist, Milton Freidman of the Chicago School, who saw the flaws in Keynesian economics and helped develop an alternative called Monetarism, based on the supply of money, and ehich is often called supply side economics, The supply of money can be controlled by numerous tools such as tax cuts, interest rates, currency rates etc. The idea being that low taxes lead to higher investment and stimulate the economy.
Both economic theories have positives and negatives.
The previous Conservative Prime Minister Boris Johnson's advisor was Gerald Lyons, who was from the New Keynesian School of Economics rather than a Monetarist.
It also should be noted that there is even disagreement among Monetarist economist such as Tim Congdon, and Liz Truss's economic advisor Patrick Minford, has been the subject of much criticism, as has it's economic theories and economic advice.
It should be noted that 79 year old Minford was also Margaret Thatcher's economic advisor.
For his fellow monetarist Tim Congdon, Minford’s views amount to heresy. He says: “It is no secret Patrick and I don’t get on. We go back a long way. I’m in favour of strong public finances and making sure governments can pay their bills. That’s part of what monetarism is about. Patrick has managed to get himself known as a monetarist without believing any of this stuff. Patrick is basically a Keynesian.”
Like Truss, Minford does not believe lower taxes would lead to higher inflation. Rather, he says, they would boost the supply-side potential of the economy, better aligning demand and supply, and therefore help keep inflation under control.
The left-leaning economist Richard Murphy says: “Minford has three strengths. He has been willing to think outside the constraints of prevailing economic models that restrict most other economists’ thinking. He has been willing to talk about his thinking, which far too few economists do. And he has stuck to his guns.
“He also has three weaknesses. His outside-the-box thinking is based on market fundamentalism, and that has casualties. His ability to forecast has been much worse than that of the average economist, and that’s saying something. As a result he has consistently been on the wrong side of events and political need.”
Gerard Lyons, a former adviser to Boris Johnson when he was London’s mayor and a Liverpool University student of Minford’s, says his former teacher was influential in persuading Thatcher to stick to her economic strategy during her first term.
“He has always believed in the relevance of fiscal policy. In the current circumstances that means borrowing is not a policy constraint, it is a policy option.”
People seem unable to fathom that the Laffer Curve is a curve. And a very primitive model, at that.
That the Tories pass laws intended to make the very rich very comfortable shouldn't surprise anyone. It's their raison d'etre.
There are several easily searchable examples with empirical evidence demonstrating that the health of the economy is far better served by rising wages rather than falling taxes. Workers who are paid living wages tend to pump it back into the economy where the impact is augmented by passing the income through the hands of multiple vendors of goods and services.
Up to a point. Those who make say, 600 times what the average workers make are more likely to pile their money up in offshore accounts and the like, where it stops moving through the economy and starts to stink. The obvious solution is to require those who benefit the most from a strong economy to support it either through increased taxes or paying higher wages.
Higher wages are not a detriment to business. McDonald's in Denmark, as I'm certain you are aware, pays employees US$ 22/hr with six months vacation and a pension plan starting at age 20. A Big Mac does not cost three times as much as in the U.S. because of wages, and in fact is priced comparably with variations in pricing due to locations in both places.
In short, the only place you can find money available for taxes without beggaring the populace is still to get it where it exists. Corporate America is way overdue for a major overhaul.
Keynes, but the point remains. Under some circumstances, reducing taxes of course works. That doesn't make it a panacea for every economic woe.
Or, in plainer terms, it is quite possible for taxes to be too high as well as for them to be too low. (That's ignoring that taxes can be targeted to achieve specific results.)
If I recall, that is precisely how the Founding Fathers set up the system, with the previous year's governmental debts being paid in arrears by adjusting tax rates to balance the books. In those days taxes came from tariffs and excise taxes, and the wealthy bore the greater burden.
Imagine if the Queen held more power than anyone knew. When the economy got a little bumpy due to new policy ideas and schemes by the Politicians the Queen would say "We are not amused" We meaning the People and the politicians would get back on track.
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Bank of England doing bond buying...let the pumping begin.
The Bank of England is buying the bonds in order to lower interest rates on Government borrowing, whilst in terms of future interest rates themselves they will ultimately significantly rise, which could cause lending and mortgage problems, but will be good news for those with savings.
Tax cuts are popular, however tax cuts for the masses are more popular than those targeted at the elites, and more moderate tax cuts would have been more sensible,
and this is where the current Government has gone wrong.
The Government may have to re-examine some aspects of the mini-budget in relation to the full budget in the spring of 2023.
Concerns over whether the plan will work, means investors have been demanding much higher interest rates to lend to the government through Treasury bonds or "gilts". But the Bank now hopes to lower these prices by stepping in as a buyer.
The Bank has already said it will "not hesitate" to hike interest rates to try and protect the pound and try and stem surging prices. Some economists have predicted the Bank of England will raise the interest rate from the current 2.25% to 5.8% by next spring.
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