New Left EViews

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New Left EViews

New Left EViews

@NewLeftEViews

economist, writer • int'l & european political economy, geoeconomics, history, climate • host: @eurotrashpod & @statesmarkets • one cat in a trench coat

London Katılım Ekim 2009
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New Left EViews
New Left EViews@NewLeftEViews·
I've written a short note––with some nice charts––to accompany a fun conversation I recorded with @BrankoMilan. We discussed whether 'global neoliberalism' is a Greek tragedy: creating the conditions for its own demise while underwriting the success of China and others.
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New Left EViews
New Left EViews@NewLeftEViews·
To answer @JamesConran1' question: the BoE is the standout case of a major central bank using active sales as a meaningful part of its AFP unwind, where the Fed is pure passive run-off with caps while the ECB does it without caps (PEPP is bit different ofc). This obviously has an impact on yields. The timing of active sales is at the Bank's discretion rather than the sovereign's maturity ladder, so the flow into the market is front-loaded relative to passive runoff. Also they can sell bonds of any maturity they hold including long-dated ones, so the private sector is forced to absorb duration immediately rather than over the natural runoff schedule. In general you would expect the UK's yield curve, and especially its long end, to face more upward pressure via a larger term premium effect. (Also with passive run-off: the fiscal policy maker chooses the maturity composition ofrefinancing, which can (and often does) tilt shorter than the duration of the bonds rolling off.) So taking the standard preferred-habitat / imperfect-substitutes framework that most central banks operate with, the differential is real and runs in the direction you'd intuit. NB: the reason the active component has been reduced relative to what is was last year (from 100 to 70bn) is precisely due to internal debates about the gilt market dysfunction. So they're definitely aware of it.
James Conran@JamesConran1

@NewLeftEViews Has the BofE been doing QT faster than the ECB? x.com/JamesConran1/s…

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New Left EViews
New Left EViews@NewLeftEViews·
@JamesConran1 They're holding them to maturity, not actively selling them into the open market.
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New Left EViews
New Left EViews@NewLeftEViews·
Take this FT piece from today. “Oh UK's the gilt market may have become untethered from its peers” and the explanation amounts to “we’re addicted to debt”. It is mentioned in HALF A SENTENCE that the Bank is actively shedding gilts. THIS IS NOT SERIOUS FINANCIAL JOURNALISM.
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New Left EViews@NewLeftEViews

It is remarkable how toxic and dysfunctional budgetary politics in Britain have become when the fiscal authority courts instability by formulating its polices around where yields and sterling will go in response while the Bank sits on its hand and nobody talks about it.

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New Left EViews
New Left EViews@NewLeftEViews·
It’s not about being so accommodating that you start ‘hoovering up’ any debt the government issues, it’s about not accommodating at all and in fact actively selling gilts at an unusual clip in order to virtue signal to markets, something no other major central bank is doing
Anthony@apterweets

@NewLeftEViews That is not a serious reaction. I like a range of your stuff but that shows a misunderstanding. You cannot blame all of this move on a lack of the BofE hoovering up every bit of debt you want to unleash.

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Adam Tooze
Adam Tooze@adam_tooze·
British politics seems to me framed by three silences that render the whole thing unhinged: 1. the electoral system that is totally out of whack with modern British society 2. the unspeakable question of returning to the EU 3. and the unmentionable fetish of BofE independence.
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New Left EViews
New Left EViews@NewLeftEViews·
I was looking into this the other day (have an upcoming piece on this) and it’s pretty grim: the UK is well above EU average. The OECD data is net of taxes and utilities. On gross income, private rental households spend on average 39% of on rent, with the poorest quintile paying 63% even after receiving housing support. I also did very rough back-of-envelope calculation (non-equivalised, averaged council tax and utility costs, excluding benefits) that suggests that the typical household in the same bottom quintile could be paying over 90% of their disposable income on rent before benefits.
Joseph Elliott@J_Elliott94

Around a quarter of private renters in the UK spend over 40% of disposable income on rents. This is among the highest rates across the world. Meanwhile new analysis for JRF finds being a private landlord has been one of the best investment options available to individuals.

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Paul Hilder
Paul Hilder@paulhilder·
The Bank of England’s aggressive active bond selling (QT) is costing the UK government billions a year, and is a big cause of rising gilt yields and falling values. This costly policy is not necessary, no other central bank is mirroring it, and it’s even crazier in the midst of the economic turbulence of the Iran crisis…
Daniela Gabor@DanielaGabor

Bond vigilantes have repeatedly told @bankofengland that its aggressive QT actions were increasing Bailey premium. the Bank's response was to stop asking them! @adam_tooze @AndyBurnhamGM

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Dario Perkins
Dario Perkins@darioperkins·
the irony is that the BoE is only selling bonds in an effort to look virtuous (after all the accusations of "debt monetization" during COVID). But the more it does that, the more delinquent it makes the govt look...
Ben Zaranko@BenZaranko

On the role of the Bank of England, I think these comments from Louise Haigh earlier in the week are indicative of where Labour party thinking might go. Discussions about monetary-fiscal coordination feel likely. Leaves all of the crucial details to be filled in, of course.

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New Left EViews
New Left EViews@NewLeftEViews·
The UK is now an emerging market because a Welsh PPE grad thinks Otmar Issing is a hero.
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New Left EViews
New Left EViews@NewLeftEViews·
Those who are confused about oil markets: you’ve never been in a chat group with traders. Not the most astute people on politics and macro but aggressively convinced that they are.
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Randeep Ramesh
Randeep Ramesh@tianran·
These aren’t technicalities. They are political choices. Reeves chose to uphold the orthodoxy – locking in monetary contraction while binding herself to fiscal rules that treat giveaways to the financial sector as sacrosanct, but deny cash to everyone else theguardian.com/commentisfree/…
New Left EViews@NewLeftEViews

Take this FT piece from today. “Oh UK's the gilt market may have become untethered from its peers” and the explanation amounts to “we’re addicted to debt”. It is mentioned in HALF A SENTENCE that the Bank is actively shedding gilts. THIS IS NOT SERIOUS FINANCIAL JOURNALISM.

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New Left EViews
New Left EViews@NewLeftEViews·
PS: I'm not saying they should ease rates (that would be unwise), or, by extension, that we can just ignore the bond market. I'm saying that there is one actor in this constellation whose job under the current architecture it is to maintain the conditions under which private leveraged finance is willing to hold sovereign debt at yields the fiscal authority can service, not the other way around. Similarly, the fiscal authority should formulate feasible budgets that lift the growth trajectory in the service of long-term debt sustainability, not in anticipation of how yields and sterling may react. Both have to do their job but neither is. x.com/AscendedYield/…
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New Left EViews
New Left EViews@NewLeftEViews·
Instead of seeing the Truss/Kwarteng incident for what is was––yes, unfunded tax cuts but in a context of overly hasty quantitative tightening blowing up part of the pension market––they filed it under fiscal profligacy and boxed themselves into a for every subsequent budget. And yes overtime hedge funds have smelt blood which has made it even harder.
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Helen Thompson POLIS
Helen Thompson POLIS@HelenHet20·
‘Never again’ as Gordon Brown’s response to Black Wednesday in 1992 was vindicated; ‘never again’ as Rachel Reeve's response to the misdiagnosed Truss crisis in 2022 has helped destroy Starmer and is turning his removal into another economic trauma.
Adam Tooze@adam_tooze

"Whoever wishes to talk about the bond market, should not be silent about the central bank" One week in Britain - what a week - and I am already seeing ghosts! Voldemort on Threadneedle street. The Bank of England and the "haunted house" of English politics. The latest Chartbook newsletter just dropped. Sign up below for more.

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New Left EViews
New Left EViews@NewLeftEViews·
There are smart people™ who seem to believe that UK fiscal policy is too loose, that Burnham's programme is dangerously left wing (?) and that the bond market reaction is warranted. No discussion of absurd and self-defeating fiscal rules and a central bank shirking its duties.
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@JamesConran1 @jerometenk @elonmusk @BarackObama @taylorswift13 @cristiano @BillGates @NASA