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Finance, coronavirus, the economy, etc (Read 58002 times)

tomtom

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#275 Re: Finance, coronavirus, the economy, etc
November 18, 2020, 01:26:00 pm
It seems that no-one in the media is brave enough to call “giving preferential contracts to friends of Tory MP’s” corruption.

Which is what it is - and why we normally have a tendering and procurement process.

Irrelevant now - but I suspect it breaches EU law....


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#277 Re: Finance, coronavirus, the economy, etc
November 19, 2020, 12:08:16 pm
A useful link showing the idea that the oft touted UK tory cabinet line that there is a trade-off between covid response and protecting the economy is wrong.

https://ourworldindata.org/covid-health-economy

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#278 Re: Finance, coronavirus, the economy, etc
November 20, 2020, 11:46:05 am
Away from covid, a report on tax havens from the Tax Justice Network:

https://taxjustice.net/2020/11/20/427bn-lost-to-tax-havens-every-year-landmark-study-reveals-countries-losses-and-worst-offenders/

"The UK spider’s web is responsible for over a third of global tax losses. The jurisdiction that causes countries the most global tax losses is British Overseas Territory Cayman, which is responsible for other countries losing over $70 billion in tax every year. However, Cayman is just one jurisdiction that falls under UK’s network of Overseas Territories and Crown Dependencies, where the UK has full powers to impose or veto lawmaking and where power to appoint key government officials rests with the British Crown. Infamously referred to as the UK spider’s web13, extensive research has documented the ways in which this network of jurisdictions operates as a web of tax havens facilitating corporate and private tax abuse, at the centre of which sits the City of London.

The State of Tax Justice 2020 finds that the UK spider’s web is responsible for 37.4 per cent of all tax losses suffered by countries around the world, costing countries over $160 billion in lost tax every year."

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https://www.theguardian.com/business/2021/jan/09/dormant-asset-scheme-be-expanded-beyond-bank-accounts-reclaim-fund-covid-relief

A heads up for those who might have a small company pension or savings account out there that they haven't been in touch with for a long time.

Help on finding small old pensions:

https://www.gov.uk/find-pension-contact-details


SA Chris

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See the investor's thread..

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Doh!...should have known it would be here somewhere. A potential stock bubble is worrying. My ISAs are up another 10% in 3 months (on average).. a bit too good to be true or that lucky.

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So is this the end?

https://www.theguardian.com/business/2021/jan/28/gamestop-shares-robinhood-app-ban-blackberry-amc-nokia-reddit

I still think this is beyond the subject of investments as the response indicates the big hedge fund players and wider market system don't like what happened and in that the reactions do look odd... free market hawks encouraging a sort of 'protectionism' within a potential 'regulatory gap' ?

Rewatching The Big Short recently I'm far from clear that enough has changed to stop big banks criminally rigging the system and getting off very light.

Incidentally, one of the 'players' in The Big Short is now shorting Barclays.

Johnny Brown

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https://www.economist.com/leaders/2021/05/08/the-digital-currencies-that-matter

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Governments and financial firms need to prepare for a long-term shift in how money works, as momentous as the leap to metallic coins or payment cards. That means beefing up privacy laws, reforming how central banks are run and preparing retail banks for a more peripheral role. State digital currencies are the next great experiment in finance, and they promise to be a lot more consequential than the humble atm

petejh

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There’s been lots of chatter over the last 12-18 months about the coming transition to state-controlled digital currencies. Many have concerns over infringements on individual freedom to make purchases of things states may not approve of, and privacy over individual purchases. A core concern being if a state - down to local council level - doesn’t like you for whatever reason then could they cut off your ability to use your own money, or prevent you purchasing what you want to with your own money. No doubt loads of conspiracy theory paranoid loons mixed into some genuine concerns, to make a fertile pot.

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#286 Re: Finance, coronavirus, the economy, etc
November 12, 2021, 01:14:42 pm
Thought I’d kick over these ashes.

I’m currently sitting at home, twiddling my thumbs.

I am supposed to be sat in a classroom at Britannia Royal Naval College, learning all kinds of exciting things about, well, stuff.
However, two of my instructors tested positive and I’ve been sent home. I’m negative, double vaccinated and I hadn’t even met the affected instructors yet.

Is anyone else still experiencing similar disruptions?

I reserve opinion on how I feel about sitting at home…

TobyD

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#287 Re: Finance, coronavirus, the economy, etc
November 14, 2021, 09:22:43 am
Thought I’d kick over these ashes.

I’m currently sitting at home, twiddling my thumbs.

I am supposed to be sat in a classroom at Britannia Royal Naval College, learning all kinds of exciting things about, well, stuff.
However, two of my instructors tested positive and I’ve been sent home. I’m negative, double vaccinated and I hadn’t even met the affected instructors yet.

Is anyone else still experiencing similar disruptions?

I reserve opinion on how I feel about sitting at home…

I sympathize with your frustration Matt, I don't think if it's due to similar disruption, but I've been applying for jobs now for nearly a year, although not during the last lockdowns last winter, without any success. Journalism, outdoor industry, catering industry, I'm beginning to wonder if I'm doing something really wrong, but I've had feedback from several people and noones said anything significantly critical, just that other people were better candidates.

The media guff about millions of jobs being advertised never seems to mention how many of them are kickstart schemes and thus only open to 16-23 year olds.

Hope your work gains some interest soon!

Oldmanmatt

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#288 Re: Finance, coronavirus, the economy, etc
November 14, 2021, 10:24:59 am
Yes, it’s not the optimistic climate that the media portray.
I have had two false starts over the last 18 months. One of which I had a signed contract for, passed my start date (without getting instruction on where to attend on that date, even though I had been promised the same on on the Friday before my Monday start) only to be told on the Tuesday afternoon that it was all postponed. Start rearranged for September (last), only to be told the whole project was to be kicked in to a September spending review, mid June. Each delay, ultimately, down to Covid, as rates surged and Gov departments retreated to home working again or issues around “isolation prior to deployment” became too tricky for Civvie contractors.

It’s been far more stressful and financially difficult than that sounds, as I had to withdraw from my other income source, prior to the first start date and have basically been unemployed for 12 months.

Our business (the climbing gym) has been massively impacted by it all. Our biggest income stream had always been schools, youth groups, clubs and parties (not climbers, there aren’t enough of us. Those kids parties you hate so much, subsidise your training). That’s only now and slowly, beginning to recover and we’ve had to cover shortfalls from the little we’d put away for a rainy day (actually it’s quite damp, really. Bloke down the road is building a big boat in his garden. I think his name is Noah, or similar).

Almost all the Government “support” went to Landlord and Utility companies and, since neither of us had ever drawn a wage, we couldn’t furlough ourselves (actually, we never even took a dividend. Still the only money we take out is “loan repayment” on our original investment and we haven’t been able to do that since Feb ‘20).

Basically, life sucks in a great many ways and Covid can do one (with an exceptionally large, spiky, dildo, coated in chilli). My patience with anti-vax morons and idiots that cry over facemasks and social distancing, is at the point where I would like to see the same dildos deployed in those quarters, too.

Add to that the more “Brexity” shite and it’s even more grating. Under the circumstances, running our van (the only thing all six of us can travel in together) is all but impossible. Even a half hour trip up to the Moors, to climb or whatever, is a once a month luxury now (we can’t budget more than £25/30 a week for fuel. Last Friday, £25 bought me 16ltrs of fuel).
As for shopping for a family of six, where the “children” are now almost as big as I am, wear adult clothes and shoes and eat adult portions? Fuck my life!

To be clear, prior to the Pandemic, we were secure, not flush, but pretty comfortable. The business gave some extras, it wasn’t essential. We’ve gone from ok, to unable to cover basic needs, even though our income hasn’t significantly diminished.
Both of us have managed to secure new employment and we both started this month, so, in theory, next month should be better. That hasn’t been as easy as it sounds, of course and I can strongly sympathise with Toby. This isn’t a sellers market, regardless of the hype in the Press. We’re both lucky to have unique skill sets, that by chance, play well into the current state of the world (which seems pretty wild and not simply because of Pandemics and Brexit. They just seem to compounding negatives for the UK. We as a nation, have shit timing).

Ok. Bit of a rant. But I’ve been sitting on it without being able to vent for months (and it feels like the above mentioned dildo).
I am certain, that all around me, people are more bad tempered, less tolerant and generally unhappy. Everyone I speak to, is struggling financially. I know many people who have lost jobs, though most seem to have found alternatives, if “lower” than their expectations. Quite a few of my friends have taken contracts in the Middle East, this year, to get away from their woes here (all Engineers).

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#289 Re: Finance, coronavirus, the economy, etc
November 14, 2021, 10:54:01 am
Thanks Matt, I don't think I've pegged my expectations too high, applied for any number of cafe, kitchen porter, retail or waiting jobs along with other things. I've got 3 degrees, 2 of which are vocational,  its getting pretty tedious. 

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#290 Re: Finance, coronavirus, the economy, etc
November 14, 2021, 11:00:25 am
Thanks Matt, I don't think I've pegged my expectations too high, applied for any number of cafe, kitchen porter, retail or waiting jobs along with other things. I've got 3 degrees, 2 of which are vocational,  its getting pretty tedious.

I know. I think about you often and wish I could help. (That sounded far soppier than intended, just add a bit of manliness there, somehow).

(Actually, I could cry about it, if only it was acceptable. I have in private. I don’t just mean my own shite, I mean all of it. I can’t explain how worried I am about my kid’s futures, for instance).

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#291 Re: Finance, coronavirus, the economy, etc
November 14, 2021, 12:21:07 pm
I have proper sympathy to anyone looking for jobs, many companies treat job applicants with contempt, communicating only when it suits and providing feedback of zero value. Good luck to you both.

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#292 Re: Finance, coronavirus, the economy, etc
November 14, 2021, 01:22:46 pm
...providing feedback of zero value...

I've been applying for a few Civil Service jobs and it seems they are required to give applicants feedback. One or two bits have been quite useful, but one was simply "17"!  :furious:

Worth bearing in mind that the "jobs boom" is only in certain sectors, and that overall the UK economy is still smaller than when the virus hit, by about 5% if memory serves me rightly. Good luck to Matt, Toby and whoever else is looking for work.

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#293 Re: Finance, coronavirus, the economy, etc
November 15, 2021, 07:30:49 am
 Thanks for the support everyone, it's reassuring in a way that others seem to have had similar experiences.
I'm not sure how much of the issue is covid and how much is Brexit, but it's easier for an organisation to blame the pandemic as it sounds less political.

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#294 Re: Finance, coronavirus, the economy, etc
November 15, 2021, 03:30:59 pm
Keep going, hang in there.

Plenty happening up here, but I think not a lot of crossover for your area of expertise sadly. 

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Rather than clog up the UK election thread, I thought this might sit better in here.   

I am interested but not educated in economics. I'm a long, long way from expert, and keen to learn more from learned sources.

Some of Nemo's comments in the other thread really got my back up. Luckily I didn't have time to bash out a quick reply.... So I'd like to take some time to unpick some of this:


Quote
As others have said, the UK is in a totally shite situation financially.  Anyone pretending on the right that they can cut loads of taxes, or anyone on the left pretending that they can spend loads of money - in both cases, by government borrowing - just haven't been paying attention to the real world.  Any government trying to do that is just going to be shut down by the bond markets, as Liz Truss painfully found out.  People just won't lend any government money at low interest rates if they think they aren't financially credible.

I have to respectfully disagree - Lizz Truss got slammed because she hadn't consulted with bond markets and signalled what she was doing, and it caused a load of feedback loops. The amount of borrowing required to do what she wanted absolutely paled into insignificance vs the covid QE/Furlough spending, all of which made nary a dent on the bond markets.

I'm just going to shoe-horn these interesting facts about UK National Debt:

Quote
The most important facts everyone should know before discussing debt issues in the UK are:
1. Two-fifths of UK government debt is owed to the UK government itself (Page 2)
2. The UK government’s extra spending during the Covid crisis has been paid for by borrowing from
itself, through the Bank of England (Page 3)
3. Over four-fifths of UK government debt is owed to people and institutions in the UK (Page 3)
4. The UK government can currently borrow at the cheapest interest rates in its history (Page 6)
5. The UK government is paying the lowest amount of interest on its debt in recorded history, as a
proportion of GDP (Page 8)
6. UK government tax revenue (as a proportion of GDP) is the third lowest of G7 countries, and
well behind other European countries (Page 8)
7. The debt of the UK’s private sector is 2-3 times bigger than that of the government (Page 9)
8. The UK economy has the second largest deficit with the rest of the world of any rich country
(Page 10)
9. The UK’s finance sector is the most exposed to a crisis of any G7 economy (Page 12)
Not the strongest reference in the world, but it all seems easily fact checkable if you so wish: https://jubileedebt.org.uk/wp-content/uploads/2021/08/10-key-facts-on-debt-in-the-UK_Update_Jan_21.pdf
It is also now a bit out of date.


Quote
The UK has debt of 2.6 trillion pounds.  That's 98% of GDP.  That is not a good position to be in, and it's vastly worse than it was a decade ago, largely thanks to the stupidity of the Boris years and the (obviously popular) furlough scheme.  The Tory government managed to spend more money on the pandemic than any other country in Europe, and yet far more people died (per capita obviously).  Throwing money at people is popular in the short term (one of the many problems with 4 year election cycles, not that I've got a better suggestion), but it's disastrous longer term.

Actually, it doesn't really. It's been shown to be about £1Tn less than that: https://www.taxresearch.org.uk/Blog/2023/12/24/the-good-news-this-is-christmas-is-that-trillion-of-the-uks-national-debt-does-not-exist/

Good luck refuting that. And refer to you back to who owns the debt. Note that the debt interest as a % of GDP has remained fairly steady and declining since the 80s: https://commonslibrary.parliament.uk/research-briefings/sn06167/#:~:text=In%20the%20financial%20year%202023,equivalent%20to%204.4%25%20of%20GDP.



Quote
A lot of what the left said about "austerity" in the Cameron years was nonsense.  The Tories were right to try and bring down government debt.  And they didn't even get started.  They didn't even manage to get the deficit (ie: how much the debt goes up each year) down to zero.  Let alone get started on the debt.  So, that much the Tories (before Boris and the populists got to power) were traditionally right about.

Can you explain exactly what about it was nonsense?  As you rightly state, the Cam/Osb Gov didn't make a dent in it because they never really intended to - it was an ideologically driven desire to reduce spending - at a time when interest rates were incredibly low. All that does is stall growth and starve services. Even bloomberg agrees it was too much, too long!  https://archive.ph/5xsUB


Quote
In short, the UK has been living well beyond it's means for way too long.  And there's going to have to be a many decades long, painful wake up call.  Which has been made much harder by making ourselves poorer by leaving the EU.  Sure we have our own currency, so if the government chooses to, it can essentially print money.  But that just makes everyone poorer by spiking inflation.

What do you actually mean by this? 

I don't like GDP as a measure of "national economic health" but until we all agree on a better measure it's all
we've got, so here goes. I'm just going to play out a scenario as a thought experiment, and I'm keen for people to pick holes and point out where it's flawed, but only with solid arguments - no hand waving. (Apologies if I've done the same anywhere in my post, can't reference everything and I've already spent way more time that I wanted to...).

Let's assume annual debt is the £2.6Tn quoted, and GDP is just about that at £2.65Tn. Let's call these the 2024 numbers.

If we assume Gov Debt Interest is around 1.5% of GDP, and underlying annual growth is 2%, base case with no "green new deal" spending (and no additional "deficit spending", which I'll keep consistent in all cases):



Then we add £30Bn/year of "borrowing", but for now let's assume this doesn't stimulate any additional growth over and above it just being plain added to GDP (any Gov Spending adds directly to GDP, no?), since it will all become "economic activity":



We can see the debt to GDP ratio gets marginally worse, due to the additional borrowing.  However, if we assume that Spending £30bn directly into the economy will have some level of multiplier effect, let's assume a 0.5% top up of growth to 2.5%:



Debt to GDP ratio stays roughly flat, but we get £30bn/yr spent into the green economy, funding our future energy security, a whole heap of good jobs...

Obviously this is hugely simplified but I don't think it's wildly off the mark. (I've just realised I should have used more like 3-4% interest, but it doesn't make a lot of difference the end result is similar and I can't be fucked going and re-exporting the tables)




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Ultimately, there are very few definitive rights and wrongs in all this, it's the kind of stuff that politicians and economists spend most of their lives debating.  So anything I say should obviously have a huge IMO around it.

Essentially, you're making the case that government borrowing can lead to significant growth in the economy, hence not affecting the debt to GDP ratio significantly.
And that is clearly the case that both Jeremy Corbyn, and Liz Truss were making in their separate ways.
And there's plenty of economists (including obviously those they work with) that will agree with them and you.  And there's plenty that won't.

In general at certain times, the above is certainly true.

But to me at least, there's two basic problems with the above in the UK currently.
- The existing huge debt level, making the bond market sceptical of the government planning on borrowing significantly more money, and thus causing borrowing to be more expensive the more they try and borrow.
- The fact that growth is extremely hard to come by in a country where there's already vast amounts of available jobs, but not enough workers to fill them.

ie: Government borrowing money to stimulate jobs and growth at a time of mass unemployment makes sense.  Doing it now, to me at least, is throwing money against a wall with little hope of generating growth.

So to me, when I see political debates, I want to see people making the case for particular choices of what they will spend more on, what they will spend less on, or what they will tax more or less.  If they are making the case for a larger state overall, that's fine, I probably wouldn't make that case, but there's a perfectly sensible case to be made for more taxation overall and more spending (as in plenty of other European countries), including on plenty of the things that yourself and others on the other thread were talking about.

What I don't like seeing and would never vote for is people just thinking they can magic money out of the bond market to pay for a shopping list. 
ie: I'm making the case that significantly more government borrowing at this point in time is a really bad idea. 

Quote
"Lizz Truss got slammed because she hadn't consulted with bond markets and signalled what she was doing, and it caused a load of feedback loops. The amount of borrowing required to do what she wanted absolutely paled into insignificance vs the covid QE/Furlough spending, all of which made nary a dent on the bond markets. - Fultonius"
Sure, but she tried to borrow more money, after the UK had already borrowed loads in recent years for the Covid / furlough spending.  And whilst making lots of noises about tax cuts without making suggestions what they were going to cut spending on.  No doubt various other factors were in play, interest rates high by recent standards anyway, new government jitters etc.  So maybe it would play out somewhat better if tried now, maybe not.  My basic point was just that IMO borrowing significantly more money at this level of debt just isn't a good idea.   

Quote
"it was an ideologically driven desire to reduce spending - at a time when interest rates were incredibly low - Fultonius"
That I largely agree with - the Tories overall wanted a smaller state, I don't.  I do want to see government debt come down.  But you're right that the case for more borrowing at that point was certainly a lot stronger than it is now due to interest rates being so low at that time, and the debt not being as high.

Quote
"What do you actually mean by this? - Fultonius"
That the UK government and indeed a lot of western governments have been spending way more than they've been taking from tax for a really long time.
With some obvious exceptions in well run countries like Norway, Sweden etc.
And so whilst I'd love for us to be able to move towards something closer to the Scandinavian model of government, we just aren't even remotely in a position to do so currently.

ie:
Sweden's national debt to GDP ratio is around 32%.
Norways is around 44%, but in reality Norway has a sovereign wealth fund that is way bigger than it's debt (it just still has the debt as the bonds often last a really long time).
So those countries are just in a completely different financial situation.  Doesn't mean we can't learn things from them though, obviously.

Quote
"It is also now a bit out of date. - Fultonius"
Which makes points 4 and 5 on that list out of date.  But most of the rest of that list is fine.
In terms of where we are now:
Quote
"Debt interest spending reached a post-war high of £111.5 billion in 2022-23, or 4.4 per of GDP, as inflation reached a 40-year high and interest rates surged"
"in 2024-25 we expect debt interest spending to total £89.0 billion. That would represent 7.3 per cent of total public spending"
https://obr.uk/forecasts-in-depth/tax-by-tax-spend-by-spend/debt-interest-central-government-net/

Quote
"Actually, it doesn't really. It's been shown to be about £1Tn less than that - Fultonius"
This is where we're really disagreeing. 
The Bank of England and the government are not the same thing.
Sure, the BOE can essentially increase the money supply and buy government bonds.  And they were right to do so to stop deflation over the past decade until recently.  And so sure, a significant percentage of government bonds are held by the BOE. 

That's still the government borrowing money to spend it though, so no, I don't agree that you can just pretend 1 trillion of government debt can be ignored.  And the BOE is unwinding QE currently to get a grip on inflation, and so those bonds either expire or get sold into the bond market anyway, making them indistinguishable from any other government debt at that point). 

But the interaction of monetary policy from the BOE and fiscal policy from the government certainly confuses any discussion around this, that's for sure. 

Quote
"But while austerity is not popular, nor was the inflation that accompanied financial repression. Independent central banks stabilised inflation expectations in the 1990s and 2000s. That hard-won credibility would vanish if investors thought that helping the government meet its bills was the main job of monetary policy."
https://www.economist.com/finance-and-economics/2021/07/24/lessons-from-britain-on-the-balance-between-monetary-and-fiscal-policy

Bit of background:
https://www.economist.com/finance-and-economics/2023/08/31/how-will-politicians-escape-enormous-public-debts



Oldmanmatt

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Both interesting posts.
I don’t propose to make any technical comment, I can’t, but you both mention or allude to something, perhaps best illustrated by the Truss debacle.
The jittery, emotional, nature of the systems’ stability.
I’m inclined to think the set up gives (in passing resemblance) some (a tiny bit) of credence to the Toxic’s Evil Elite (tm) economic model.
Not because there’s some evil cabal, systematically policing/preventing radical change, but because simple prudence and adherence to the the maxim “he who hesitates is lost”, quite naturally mitigates against such change, where it is intimated to be sudden, drastic and likely to have broadly unpredictable/unexpected consequences.

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I've linked to it in the other thread but to me a great explainer (and source of further links) is https://jwmason.org/slackwire/thirteen-questions-about-money/

About the Truss debacle:- that episode cuts through to whether the BOE is there to serve the will of politicians or is an independent protector of the integrity of the pound (whatever that may mean). Part of the BOE role is to police the financial system to prevent situations arrising that risk systemic financial peril. For example they don't allow mortgage lenders to provide mortgages denominated in foreign currency. I think the BOE should be castigated for allowing pension funds to enter into swap contracts that imperilled them when bond yields rose. There was a feedback loop such that a rise in bond yields made those swap contracts wildly expensive such that the pension funds needed to sell bonds in a panic and that led to increasing yield rises etc etc.

There is always a battle of will between those who think the monetary system should be engineered to be a seemlessly robust tool for public purpose and those who think it should constrain tendencies towards big government. I suspect the Truss debacle entailed a bit of that. The design of the Euro currency system has been aknowledged as being influenced by that motivation. As with so much, there is a lot of politics and power struggle in all of this.

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I think the BOE should be castigated for allowing pension funds to enter into swap contracts that imperilled them when bond yields rose. There was a feedback loop such that a rise in bond yields made those swap contracts wildly expensive such that the pension funds needed to sell bonds in a panic and that led to increasing yield rises etc etc.

Without getting into too much detail, there’s a reason why pension funds invest in swaps and restricting this ability might have other knock-on impacts that could be equally unwelcome. In its simplest form, pension fund investment strategy looks to match expected future cashflows to some extent which requires exposure to the gilt market. The more direct exposure you have to the gilt market, the less exposure you can have to areas of the market where there are higher growth opportunities. That, in turn, would lead to higher pensions costs for employers. Using swaps allows the funds to gain gilt market exposure and meet matching requirements while still leaving opportunity for investment growth.

You could argue this is a high risk strategy, but managing pension funds is a balancing act between keeping trustees and sponsors happy. Using swaps in this way should (in theory) allow lower contributions in the short term or (more likely) move the scheme towards derisking at a faster pace, swapping some short term risk for longer term certainty.

From a regulatory perspective, I think The Pensions Regulator is the responsible body, so (at least indirectly) they are a government agency. The BoE could provide external pressure, but I’m not sure they can do anything to restrict/reduce swap usage via pension scheme valuation rules. Even if they (or TPR) did, it would just move the problem elsewhere. Also, I’m not that close to how pension funds stress test their positions, but I would guess it’s less robust than life companies and the 2022 scenario was a bit of a wake-up call. Finally, worth noting that it wouldn’t have been an issue without Truss going “off script” as it was the pace of yield movements that caused the problems, not the movements themselves.

 

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