| Bank of England stepping in again. on 10:28 - Oct 11 with 760 views | giant_stow |
| Bank of England stepping in again. on 10:23 - Oct 11 by noggin |
"The biggest losers are likely to be those paying rent to private landlords. Their income, after retirement, isn’t going to increase as much as their rent , council tax, energy costs. Wonder if Labour will limit rent increases when they get into power."
If only there was some kind of council owned social housing for the less well off. |
I think rent caps could only work if accompanied by a huge public house building programme. In fairness to the Tories and Gove in particular (I think) they've already made being a landlord vastly less profitable, but that's now pushing up rents due to less supply. If you capped rents in that scenario, more landlords still would sell up and there's be less supply still - more hardship. [Post edited 11 Oct 2022 10:30]
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| Bank of England stepping in again. on 10:29 - Oct 11 with 754 views | Darth_Koont |
| Bank of England stepping in again. on 09:55 - Oct 11 by nodge_blue |
Economists often say that growth in GDP and in Productivity is the answer to the sickness you describe....you grow your way out of the debt. In essence you become richer and therefore the debt more affordable.
That is what Truss is really arguing.
But what she misses is that we cant borrow more money to fund tax cuts as a way of achieving it. Its complete madness and sends the wrong signals to the markets which are now trying to sell the loans they've made to UK government at an alarming rate.
Its really worrying. Theres a book called The Mandibles if you fancy a novel about the collapse of the world caused by a debt crisis. |
Agreed. Although over the past couple of decades, we have become dodgy accountants to financialise our economy and inflate GDP. And it lets us pretend our long-standing low productivity isn’t a massive problem.
Re: taxes, you’re right that tax cuts sent the wrong message. But they’re also inherently wrong for an economy like ours that has become too weak, unbalanced and unskilled to be productive.
Grown-up countries neighbouring the UK have higher taxes and a far higher spend (and a far higher percentage coming back to society and the economy) because they’re simply more serious about looking after ordinary people and their interests. A key part of which is ensuring the population can productively respond to the rapidly changing global economy and its new industries, products and services. |  |
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| Bank of England stepping in again. on 11:42 - Oct 11 with 691 views | XYZ |
| Bank of England stepping in again. on 10:01 - Oct 11 by blueasfook |
it's going to be balanced out by Austerity 2. Kwarteng will be possibly announcing £60bn of spending cuts at the end of the month.
That will be cuts to public services that are already operating on shoestring budgets. What a time to be alive! |
He does that and he gets mass riots.
Even Gordon Brown was prepared to go public on that and nobody blinked. [Post edited 11 Oct 2022 11:48]
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| Bank of England stepping in again. on 11:48 - Oct 11 with 688 views | nrb1985 |
| Bank of England stepping in again. on 10:03 - Oct 11 by nodge_blue |
Pension schemes - especially defined benefit ones - largely invest in safer investments - like government gilts.
There does appear however some weird thing thats happened in the last ten years where some kind of weird leverage thing has gone on. I don't fully understand it. But essentially everything was ok whilst the interest rates and yield levels were low. When they started to go uo pension schemes were being asked for money back by this weird scheme. Which they could only raise by selling more of the gilts they held. And a vicious circle.
Total cock up. You hope that intelligent people run things but in truth I think even pension scheme trustees sign ups for stuff they don't really understand. [Post edited 11 Oct 2022 10:06]
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Yields on government debt have been extremely low for over a decade due to the low interest rate environment.
As such, pension funds take very moderate leverage to increase their return on gilts and match their liabilities, i.e. payments to pension scheme participants.
That leverage on paper is fine and well within prescribed risk limits as the collateral is cash/gilts - i.e. historically very low volatility assets.
As Oldsmoker said, the problem starts when you get idiots who don't understand anything making stupid decisions that suddenly means the price of that low volatility collateral starts going up and down like equity markets.
This means the collateral of the pension funds suddenly start losing value and to cover the margin calls they need to raise capital quickly and sell the most liquid parts of their portfolio - which are usually gilts/government debt, creating a death spiral of continuing gilt price declines. That is until the BoE stepped in and started being a buyer of last resort to stop the price declines and allow pension funds to reset.
It's not weird, it's entirely reasonable and works fine until you get morons stepping in and meddling with things they don't understand.
Hope that helps. [Post edited 11 Oct 2022 11:52]
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| Bank of England stepping in again. on 12:44 - Oct 11 with 655 views | nodge_blue |
| Bank of England stepping in again. on 11:48 - Oct 11 by nrb1985 |
Yields on government debt have been extremely low for over a decade due to the low interest rate environment.
As such, pension funds take very moderate leverage to increase their return on gilts and match their liabilities, i.e. payments to pension scheme participants.
That leverage on paper is fine and well within prescribed risk limits as the collateral is cash/gilts - i.e. historically very low volatility assets.
As Oldsmoker said, the problem starts when you get idiots who don't understand anything making stupid decisions that suddenly means the price of that low volatility collateral starts going up and down like equity markets.
This means the collateral of the pension funds suddenly start losing value and to cover the margin calls they need to raise capital quickly and sell the most liquid parts of their portfolio - which are usually gilts/government debt, creating a death spiral of continuing gilt price declines. That is until the BoE stepped in and started being a buyer of last resort to stop the price declines and allow pension funds to reset.
It's not weird, it's entirely reasonable and works fine until you get morons stepping in and meddling with things they don't understand.
Hope that helps. [Post edited 11 Oct 2022 11:52]
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Whats the point of buying low risk investments only to increase risk by borrowing against them. Defined Benefit pensions ran for decades just buying government gilts.
If they wanted more risk then buying company bonds or a greater percentage of shares would seem a better more straight forward thing to do.
But gilt yields were low so trustees were encouraged into these LDIs. I read one trustee saying then when the presentation was made they didnt really understand it!
And then, who would have thought it, one day inflation happens and suddenly these start to unwind. All this leveraging is just greed. It happened in 2008 in a different way. And now its happened again.
We never learn.
They are weird in the sense that the very funds that have borrowed the leverage are then getting called on for cash themselves to pay others in this death spiral. How can that not be weird? And then rely on the BOE to step in to save a collapse and contagion into other areas.
It does make me angry. The morons are the people that devised these schemes and then sold them into pension trustees. |  |
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| Bank of England stepping in again. on 13:11 - Oct 11 with 640 views | BanksterDebtSlave |
| Bank of England stepping in again. on 11:48 - Oct 11 by nrb1985 |
Yields on government debt have been extremely low for over a decade due to the low interest rate environment.
As such, pension funds take very moderate leverage to increase their return on gilts and match their liabilities, i.e. payments to pension scheme participants.
That leverage on paper is fine and well within prescribed risk limits as the collateral is cash/gilts - i.e. historically very low volatility assets.
As Oldsmoker said, the problem starts when you get idiots who don't understand anything making stupid decisions that suddenly means the price of that low volatility collateral starts going up and down like equity markets.
This means the collateral of the pension funds suddenly start losing value and to cover the margin calls they need to raise capital quickly and sell the most liquid parts of their portfolio - which are usually gilts/government debt, creating a death spiral of continuing gilt price declines. That is until the BoE stepped in and started being a buyer of last resort to stop the price declines and allow pension funds to reset.
It's not weird, it's entirely reasonable and works fine until you get morons stepping in and meddling with things they don't understand.
Hope that helps. [Post edited 11 Oct 2022 11:52]
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Are these financial instruments more or less likely to be designed with inherent weaknesses when there is now the guarantee of central bank QE whenever things go tips up? |  |
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| Bank of England stepping in again. on 13:12 - Oct 11 with 636 views | nrb1985 |
| Bank of England stepping in again. on 12:44 - Oct 11 by nodge_blue |
Whats the point of buying low risk investments only to increase risk by borrowing against them. Defined Benefit pensions ran for decades just buying government gilts.
If they wanted more risk then buying company bonds or a greater percentage of shares would seem a better more straight forward thing to do.
But gilt yields were low so trustees were encouraged into these LDIs. I read one trustee saying then when the presentation was made they didnt really understand it!
And then, who would have thought it, one day inflation happens and suddenly these start to unwind. All this leveraging is just greed. It happened in 2008 in a different way. And now its happened again.
We never learn.
They are weird in the sense that the very funds that have borrowed the leverage are then getting called on for cash themselves to pay others in this death spiral. How can that not be weird? And then rely on the BOE to step in to save a collapse and contagion into other areas.
It does make me angry. The morons are the people that devised these schemes and then sold them into pension trustees. |
I'll try to answer with these one by one.
Defined Benefit pensions ran for decades just buying government gilts:
Yes they did when they gilts actually yielded something. They have yielded next to nothing for over a decade now.
If they wanted more risk then buying company bonds or a greater percentage of shares would seem a better more straight forward thing to do:
Buying those instruments adds significantly more risk than taking very moderate leverage against extremely low volatility government debt.
For context, annualised volatility of the global stock market index (MSCI World) is about 20%, annualised volaitility is of the corporate bond market is 7-8% and developed world government debt is 2-3%.
But gilt yields were low so trustees were encouraged into these LDIs. I read one trustee saying then when the presentation was made they didnt really understand it:
a) LDI is an investment strategy not a thing - it's investing with the goal to meet the income needs of your investors in this case.
b) I'd suggest Trustees that don't understand that are either not Trustees or extremely bad at their job.
And then, who would have thought it, one day inflation happens and suddenly these start to unwind:
If you saw covid, putin and and extreme under investment in fossil fuels coming then you probably should have told someone.
We can argue that perhaps pension funds shouldn't have had any leverage but to your earlier point that would entail them taking even more risk to meet their obligations which would inevitably lead to other problems.
The problem here is the cretins in government not the financial system. What you're saying here is akin to giving a child matches, and then blaming the matches when the kid burns themselves. [Post edited 11 Oct 2022 13:14]
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| Bank of England stepping in again. on 13:26 - Oct 11 with 618 views | nodge_blue |
| Bank of England stepping in again. on 13:12 - Oct 11 by nrb1985 |
I'll try to answer with these one by one.
Defined Benefit pensions ran for decades just buying government gilts:
Yes they did when they gilts actually yielded something. They have yielded next to nothing for over a decade now.
If they wanted more risk then buying company bonds or a greater percentage of shares would seem a better more straight forward thing to do:
Buying those instruments adds significantly more risk than taking very moderate leverage against extremely low volatility government debt.
For context, annualised volatility of the global stock market index (MSCI World) is about 20%, annualised volaitility is of the corporate bond market is 7-8% and developed world government debt is 2-3%.
But gilt yields were low so trustees were encouraged into these LDIs. I read one trustee saying then when the presentation was made they didnt really understand it:
a) LDI is an investment strategy not a thing - it's investing with the goal to meet the income needs of your investors in this case.
b) I'd suggest Trustees that don't understand that are either not Trustees or extremely bad at their job.
And then, who would have thought it, one day inflation happens and suddenly these start to unwind:
If you saw covid, putin and and extreme under investment in fossil fuels coming then you probably should have told someone.
We can argue that perhaps pension funds shouldn't have had any leverage but to your earlier point that would entail them taking even more risk to meet their obligations which would inevitably lead to other problems.
The problem here is the cretins in government not the financial system. What you're saying here is akin to giving a child matches, and then blaming the matches when the kid burns themselves. [Post edited 11 Oct 2022 13:14]
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You have made rational points in a considered way.
But the bottom line for me is that is a DBP is under funded then the company either has to put a cash injection into it or they buy riskier investments.
These LDIs have unravelled too quickly and too fast. Anything designed on this scale should be robust enough to withstand significant events. And its still the financial system that invented them - not the government. The financial system has been bailed out once before at huge cost - it should never have got into any state again where it needed state or BOE intervention. And last time it was because of packaged debt too. Theres a theme and a lesson there.
The financial system is still run to a degree for huge profits - if it makes money then sell it. They need to be much more cautious and less aggressive in their pursuit of that.
I read somewhere that China doesn't need to start a war with America, it just needs to ask of its money back.
This is the state that we've got ourselves into with debt and these LDIs are another piece in that jigsaw. [Post edited 11 Oct 2022 13:30]
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| Bank of England stepping in again. on 15:44 - Oct 11 with 573 views | Cotty |
| Bank of England stepping in again. on 10:28 - Oct 11 by giant_stow |
I think rent caps could only work if accompanied by a huge public house building programme. In fairness to the Tories and Gove in particular (I think) they've already made being a landlord vastly less profitable, but that's now pushing up rents due to less supply. If you capped rents in that scenario, more landlords still would sell up and there's be less supply still - more hardship. [Post edited 11 Oct 2022 10:30]
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This doesn't quite follow. Houses are not bulldozed when landlords sell up. The housing stock still remains. Who is buying the house? |  | | |
| Bank of England stepping in again. on 16:32 - Oct 11 with 560 views | HARRY10 |
| Bank of England stepping in again. on 09:42 - Oct 11 by nodge_blue |
Its never that simple.
Brighter people than me may correct this, but the BOE "buys" the bonds with a view to one day still selling them back to the market or at least redeeming their maturity value.
Its more an act of trying to stabilise a rocking boat.
But to a degree your point is true.
But then again we are in so much debt due to funding Covid and Fuel crisis too. Its a cumulative thing and pensions are the heavy straw and not the biggest cause.
In truth May was always right - there is no magic money tree. At some stage the credit card needs paying off. [Post edited 11 Oct 2022 9:43]
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"In truth May was always right - there is no magic money tree. At some stage the credit card needs paying off. "
actually she was wrong - as she well knew
there is a magic money tree it is called quantiatve easing, or printing money
What May meant was that voters could not expect money (whether funny or not) to be spent on what they saw as important....schools, hospitals housing etc
Unfortunately the pandemic blew that lie wide apart.
So it comes down to what voters want. A government (Thatchers) that made off with so much of what was previously ours (see enclosure acts) to divvy out among the wealthy (inc owners of newspapers), or the Norwegian model where an unexpected bonus (oil) was used to buld a sovereign fund
Just as with tax, which ultimately, no matter how many hands it passes through, is a tax on profits. There is no evidence that tax on companies 'drives them away'. Were that to be true then Scandinavian countries would be bereft of multi nationals and very globally successful companies.
Put bluntly you are either a 'thems our betters' type, or not. | | | |
| Bank of England stepping in again. on 16:40 - Oct 11 with 557 views | jeera |
| Bank of England stepping in again. on 10:28 - Oct 11 by giant_stow |
I think rent caps could only work if accompanied by a huge public house building programme. In fairness to the Tories and Gove in particular (I think) they've already made being a landlord vastly less profitable, but that's now pushing up rents due to less supply. If you capped rents in that scenario, more landlords still would sell up and there's be less supply still - more hardship. [Post edited 11 Oct 2022 10:30]
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I see this has already been addressed but was going to ask the same.
To me the answer has always been to discourage private renting. It's that sector that has had such a massive negative effect on housing stock.
One person owns 10 houses, that's nine properties other people can't buy themselves. Greed and the opportunity being available to exploit people in the first place.
The answer would be to force landlords to sell up over time so putting that stock where it belongs, back into the market place. |  |
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| Bank of England stepping in again. on 18:29 - Oct 11 with 534 views | giant_stow |
| Bank of England stepping in again. on 18:15 - Oct 11 by You_Bloo_Right |
Without wishing to be flippant I'd be all in favour of "a huge public house building programme".
Hic!
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I deserve that!
To answer Cotty, all else been equal, the person buying the house a landlord sells, would be someone who can buy outright or can get a mortgage. If the capped rent made buying to let that house uneconomic for one landlord, surely that would put off the next one, unless they put in more up front to get a smaller loan, but that's comparing apples and oranges I would guess.
Jeera, I don't like the buy to let thing either - for a long time, its been clear that it's only good for a few people. But having encouraged individuals to do this over many years, I reckon it'd be harsh for the govt to come down on them too sharply, and also silly to do that if there weren't a load of new social housing built to replace those places. | |
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| Bank of England stepping in again. on 18:54 - Oct 11 with 520 views | jeera |
| Bank of England stepping in again. on 18:29 - Oct 11 by giant_stow |
I deserve that!
To answer Cotty, all else been equal, the person buying the house a landlord sells, would be someone who can buy outright or can get a mortgage. If the capped rent made buying to let that house uneconomic for one landlord, surely that would put off the next one, unless they put in more up front to get a smaller loan, but that's comparing apples and oranges I would guess.
Jeera, I don't like the buy to let thing either - for a long time, its been clear that it's only good for a few people. But having encouraged individuals to do this over many years, I reckon it'd be harsh for the govt to come down on them too sharply, and also silly to do that if there weren't a load of new social housing built to replace those places. |
I already don't understand how houses are still in so much demand given we were told they were all being taken up by foreigners via EU membership and all that, so by that reasoning we should now have surplus stock bring the prices down considerably.
Yet here we still are.
It seems any 'surplus' is bought up by those who don't need it in order to artificially keep valuations high.
Also forces more borrowing which means more profit for mortgage lenders, more economic 'growth' etc. The truth is that it's just the public being held to ransom and being forced to pay some triple what these places are worth in order to have somewhere to live. The same people are then unable to save for their futures because their outgoings are so high there is little/no expendable income.
They are then told to get better jobs. They are also forced to pay other people to pay to look after their children whilst they are busy chasing their own tails.
They suffer, their futures suffer, their offspring's prospects suffer whilst a few continue to stuff their own pockets.
I have no care whether making homes available again for the masses hurts a few greedy people who have helped create an unnecessary problem by benefitting from those they've helped to put of reach of the property market.
The impact can be lessoned by giving them three years to get their affairs in order.
In three years from *whenever* tiers of taxation would be introduced according to how many properties someone owns. By the time it gets to their 2nd/3rd owning more would be untenable.
They've had a good run at the expense of others.
I'd never get elected would I. [Post edited 11 Oct 2022 18:59]
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| Bank of England stepping in again. on 19:26 - Oct 11 with 504 views | HARRY10 |
"I'd never get elected would I. "
Nope, as it is not those you threaten that would stop you, but the idiots who delude themselves that improving the lot of others comes at their expense.
One of the main causes of a labour shortage, aside from Brexit, is the inability of UK workers to move to where the work is. Own or rent a house north of Birmingham and there is little chance of moving south
Previously when workers were needed in the shipyards, mines, mill factories housing was built.
So whilst East Europeans will willing share a caravan to work on temporary farms, as the money they earn is worth 3-4 times more when taken back, it is not feasible for a UK worker.
Another bit of lunacy was the case I read some while back of a disabled woman living in a crumby one bed flat. It was worked out that by 18 years she could have bought the flat with the money paid. Because of her condition it was paid by housing benefit. Were the local authority to have built that and other flats the loans would have been paid off and so reduced the cost of housing such tenants. Free, rather than £500/£600 a month.
Multiply that by the colossal cost of housing families in B/B and overpriced squalid housing via Housing Benefit.
Sometimes the answers are so simple | | | |
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