Truss and the Brit mortgage market

[skuthorp]

It isn't.
Lenders are saying they cannot set a rate because of uncertainty and are withdrawing from the market. It was already in trouble.
What's the situation in America?
In Aus. RE prices havedropped and money is tight.

[Peerie Maa]

[Chip-skiff]

Yet more evidence that political orientation affects math skills.

Despite the repeated dogma about tax cuts stimulating economic growth, there has been no example whatsoever of this taking place.

[Peerie Maa]

Yet more evidence that political orientation affects math skills.

Despite the repeated dogma about tax cuts stimulating economic growth, there has been no example whatsoever of this taking place.

Most of our RWWs are Thatcherite, so are locked into Reaganite thinking.
The thing about dogma is that politicians do not have to engage brain to repeat them.

[Paul Pless]

Despite the repeated dogma about tax cuts stimulating economic growth, there has been no example whatsoever of this taking place.

actually tax cuts can and do often spur economic growth
that's why they are so widely used as parts of stimulus packages for one thing

what tax cuts do not do is increase tax revenue, quite the contrary to what most republicans since reagan have claimed
another thing tax cuts do not do is share the benefits of tax cuts across the income spectrum in any way resembling equality nor proportionality

[Andrew Craig-Bennett]

I have just been reading Larry Summers’s Twitter.
And much more in the same vein from others.

Mary McCarthy (let’s call “Liz Truss” by her actual name) and her Chancellor of the Exchequer have done something far worse than just causing the property (real estate) market to stumble.

We all remember the joke about coming back as the bond market because that way you can terrify everyone.

Well, British government bonds are called “gilts”, and today the gilts market is scaring a lot of people.

Truss said she intended to exchange short dated gilts for longer dated gilts.

Well, now she can’t. The price of long gilts has risen to the point where the British Government cannot afford to buy them.

We have a problem.

When Larry Summers writes that he expects the £ to fall below both the € and the $, I pay attention.

[Peerie Maa]

actually tax cuts can and do often spur economic growth
that's why they are so widely used as parts of stimulus packages for one thing

Is that all tax cuts, or only Corporation Tax and the other taxes applied to businesses?

[Paul Pless]

Is that all tax cuts, or only Corporation Tax and the other taxes applied to businesses?

very generally speaking, anything that increases the supply of money in consumers hands spurs economic growth; so given that, all tax cuts spur economic growth to various extents

some tax cuts, such as cuts to sales or consumption taxes spur economic growth through a different mechanism than cuts to income taxes - one is supply side (reduction of cost of goods and services) and one is demand side (giving consumers more money to spend)

in the united states, the big divide over tax cuts and their benefit to the economy and the population as a whole has usually centered on the cutting of income tax rates for the wealthy

[Andrew Craig-Bennett]

very generally speaking, anything that increases the supply of money in consumers hands spurs economic growth; so given that, all tax cuts spur economic growth

… not so fast!

If tax cuts damage essential infrastructure, like roads, or electricity, or ports, trade flows more slowly and at greater cost.

[Paul Pless]

andrew, i think we'd file that under the long term consequences of poor tax policy, poor fiscal policy, poor economic policy overall, and poor governance in general - all hallmarks of the political right



btw, we can add to the list above of 'failings of the right due to economic shortsightedness and greed' things like poor regulatory oversite, gutting of the administrative state (currently seen in the u.s. by a poorly functioning i.r.s.) privatization of essential government services, bailouts (everything from environmental superfund sites to bank and insurance bailouts) anyone can add to the list ad infinitum. . . they all have catastrophic consequences for economies in the long run and they all are the result of right leaning dogma

[Peerie Maa]

very generally speaking, anything that increases the supply of money in consumers hands spurs economic growth; so given that, all tax cuts spur economic growth to various extents

some tax cuts, such as cuts to sales or consumption taxes spur economic growth through a different mechanism than cuts to income taxes - one is supply side (reduction of cost of goods and services) and one is demand side (giving consumers more money to spend)

in the united states, the big divide over tax cuts and their benefit to the economy and the population as a whole has usually centered on the cutting of income tax rates for the wealthy

The reason that I asked was:

• Low wage earners don't pay much taxes, so a small change to not a lot has little effect on their buying power.
• The top 10% probably don't spend a big proportion of their income, so a tax cut will not encourage them to spend any more.

So does cutting income tax really have that much of an effect?

[Paul Pless]

So does cutting income tax really have that much of an effect?

it certainly can, i think much of it depends on the overall conditions in the economy at the time

obama signed tax cuts into law as part of his relatively small stimulus post george w bush recession/post collapse of the financial markets due mostly in my opinion to poor regulation

those tax cuts were wide ranging from reductions in top tax brackets, to increases in the earned income tax credit and a 'holiday' on fica - along with very very cheap money from the fed they cushioned the effects of the recession and began the process of slow stable growth in our economy for the next ten years

trump comes along, installs a fed chief that continues to insure a large money supply and further reduces taxes to the rich and reduces regulatory oversite and in my view irresponsibly pours gas on the economy

we certainly saw economic growth due to tax cuts in both cases

another example of tax cuts, aimed at the not wealthy are sales tax holidays - these are state and local events held for various reasons throughout the year in the unites states - sometimes they coincide with the beginning of the school year, other times they coincide with the christmas holiday shopping season - their purpose may be otherwise, but their effect is to spur local economic activity - chambers of commerce love them

[Peerie Maa]

OK, Other tax cuts yes, income tax cuts not so much.

[Paul Pless]

OK, Other tax cuts yes, income tax cuts not so much.

i don't know the effect, i haven't looked at the numbers, my argument for or against tax cuts lies in other directions

my gut feeling is that cutting taxes on the rich has as much or more of a positive stimulus effect on the economy as does cutting taxes on the poor, we certainly see this in the housing market for example and the durable goods markets and in the market for new vehicles

where i disagree with tax cuts for the rich is they represent in my belief poor long run fiscal policy and poor economic policy - i don't believe in the laffer curve and i believe 'trickle down' policy exacerbates income inequality

[Gerarddm]

The Laffer Curve should have been named the Laugher Curve. What unadulterated nonsense. Again, Reagan to blame.

[Peerie Maa]

The UK government should reconsider its plan for tax cuts, the International Monetary Fund has said, warning that the measures are likely to fuel the cost-of-living crisis.
In an unusually outspoken statement, the IMF said the proposal would be likely to increase inequality and add to pressures pushing up prices.
Markets have already raised alarm over the plans, sending the pound plunging.
The government says the measures will kickstart economic growth.
Chancellor Kwasi Kwarteng unveiled the country's biggest tax package in 50 years on Friday, funded by the government borrowing tens of billions of pounds.
The IMF, which works to stabilise the global economy, said it understood the package aimed to boost growth via tax cuts, but it said that it could boost inflation, which the UK's central bank is trying to bring down.
"Furthermore, the nature of the UK measures will likely increase inequality," it said.
The UK government proposals would scrap the top rate of income tax, and end a cap on bankers' bonuses, among other measures.
The announcement on Friday sparked days of financial turmoil, as investors dumped the pound and UK debt, and some of the country's biggest lenders suspended mortgage deals amid the uncertainty.
The Treasury said: "We are focused on growing the economy to raise living standards for everyone."
It added that Mr Kwarteng was due to publish his medium-term fiscal plan on 23 November, which would include ensuring that UK debt falls as a share of economic output in the medium term.

https://www.bbc.co.uk/news/business-63051702

[Andrew Craig-Bennett]

Thwack!

The Labour Party have been having a high old time at their Conference, today, and are more or less sorting out who gets which office when they move in. 17% ahead in the polls and counting.

I suspect that Kwarteng’s “Fiscal Event” last Friday was intended as the basis for a snap election. and that has gone about as well as Putin’s three days to take Kyiv…

[gypsie]

IMF are scathing.

UK government are essentially trying to undermine the central bank. Fiscal and monetary policy pulling in opposite directions. Another own goal, possibly as big a brexit, in the short term anyway.
This will get worse before it gets better.

[Paul Pless]

one wonders if certain britains have decided to rid themselves of their debt via inflation

The UK government should reconsider its plan for tax cuts, the International Monetary Fund has said, warning that the measures are likely to fuel the cost-of-living crisis.In an unusually outspoken statement, the IMF said the proposal would be likely to increase inequality and add to pressures pushing up prices.
Markets have already raised alarm over the plans, sending the pound plunging.
The government says the measures will kickstart economic growth.
Chancellor Kwasi Kwarteng unveiled the country's biggest tax package in 50 years on Friday, funded by the government borrowing tens of billions of pounds.
The IMF, which works to stabilise the global economy, said it understood the package aimed to boost growth via tax cuts, but it said that it could boost inflation, which the UK's central bank is trying to bring down.
"Furthermore, the nature of the UK measures will likely increase inequality," it said.
The UK government proposals would scrap the top rate of income tax, and end a cap on bankers' bonuses, among other measures.
The announcement on Friday sparked days of financial turmoil, as investors dumped the pound and UK debt, and some of the country's biggest lenders suspended mortgage deals amid the uncertainty.
The Treasury said: "We are focused on growing the economy to raise living standards for everyone."
It added that Mr Kwarteng was due to publish his medium-term fiscal plan on 23 November, which would include ensuring that UK debt falls as a share of economic output in the medium term.

[John Meachen]

one wonders if certain britains have decided to rid themselves of their debt via inflation

Shortly after the quite generous furlough payment scheme was announced when the pandemic flared up I was talking to a contact who is in the financial services business and we concluded that a spell of inflation to reduce the scale of the debt was quite likely.The recent quite exceptional increase wouldn't have been planned,its just a consequence of senior politicians with L plates on their office doors.The opinion polls won't be cheering them up.

[P.I. Stazzer-Newt]

......The opinion polls won't be cheering them up.

Indeed not...
https://www.itv.com/news/2022-09-29/...es-in-new-poll

[AndyG]

The residents of these isles don't often take to the streets, nor hold general strikes: but I think we're getting there.

Andy