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Nothing surprises me about this. If you accept that bond markets must be obeyed, as they do, of course they think they must jump to the City’s tune.

They accept the rule of the bond market because they refuse to accept QE cancels government debt, when it undoubtedly does, and that this puts government money creation in the economic driving seat.

No one does say that bond markets must be obeyed. What they do say is that bond markets – as with any and every other market – will react to what government does. Which means that if you do the things which lead to bond market reactions that you don’t like then perhaps you need to reconsider doing those things.

Perhaps the most important of these reactions is that you can only control – at best – two of three things. The size of the money supply, inflation and the exchange rate. You can’t, at the same time, control all of them.

The easiest proof of this is to think about the gold standard. That – clearly – controlled the exchange rate. But as everyone also knows that meant that you couldn’t control the money supply. Therefore and also inflation wasn’t something under domestic control.

We can also make this a wider point. The people will react – not just markets, which is the interaction of people – to what government does. Institute a poll tax and get riots. That’s just the people reacting to what government has done in instituiting a poll tax. Shrug.

In this wider sense there’s no difference between riots in Trafalgar Square and those in bond dealing rooms. Do this, that’s the reaction, because that’s what folk do.

Fat Contollerism doesn’t work.

4 thoughts on “Err, no”

  1. Think you picked the wrong example there with the supposed “Poll Tax Riots”. From having been around at the time, I’d say the majority of people rather liked the Community Charge. Especially in comparison to the previous rates system which was a way of high spending councillors buying votes at the expense of the ratepayers. The “Riots” were a political thing orchestrated against the Thatch government by the usual supects. Poll Tax was just what they hung it on. Sure, on the streets, it picked up the ever present idiots who want a bit of participant “theatre”. It was actually crafted to do that. And of course the media, particularly the BBC, made out of it what suited their agenda.
    The only people I ever heard bitching about the community charge were those that hadn’t been paying anything under the rates system. Over 4 quid a week wasn’t it?

  2. My favourite paragraph in this post!!

    If anyone thinks I am going to live with this madness any more than I was willing to live with the madness of Tufton Street, then they are seriously mistaken. Austerity from Labour will be no better than Tory austerity.

    ‘I’m mad as hell and I’m not going to take it anymore! Hilarious!!

  3. Does anybody honestly believe that “the market” wants Britain to raise corporation tax by 30% during the worst inflationary recession any of us have seen in our puff? Lol, no.

  4. It’s rather amusing to hear Starmer complaining about the effect of government policy on City prices. Just what does he expect to happen if he ever got his hands on the levers of power? Are we seriously going to see a manifesto of austerity from Labour?

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