Second, I believe that she was not warned about the risk to her plans from liability-driven investment programs within the UK’s pension funds. I entirely believe her about this because I have little doubt that this particular crisis was not created by the mini-budget issued by Kwasi Kwarteng on 23 September 2022. It was instead almost entirely created by the announcement by Bank of England, Governor, Andrew Bailey on 22 September 2022, that he was about to launch an £80 billion quantitative tightening programme. That would require persistent long-term high real interest rates which markets knew would be unsustainable within the UK economy and which would, as a result, undermine the whole of the liability-driven investment program that had been pursued by many UK pension funds, which was entirely dependent upon stable interest rates.
Err, no, not really. The problem was rates changing too fast for people to be able to move their portfolios. LDI doesn’t depend upon the level of interest rates. Rather, on their not changing too far too fast. Which was the problem. And that’s also why the BoE has already – at great profit – reversed the position it took to clam that specific problem.
Spud’s analysis is 100%, exactly and precisely, wrong.
This is also good:
The neoclassical/neoliberal viewpoint (and I see them as the same)
Neoclassical is “things happen at the margin”. Neoliberal is me. These are not the same thing.
It is fairly clear, however, that Bailey did launch the coup, probably to divert attention from yet another regulatory fuck up. Who was it who allowed pension funds to get into LDIs?