It’s all a conspiracy, I tell ‘ee

Unsurprisingly, the reaction of markets to the UK situation has been adverse. Alongside Italy, it has seen the biggest increase in its potential government borrowing costs as a consequence of this war. They have increased by 0.5% as a result. Apart from Italy, France is the only other large country to see an increase of broadly similar scale, with its market interest rate increasing by 0.45%.
What, then, is all this about, and why is it that both markets and the IMF think the UK is going to have such a rough time as a consequence of this war, albeit that I think they have so far altogether failed to estimate the real scale of its consequences and that things are going to get very much worse than they are forecasting?

This is approximately the 500th systemic collapse he has predicted in the last decade and a half. By the logic of a ‘stopped clock’ surely he must be right at some point?

There is just one explanation for why this is going to be the case, although that one explanation can be interpreted in a number of ways.
Rachel Reeves is the explanation. She is the cause of our problems. UK interest rates are going to be worse than in other countries, and our growth rate is going to be smaller because her actions will ensure that this is the case.
That suggestion requires elaboration.

As the great ‘BiS’ makes the point frequently, one thing noone can accuse any government since Cameron (or even before) of is ‘insufficient spending’ – at least outside of the fantasy land which MMT advocates inhabit.Let’s be very clear I actually agree Rachel Reeves is the cause of many of our problems. She is Chancellor of a government so bad one can scarcely credit it. However one would have to be either spectacularly ignorant, genuinely evil or power mad or in this case all three simultaneously to think the problem in the UK is caused by ‘insufficient government intervention’

Firstly, the sheer size of the London financial market-based economy is one reason why we will always have excessive market speculation against perceived government courses of action in the UK. When you provide a few people in the City of London with a toxic weapon, in the form of control over other people’s money, with the opportunity to speculate against the best interests of their government, whose thinking they believe, with good reason, will be excessively rigid when it comes to issues of economic management, you provide those few people with the opportunity to undertake speculative trades from which it is almost certain they can profit, at cost to both the country where they are resident, the government whose activities they are undermining, and the people whose funds they are using to undertake this activity.

I know Tim’s penchant for being ‘tongue in cheek’ often comes to the fore in these posts but there really is very little to separate the above from the rhetoric in 1930s Germany – combined with his obsession with zionism you do have to ask the question whether he’s actually not that far from being a fascist himself?

Saying this, let me be clear about what I mean. Amongst those who will be speculating about UK interest rates will be pension funds, life assurance companies and maybe banks, all of whom will be entrusted with money saved by individuals within the UK economy, all of whom will be worried about their future at present.
Rather than accept their fiduciary duty to those people to deliver long-term overall well-being on their behalf, the UK’s preferred savings structures, such as pension funds, separate the interests of savers from the interests of those who manage saved funds, and provide savers with insufficient alternative options for places to locate their money for a greater social purpose. This means that those institutions can speculate for short-term gain, even though doing so almost invariably undermines the well-being of the people who have saved with them.

ESG Funds have been found wanting in performance terms and the ‘zero return’ bonds for Murphy/ Hines Green New Deal would really be attractive to savers in this environment. I am also struck by the equation of ‘long -term well being’ with a convenient and lucrative sinecure for the author.

The types of reform of the UK saving system that I have persistently promoted on this blog would help alleviate this problem. There is no sign that Rachel Reeves has considered taking action to reform savings in the way that I suggest, and the consequence is that this activity located within the City of London persists, even though she is aware that it is undermining the country’s well-being. That represents a failure on her part.

As always, salvation is at hand – for a small fee then if Reeves simply does whatever Murphy suggests everything will be fine. A lot of bridge sellers take note…

I am sure Gamecock will more effectively torpedo this but as with so many Murphy posts – many words to reach the same conclusion. He is right about everything.