The IMF queries Bank of England policy

In an interesting recent IMF blog three senior officials advise Central Banks on how to balance counter Ā inflation policy with the need to avoid problems with banks and non bank financial institutions.

They look at how UK pension funds and liability driven investment strategies revealed ā€œthe perilous interplay of leverage, liquidity risk and inter connectednessā€. They query how a Central Bank injecting liquidity to ease such a situation could complicate the fight against inflation. They Ā propose three types of permitted intervention.Ā  Discretionary market wide intervention targeted to segments at risk. Lender of last resort loans. Standing Ā loan facilities for non bank financial institutions in need.

They go on to stress ā€œClear communication is critical, so that liquidity support is not perceived to be working at cross purposes with monetary policy. For example, purchasing assets to restore stability while continuing with quantitative tightening to bring inflation back to target may cloud intent and complicate communication. ā€œ Yet this is what the Bank of England tried over LDI.

ThisĀ  is what the Bank of England did. They deliberately drove bond prices down by announcing Ā and commencing a large bond sale programme. This led to big losses in pension funds, and more calls for cash on the geared positions in government bonds LDI funds were running.Ā  LDI funds then also sold bonds to meet calls making their positions worse and increasing the losses. The Bank then bought up some bonds to reverse some of the price falls it had helped create.

The truth is the Fed and the Bank of England printed too much money and kept rates too low in 2021.In the last year they rushed to tighten, causing tremors in UK pension funds and some US regional banks. When financial instability Ā appeared they both eased by supplying money to markets offsetting the severe Quantitative tightening they were still executing. They should both take money and credit growth more seriously and stop lurching from too easy to too tight.

It is strange the leading western Central banks all thought they could create money and buy bonds at ever higher prices to ease conditions without it causing inflation. They were wrong. Now they think they can sell bonds at ever lower prices, tightening money and drying up liquidity without it causing any problems amongst banks, pension funds and other large holders of bonds.Ā  Why?

107 Comments

  1. Mark B
    April 11, 2023

    Good morning,

    The problem has been poor regulation right from the outset of the New Labour government. The New Labour government then went on a pension raid and a PPI bonanza, loading the State, and especially the NHS, with off-the-book debt to get around EU Economic policy rules.

    The raid on private pensions destroyed not only a lot of peoples long term savings but, confidence in the market. This, along with low interest rates and cheap money, led people into buy-to-let and so started the property boom. The government were not to bothered as it raised Stamp Duty and just collected more money for nothing.

    All the above led to pension funds without new cash coming in and so, they had to go elsewhere and take in more risk. They were then screwed once more when the government lost control of the economy.

    The above can be put down to reckless spending on projects no one wanted such as HS2. Our essential services and roads are crumbling away, but that is OK, because the government has a solution. Just force people off the roads and splash the cash on carbon capture, because despite it all, ‘we’ need to save the planet !

    1. Sir Joe Soap
      April 11, 2023

      Yes the problem began with Brown circa 2000 spending all he could, taking from the middling poor to give to the feckless and the NHS. People noticed and voted the Tories in in 2010 to recover the situation, but they continued in the same vein. So you can only politicise this by saying that both Labour and Tories are big tax and spenders.

      Ultimately, the more pertinent question is “who is behind these politicians, pushing them into profligacy, and us into bankruptcy?” It wasn’t always like this.

      1. Mike Wilson
        April 11, 2023

        People noticed and voted the Tories in in 2010 to recover the situation,

        People noticed the 2008 crash. Thatā€™s all, nothing else. The Tories version of ā€˜recovering the situationā€™? Well, when Labour left office in 2010 the national debt was 1.2 trillion. The Tories have whipped that up to 2.3 trillion. The Tory reputation for fiscal competence is well deserved.

      2. mancunius
        April 11, 2023

        It’s not happening accidentally, that’s for sure.

        1. rose
          April 11, 2023

          No, it’s not. Hunt has just put a not very bright rejoiner on the MPC.

    2. Ian B
      April 11, 2023

      @Mark B ‘poor regulation’ or is it not management, no responsibility, just jobs-for-the-boys, reward failure

    3. Ashley
      April 11, 2023

      +1 indeed an insane government agenda a choice of green crap ConSocialists or green crap Socialists.

  2. Javelin
    April 11, 2023

    Iā€™ve worked in investment banks for 35 years and my observation is that the Treasury and Bank of England decision making is done first and foremost to protect civil service salaries and final salary pensions. When you understand this you understand why they do what they do.

    1. Aden
      April 11, 2023

      The debts are so large they wonā€™t get the pensions

      1. mancunius
        April 11, 2023

        Oh they will, even if their nepotistically appointed successors do not.

  3. turboterrier
    April 11, 2023

    The more I read your entries on the actions of the BOE and other Westen financial institutions it just keeps prompting the question in my mind, are they really fit for purpose and acting in th best interest of the government’s they are supposedly meant to serve?
    Are there outside interests influencing their decisions?
    China has its financial tentacles everywhere buying up businesses and swathes of natural resources all indirectly funded by the Western Economies buying all their essential equipment, products and supplies supercharging their economy.
    If they woke up to the possible threat and curtailed purchasing nye everything from the Chinese that I feel would have a disastrous effect on the Chinese financial institutions and banking system. The amount of business done with them by the USA alone would surely do a lot of damage to them. President Trump had big concerns, so should we the whole of our NZ aspirations lie in the hands and control of Chinese companies.
    For that change to happen you need exceptional, strong leadership from all the Western World governments. That makes it a total non runner for starters.

  4. Javelin
    April 11, 2023

    John you omitted a crucial fact in your discussion. The LDI fiasco only came about because of high risk-growth strategies to support final salary pensions, which are mostly Government pensions.

    The Government have run productivity down through high taxes to pay for Government to grow and Government salaries to grow. This lower productivity lead to lower growth in pensions, which has been propped up through QE and high risk pension growth.

    Money printing through lock down was mainly to pay for Government salaries through maintaining income tax and corporate tax. Small businesses were thrown to the wall because they donā€™t pay so much tax.

    1. glen cullen
      April 11, 2023

      I can second that

    2. Berkshire Alan
      April 11, 2023

      Javelin
      Thank you, my thoughts entirely, they are killing the goose that pays the taxes, which Government then wastes or redistributes at will !

  5. Peter Wood
    April 11, 2023

    Good morning.
    Let’s not over-think this. When Ms Truss came into office she appointed an inexperienced minister to be Chancellor, together with her own lack of experience they decided to effect a major shift in national economic policy, with only a half-baked plan. This they dumped on the market, and the sleepy chap at the BoE, who was asleep at the wheel as usual, took no notice until gilts started to drop, as yields rose as intended. What a surprise!
    Did a panic need to ensue? No. If the BoE were awake they could have quietly managed the gilt sales and maintained order. They didn’t, and that’s the question that needs answering.

    1. Ian B
      April 11, 2023

      @Peter Wood – are you really that sure, or is that the BoE and Treasury line? Someone was breifing against them and their aims which in reality was the only problem – for once it wasn’t the markets.

      Which ever way yo look at it this Conservative Government has niether background nor ability to effect the paradigm shift required at the BoE and the Treasury to move us all forward

      1. Peter Wood
        April 11, 2023

        You suggest there were darker forces at work, well, possibly, but I’m trying not to rush down that rabbit hole. I think this was simply political inexperience, that pushed too hard on a policy that was already heading in one direction. Then a lack of timely reaction from somebody, to a market moving swiftly. When a run starts, it gathers pace quickly, quick reaction at the BoE, to do their job of keeping orderly markets, would have saved Truss. Instead we had show-boating from the BoE, and that’s what is out of character.

        1. Mark B
          April 11, 2023

          Peter

          You raise a good point regarding experience. The Cabinet could have done with some much older and wiser heads. Instead they went with ‘Yoof’ (relatively speaking) and inexperience. That is why we have different PM’s but the same old faces.

        2. IanT
          April 11, 2023

          Clearly there were mistakes made but in terms of what happened at the time of the ‘mini’ budget – Truss & Kwarteng were unfairly blamed for what happened to Gilts and LDIs in my view.
          These problems were caused by inept (barely describes it!) managment at both the BoE and the Pensions Regulator. Gilts had been falling steadily since the beginning of the year, exacerbated by BoE actions. The LDI problem had been flagged by a number of well-respected pundits 18 months prior to this with no action by TPR. There wasn’t too much wrong with what Truss planned and the really big spend on energy support (which had been long predicted) wasn’t contentious. By comparison, the cut in 45% tax was very small and wouldn’t have caused any issues at all in hindsight.
          So why did the IMF (and even Joe Biden) need to get involved? If I had to point a finger at just one person though, it would be Andrew Bailey. Why Savid Javid ever thought he was a suitable candidate after his term at the FCA – I have absolutely no idea.

          1. mancunius
            April 11, 2023

            Who chose Sajid Javid? Cameron.

          2. rose
            April 11, 2023

            Bailey is said to have been Scholar’s choice not Javid’s.

          3. glen cullen
            April 11, 2023

            That ‘mini’ budget was to get people interested in growth again …it was all about projecting growth, and it got shot down

    2. Lynn Atkinson
      April 11, 2023

      Interesting that the ā€˜inexperiencedā€™ budget (which could easily have been improved in 100 ways I agree) had the IMF forecasting growth for the U.K. immediately!
      How bad is the ā€˜experiencedā€™ budget to reverse that so comprehensively?

  6. Lynn Atkinson
    April 11, 2023

    Maybe because they did not attend your bond market lecture? I understand the average age in the Treasury is 29.
    They live in a parallel world where Sterling and Monopoly money are indistinguishable. In monopoly the amount of money is set, so there is no experience gained of increasing and de reading the amount of money on the board.
    Maybe itā€™s time to create a new game? Although as they have named themselves Generation Z (the last generation) I wonder if itā€™s worth it?

    1. Bloke
      April 11, 2023

      Age should not be an issue.
      If someone makes the right decisions they are right.
      However there are too many bunglers creating nuisance.

      1. IanT
        April 11, 2023

        Age should not be an issue but a lack of experience certainly is.
        Many now in senior positions have only worked during a period when MMT-based policies have completely distorted Western economies and inflated many global asset classes. They’ve had zero experience of working within a free economy with all its very real ups and downs. Gordon Brown thought there would be no return to Boom and Bust without recognising that both have their uses within the business cycle. Wealth & savings are built during Boom times and Bust weeds out the insolvent companies and overpriced asset classes.
        Our current Leaders (both Political & Business) have no experience of these cycles, as they have been artifically supressed. I suspect that we will now see some very strange behaviour as a result. In fact we already have, Mr Hunt is raising taxes as we hover on the edge of recession. We are in the first tax week of this fiscal nonsense but I suspect that it won’t take too long to start seeing the unwanted outcomes…

      2. mancunius
        April 11, 2023

        Age is an issue – where all the decision-makers are inexperienced and unaccountable, it creates a toxic and self-indulgent peer-group bias

      3. Lynn Atkinson
        April 11, 2023

        JR was very young, but an extraordinary talent. You canā€™t appoint young people to imbue them with talent. Unfortunately many of the old ones merely have 1 years experience 30 times over – I agree, but you look for talent and promote it even if – horror of horrors – it comes in a pale, male grey suit! šŸ˜±

  7. Walt
    April 11, 2023

    Re para. 4 of your post, why were Liz Truss and her Chancellor blamed for the outcome of the BOE’s deliberate action?

    1. Richard1
      April 11, 2023

      I believe the chancellor has to prove monetary interventions in the bond market, so presumably Kwasi signed off on this push-me-pull-you exercise?

      1. Richard1
        April 11, 2023

        Approve

    2. Ian B
      April 11, 2023

      @Walt They were briefed against by those resiting much needed change ā€“ comes to mind.

    3. Lynn Atkinson
      April 11, 2023

      Because the panic set in only after Truss herself confirmed at the Despatch Box that she was NOT going to cut spending to pay for her programme. That was the gift that the establishment needed to push the panic button.

  8. Ian wragg
    April 11, 2023

    Off topic but very pertinent. I hear that Poland is too fabricate the hulls for the Royal Navies Type 31 shops
    Given that Spain is doing th same for the three close support ships, one can see a pattern emerging
    All the blacksmith type work done offshore to compliment the net zero nonesense. No thought for the livelihoods or cost to the UK taxpayer.
    You really do deserve a ling period in opposition to decide who’s side you’re on

    1. glen cullen
      April 11, 2023

      A national disgrace

  9. Sakara Gold
    April 11, 2023

    Why? The answer is the derivatives market. When global debt exceeds 250% of global GDP and ginormous sums are gambled daily on derivatives by huge investment banks, the central banks become lenders of last resort. Central banks (“buy side”) hold huge amounts of government debt (“supply side”) bought when interest rates were at, below, or close to zero. Now that interest rates are inexorably rising across the world, these (frequently leveraged) positions are seriously out of the money and are subject to margin calls.

    Warren Buffett – the Sage of Omaha – once described derivatives as “financial weapons of mass destruction” Hard assets like gold are the only protection from the growing risk of a global banking collapse. Sovereigns are good, as are krugerands. Kilo bars held in secure London or Zurich bullion vaults are even better.

  10. MPC
    April 11, 2023

    So itā€™s all the Bankā€™s fault and nothing to do with the political party in power with a substantial majority

    1. Ian B
      April 11, 2023

      @MPC correct, we have a Conservative Government unable, unwilling and just plainly refusing to ‘manage’ on behalf of those that elected Conservative at the last election or the Country as a whole. They know the damage they are doing to the Conservative Party and the Country, but hay ho we are off soon and it was fun while it lasted…

      Just everyone else has to pay and pick up the mess. Then again its CCH and Conservative MP’s and the Greater Party that are perpetuating the misery by not bring the Conservative Government into line with Conservatism.

    2. rose
      April 11, 2023

      When Miss Truss and Mr Kwarteng looked as if they might reform the Bank they were both got rid of, pronto. They had a fair sized majority, but an ignorant and easily led one.

  11. Anselm
    April 11, 2023

    Caution: I do not know anything about money.
    My Question: I thought that every bank had to have a reserve in specie. Wasn’t the 2008 crash caused by derivatives taking the place of specie? How many banks are resting on derivatives today?

    1. Mark B
      April 11, 2023

      The problem, well one of them, is that the derivatives were repackaged and sold multiple times, effectively creating a financial world of mirrors.

      ie No one really knows.

  12. Nottingham Lad Himself
    April 11, 2023

    Under the Tories the UK economy has become ever more financialised.

    Its problems are obvious.

    Unsurprisingly, the IMF have noticed.

  13. Sea_Warrior
    April 11, 2023

    A good, mind-stretching article, Sir John.
    Are our financial institutions obliged to hold gilts? I seem to recall that some of them are. I wouldn’t touch the product with a barge-pole. Perhaps the obligations should be removed until this government stops spending like crazy, financing itself with debt.

    1. Aden
      April 11, 2023

      The debts are so large they wonā€™t get the pensions

      1. a-tracy
        April 11, 2023

        Aden, if the public sector doesn’t get their pension then the whole country is screwed because state pensioners definitely won’t get theirs 2021/22 expected state pension spend according to Statista was 104.5bn compared with just over 102bn the previous year (although pension payouts have dropped because of covid), how will they fund the pension credits in the future?

        The OBR says “Welfare spending is the biggest source of Annually Managed Expenditure spending, with pensioner spending the biggest item in the social security budget (accounting for 47 per cent of the total in 2022-23, down 0.4 percentage points from 2021-22).” https://obr.uk/forecasts-in-depth/tax-by-tax-spend-by-spend/welfare-spending-pensioner-benefits/

        It would be interesting to see the split, state pension, pension credit, pensioner housing benefit, winter fuel payments, pension disability benefits.

        “Pensioner benefit spending is forecast to total Ā£123 billion in Great Britain in 2022-23, of which we project Ā£110 billion will be spent on state pensions.”

        Aden, do you know how much per year is spent on the public sector defined benefit pension bill?

        1. hefner
          April 12, 2023

          Thepensionsregulator.gov.uk, 08/12/2022, ā€˜Annual report on UK defined benefit and hybrid schemesā€™. Does Figure 7 (partly) answer your question(s)?

  14. DOM
    April 11, 2023

    Biden wants to see a united Ireland ie the destruction of the UK

    1. Ian B
      April 11, 2023

      @DOM so does the Conservative Government, they appear to act as member of the Conservative and Unionist Party in name only

      1. Timaction
        April 11, 2023

        Indeed they do. There deal is awful for the people of Northern Ireland as was there deal for the UK. WTO was the right way to go, not level playing fields in EU’s favour. The Tory’s are useless. Boat people still coming, no one ever deported, paid for by ever higher taxes. Mass minimum wage immigration continues and therefore NHS waiting lists grow. Congestion grows, building on the greenbelt continues whilst they export our jobs and manufacturing on their alter of net stupid. The Tory’s need to go the way of the Dodo, as do Labour. We desperately need Reform.

        1. Whisperit
          April 11, 2023

          There is very little wrong with the framework deal – 70 per cent in NI agree with it however we should have had all of this spelled out to us beforehand, ie. before brexit, by the DUP and Tories so it’s not the EU’s fault nor Biden’s nor RoI fault. The blame for the difficulties we are now in lies much closer to home – remember promises made by Boris, Gove, IDS, Peter Bone and Bill Cash etc not to forget the two lords Lamont and Lawson also the other deluded – havn’t heard a peep from any of them in months – it was the spin and lies told that has us in this dark place.

    2. Sea_Warrior
      April 11, 2023

      I’m beyond disappointed that Sunak allowed Biden – a man who happily posed with ā€¦..Rota O’Hare – into Northern Ireland to pose as an Irishman.

      1. Lynn Atkinson
        April 11, 2023

        Two posers thenā€¦.

    3. rose
      April 11, 2023

      He’s not the only one.

  15. Ashley
    April 11, 2023

    Correct. As to why headed up by fools perhaps. Bailey while at the FCA gave us one size for all personal overdrafts (regardless of credit rise) at 40% effectively abolishing them for sensible borrowers. Such a foolish man is not suitable to run any bank.

    1. Ian B
      April 11, 2023

      @Ashley he was also warned while at the FCA by his own people that LDI funds needed to be brought into line, then he failed. It is reasonable to suggest that the extra call on the Taxpayer under the guise of a Liz Truss fail, was him hiding his tracks with a Taxpayer bail out.

  16. Cuibono
    April 11, 2023

    The Telegraph confidently announced yesterday that the IMF predicts U.K. inflation will fall soon and interest rates will return to-pre pandemic, ultra low levels. As if that were a wholly desirable scenario!
    I always thought that a large part of banking was the fact that people lent banks their savings in order to earn interest. ( NOT that banks suddenly turned poacher and printed money).
    As ever, ordinary people, living by the rules, are expected to put up and shut up!

    1. Bloke
      April 11, 2023

      Banks invite customers to ā€˜investā€™ in them.
      All they are doing is asking to borrow money they donā€™t have to gamble with it.
      People who manage their own money better should invite banks to invest in them,
      saying:
      ā€˜If you want to borrow from me the charge is 12%. Take that or get nothing!ā€™

      1. Cuibono
        April 11, 2023

        ++100
        Brilliant idea!
        But if they printā€¦do they even need our money?

        NB ā€œPrintingā€ ā€¦counterfeitingā€¦ is illegal for anyone except the banks!

    2. Mark B
      April 11, 2023

      When you borrow the banks create money out of thin air (so to speak) and then charge you interest on it. Nice work if you can get it. They then sell the ‘risk’ (ie you not paying the amount plus interest back) through derivatives, effectively spreading their ‘risk’. Works OK when you have a very small number of ‘High Risk’ borrowers as the interest from more safer borrowers covers the losses from defaults. But not so good as what happened in the USA when they sold to ‘Sub-prime’ borrowers (ie people who were very high risk of defaulting) as the market cannot stand the losses. This is what happened in 2008.

  17. Sharon
    April 11, 2023

    Why?

    Crash the economies and introduce digital currency?

    Or they are collectively inept?

    1. Mark B
      April 11, 2023

      Sharon

      More introduce Digital Credits in the form of a currency. Be a good boy and girl and we will let you have some ‘time limited’ credits to spend on things we the State want you to spend on. Want that nice foreign holiday ? Well, will you Digital Credits cover you and you CO2 emissions ? Because is it does not, you cannot have it.

      They are ‘Building Back Better’ in order so, that you ‘Will own nothing and will be happier’ because we will all be Levelled Up to receive the same.

      All humans are equal. But some humans are more equal than others.

      1. glen cullen
        April 11, 2023

        Spot on Mark B …..I don’t trust our government(s)

  18. Stephen Reay
    April 11, 2023

    The BoE and this government kept interest rates too low for to long prior to 2021. Quantitative easing was meant to be an emergency measure but the rich just got richer whilst the poor just got poorer. Quantitative easing should be for emergencies only, blame the government not the BoE.

    1. Mark B
      April 11, 2023

      The System is run by the rich for the benefit of the rich.

  19. Berkshire Alan
    April 11, 2023

    I lost faith with the Banking and financial institutions years ago, since the customer always seems come out second best to them making money out of my money, no matter if you win, lose, or draw.

    When in business all the Banks wanted to do was suggest that I should borrow more and more money at exorbitant rates, but only if I put my own house on the line, as well as my business, thus I decided to only expand at a rate I could afford out of re invested profits, it meant much slower growth, but I was still in complete control of my finances.
    Not much government help for that sort of reinvestment at the time, as the taxman wanted their slice of the “Profit” as well !
    Taxes were a little lower then, so we managed to move forward slowly over the years, but now taxes are so high, it’s really not worth the bother or the risk to run your own business in many instances, as all you end up doing is feeding money to everyone else but yourself, with them first and yourself last.

    1. Mark B
      April 11, 2023

      +1

      What you describe sounds very much like Socialism. And from a supposedly Conservative government.

    2. Ian B
      April 11, 2023

      @Berkshire Alan – strange how running a business along the lines of ā€˜good housekeepingā€™ actually works. Were as the refusal of the Conservative Government to even think about ā€˜cutting their clothā€™ accordingly, making their own expenditure achieve results or even require responsibilities placed on those that get access to taxpayer money. There is the feeling that all the time taxpayers have money they(this Conservative Government) can keep taking it to flatter their own personal ego ā€“ spend, spend spend.

      1. Timaction
        April 11, 2023

        They are indeed the spend, spend spend consocialists at the expense of the 46% of us who foot the bill for the fools in charge. They have killed the golden goose who is alive to their continued abuse.

      2. Sir Joe Soap
        April 11, 2023

        It works eventually but much more slowly.
        Take a business making a respectable profit year 1 of Ā£100K on Ā£350K turnover. Even before capital investemnt, probably Ā£50K tied up in inventory, Ā£50K in debtors less creditors, yet he’ll pay Ā£25K in CT with effectively nothing to pay it from, except relying on the following year’s profits to finance his past year’s CT payable at 9 months. That eats into next year’s retained profits. It’s nuts.

  20. Narrow Shoulders
    April 11, 2023

    When creating money who you give it to matters. Helicopter money, furlough style creates inflation.

    Giving it to banks creates asset inflation which helps the rich get richer but other than house prices tends not to affect the population overly.

    House prices are insured by population growth.

    1. Mark B
      April 11, 2023

      +1

  21. Handbrake
    April 11, 2023

    Doctor’s differ and patients die – the only explanation

    1. glen cullen
      April 11, 2023

      When I get an employment contract, I sign and agree to its terms ā€¦.I donā€™t later argue that the contract was wrong and that the pay has been degraded for two decades and demand a 35% increase, backdated a couple of years with a bonus thrown in ā€¦..in the private sector you get what you agreed on your contract of employment and if you donā€™t like that you move on

  22. majorfrustration
    April 11, 2023

    How much growth has QE produced?

  23. Bloke
    April 11, 2023

    A sensible Chancellor would take the shortest path to long-term better for the UK economy and well-being.
    This one isnā€™t.

    1. glen cullen
      April 11, 2023

      ā€˜ā€™When Chancellor Jeremy Hunt unveiled his budget ā€“ one of the horrors lurking in his red box was something that the Road Haulage Association feared: the return of the HGV Tax Levy. It was suspended in August 2020 to aid recovery from the pandemic for our sector ā€“ But itā€™s another tax. Another burden on a hard-pressed industryā€™ā€™ https://news.rha.uk.net/2023/04/11/rod-abnormal-loads-roadway/content.html?utm_campaign=RHA+Costs+and+Regulation+Campaign&utm_content=facebook&utm_medium=social&utm_source=facebook
      Tax levies push inflation

  24. Ian B
    April 11, 2023

    ā€œThe IMF queries Bank of England policyā€ IMF and BoE, the blind leading the blind

  25. Ian B
    April 11, 2023

    LDI funds, I wonder why Mr Bailey in full knowledge of the LDI problem while at the FCA failed to act. Then you get to wonder why the Conservative Government as a nod to their own ineptitude allowed the BoE to dump the cost of the LDI miss-management of the on to the UK Taxpayer.

    Surely the Taxpayer never caused the problem. It comes over as reward the job-for-boys cabal yet again for failure ā€“ us UK taxpayers are running out of money to keep supporting a failed Government

  26. Ian B
    April 11, 2023

    Lets have a Conservative Government that refuses to ā€˜manageā€™ …anything. After-all they can keep getting the taxpayer to dig deeper. Oh that’s right, we have a spend, spend Conservative Government because they perpetually can tax, tax and tax some more, and no one cares or is held responsible.

    Kill the economy, oh they have already done that. Stymie enterprise, oh they have already done that. Force the UK to be beholden to Foreign States for energy, oh the have already done that. Force the UK Taxpayer to keep funding Government managed mistakes, oh they have already done that.

  27. agricola
    April 11, 2023

    If a nations spiritual energies have been exhausted, it will not be saved from collapse by the most perfect government structure or by any industrial development. A tree with a rotten core cannot stand.
    Aleksandr Solzhenitsyn.
    This could not be more applicable than it is to the UK. We suffer an inadequate, loaded form of democracy in a Parliament that fails to represent the will of the people either for malign reasons or sheer incompetence. We suffer a parallel form of governance, oft refered to as the establishment which beyond self interest has no clearly defined purpose, but looks upon the people as irrelevant. We currently suffer a small number of fringe but vocal intellects who abuse the people like disturbed wasps with their obscure protesting circus. Our current infrastructure and public services, a contradiction in terms, are appalling if not falling apart. In AS’s words reversed, we have a less than perfect government that usurped power in a coupe against the most legitimate government the system allowed, short of a general election. A government in the process of consigning part of the UK to a foreign power, either through indifference or incompetent malign intent. If that is not a tree with a rotten core, tell me what is.

  28. Keith from Leeds
    April 11, 2023

    Why? For the B of E, the answer is simple, for other central banks, I don’t know. The simple answer is that Andrew Bailey should never have been appointed & by now, should have been sacked. If you tolerate mediocrity, that is what you get!
    The B of E was warned about LDI investments several years ago & did nothing.
    How can a Governor survive when inflation has been over 10% when his job is to keep it at 2%?

    1. Ian B
      April 11, 2023

      @Keith from Leeds This Conservative Government glorifies and rewards failure above all else. Success and enterprises is deterred and penalised as it suggests being self-reliant

  29. Original Richard
    April 11, 2023

    Bloomberg reported last month that the BoE, ā€œbecause of cost pressures, has been prompted to focus on core areas and climate programs will slip lower on the central bankā€™s agenda so officials can focus more on the core operations such as financial stability, markets and a digital currency. The BOEā€™s climate work currently focuses on building ESG disclosure guidelines, preparing insurers for risks from rising global temperatures and getting banks to carbon-test their balance sheets.ā€

    Our politicians have made the BoE, hundreds of quangos and even many departments of the civil service ā€œindependentā€ so they can campaign on one set of policies to win elections whilst in reality pursuing a different set of policies via these ā€œindependentā€ organisations.

    Immigration and Net Zero are two obvious examples.

    1. Ian B
      April 11, 2023

      @Original Richard. The question that I am prompted to ask how in a democracy can those in receipt of taxpayer funding even contemplate being ā€œindependentā€?

      It seems to suggest if you have friends of friends this Conservative Government will extract more and more of the taxpayers money to enable you to have a healthy and prosperous life style, while not attaching, responsibility or accountability.

  30. Ralph Corderoy
    April 11, 2023

    ‘They deliberately drove bond prices down by announcing and commencing a large bond sale programme.’

    The Bank of England did this the day before Kwarteng’s budget. What other budgets had a significant BoE action the week beforehand?

    The Pension Regulator was blogging publicly about the LDI risk in the months before the budget.ā€‚Does the PR also report risks directly to the BoE?

    A reader here who’s retired might like to play armchair detective and come up with some answers.

  31. Aden
    April 11, 2023

    The core problem remains. You as a government are spending too much. To find that you are creating the mess

  32. Bert Young
    April 11, 2023

    There is only one thing that matters and that is the management of our own affairs . Of course there are outside influences that impact on our lives but we have to be masters of our own affairs governed by the conditions or our democracy .

  33. glen cullen
    April 11, 2023

    In other Climate news
    Russia Shiveluch volcano erupted today with an ash cloud 42 kilometres squared, but donā€™t worry it NOT MANMADE https://www.bbc.co.uk/news/av/world-europe-65238816

    1. Timaction
      April 11, 2023

      Don’t worry our Government will be working on carbon capture for the Russians or thinking how they can throw foreign aid at it or is there a means to tax English taxpayers as we somehow caused it. A climate change sympathy tax!! But volcanoes are naturally occurring producing more CO2 than people. Who cares ban ice and gas boilers, let us pray.

    2. glen cullen
      April 11, 2023

      ā€˜April Showersā€™ oh my god itā€™s a climate change emergency

  34. Atlas
    April 11, 2023

    Presumably a major source of pressure came from the political prospect of headlines screaming about the number of homes being re-possessed because of high interest rates – and what that would do to electoral chances.

  35. a-tracy
    April 11, 2023

    Do all pension funds heavily invest in government bonds (gilts) equally?
    Defined benefit schemes like the public sector ones and the ex-public sector now private sector HAs and BT etc?
    Defined contribution benefit pension schemes like those under Workplace pensions eg. NEST?
    Defined contribution benefit pension schemes such as Scottish Widows,

  36. Sea_Warrior
    April 11, 2023

    How much does our membership of the IMF cost us? Perhaps we should leave.

    1. glen cullen
      April 11, 2023

      hear hear

  37. Derek
    April 11, 2023

    The BoE messed up. So why did no one ever admit to it?
    It’s time for them to put up their hands and do a “Sturgeon” – Leave, ‘to spend more time with their family’ . Whatever.

    1. mancunius
      April 11, 2023

      We could club together to buy Bailey a nice campervan.

      1. Timaction
        April 11, 2023

        I read there might be one for sale soon in Scotland!

  38. agricola
    April 11, 2023

    The disturbed wasps I referred to earlier are dining out on the UKs past links with slavery. They major on our involvement with the trade while conveniently forgetting the Royal Navy’ s fight over many years and lives to eventually abolish it. They work themselves to a fury, demolishing statues and calling out families and organisations that had anything to do with it in centuries past. They have a pick and mix attitude to the subject, overlooking when buying vehicles, German involvement with slavery and annihalation at the basis of most of their manufacturing industry last century. I place no blame on the current German polulation for an unfortunate fact of history.
    I would suggest to them a much better slavery target, which unbeknown to most of the UK population, we are all benefitting from on a daily basis.
    A large proportion of our salad intake is produced in vast tented greenhouses in Almeria Spain. The labour tending this enormous industry is largely African. Men who have travelled from central africa, crossed the Mediteranean as illegal economic migrants to find the only work available is in these saunas of salad growing, working for pitiful wages and living in appaling accomodation , the cost of which is deducted from their wage . This is modern day serfdom/slavery at the behest of the salad barons of Almeria. The extent to which our and Europe’s supermarkets are aware of this should be investigated. A fitting target for the guilt warriors effectively destroying racial harmony in the UK.

    1. Mark B
      April 12, 2023

      The Maoists have taken over the narrative and are putting us through our version of a Cultural Revolution. Slavery is just a tool for them to abolish us from history.

      The notion that we the taxpayer, and former serfs, must pay for sins of the rich and powerful is laughable.

  39. paul
    April 11, 2023

    The neo con globalist era is starting to come to a close, their empire is fading away. Their mickey mouse money system is under pressure by their own hands as they try to get out from under a rock, while they are trying to save themsleves, the pain of their actions will be felt by the people all over world apart from Russia who have been cut off from their system by the neo con. The money exchanges have their heads in their hands.

  40. Bryan Harris
    April 11, 2023

    My posts now disappear – is there a specific word check going on?

    1. Mark B
      April 12, 2023

      It is happening to a lot of people. It is something to do with this site.

  41. mancunius
    April 11, 2023

    Exactly, what the BoE did was to pretend to ignore the expansionary growth policy of the new Truss/Kwarteng government and finally after years of wasteful bond-buying, start to sell the bonds contrary to all economic common sense, the day on which the Bank knew a change of economic policy was announced in Parliament. A new economic direction the entire country – except for Andrew Bailey – knew in advance, or at least strongly surmised would be happening.
    Bailey had presided over the FCA and knew the dangers of the LDIs, and what would trigger their perilous decline. He then pulled the trigger.
    It really does look like a deliberate coup by Bailey, to cover and usher in the immediate political coup of an unelected PM who had promised to engineer a surrender of Northern Ireland to the EU within four months – as demanded by Brussels – and a reversal of economic policy to harmonize the UK’s fiscal arrangements with the tax-and-spend policies of the EU, as then happened.
    This is not coincidence, it was plotted.
    ‘Nice little pretend-Conservative pretend-independent government you have there. Nice little earner for you lot, isn’t it. Shame if anything happened to it…’

  42. glen cullen
    April 11, 2023

    Home Office ā€“ 10th April 2023
    Illegal Immigrants ā€“ 49
    Boats ā€“ 1
    ā€¦ā€¦ā€¦ā€¦.

    1. Iago
      April 12, 2023

      Slow day.

  43. ed2
    April 12, 2023

    Why are young men dying like cannon fodder in Ukraine. The answers because of politicians. We don’t need you. Just go.

  44. XY
    April 13, 2023

    Why?

    I have long questioned the competence of the BoE and its MPC members. Yesterday we saw a report on Guido that Hunt has appointed a rabid rejoiner to the MPC. Guido posted some of her anti-Brexit rant twitter rants and they don’t lead to comfortble conclusions regarding this person’s abilities. Nor do they seem qualified for the role.

    There is a continuing politicisation of key roles in the machinery of State, where we see appointments of the wrong people designed to advance a political belief rather than simply to do an important job well. And that’s before we even begin to get into deliberate infiltration.

    There were also reports that the BoE pension fund was 100% invested in LDI funds at the time of the bonds problem and only managed to reduce it to 82% afterwards, leading us to question what/who exactly they were saving with their interventions.

    P.S. The first thing any investor learns is not to put all your eggs in one basket – diversity is Lesson One. How can people who are supposedly the best minds in finance not know that?

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