Personally I am expecting a 20/30% correction on house prices over the next 1-2 years. Each time something inflationary occurs, such as the £65 billion recent spend, it takes around 1-1.5 years to filter through.
For those beginning to get worried today, it might seem much worse in another years time. The big problem is every nation seems intent on ignoring the real issues, foregoing any real pain, until all other avenues are exhausted, causing much harsher pain overall.
Most of today’s problems stem from the Covid bail out decisions, and having never addressed the problems from 2008. Now we also find pension companies massively over leveraged, unable to cover margin calls. This reckless gambling on people’s pensions should be illegal.
What has happened? Another bail out, unlimited gilt purchases guaranteed by the BoE. Now that is going to teach them. Amazed this is still allowed to happen in the world, when will people decide enough is enough? When 20 million pensions actually disappear? The UK was within hours of that scenario the other day.
That got an up-vote from me - it covers at least 75|% (probably much more) of everything that has been going wrong for a very long time.
One could add falling productivity, lack of proper pension arrangements (thereby forcing many people to invest in houses, instead of a SECURE pension) mismanaged Brexit negotiations, a wrongly structured health system, an over-complicated tax system that is loaded with loopholes, a completely mad political system and worst of all, government spending now accounting for about (nobody really knows the real precise figure!) 50% of GDP.
But all (except that last point) are minor irritations for the UK economy. But gov. spending is now about half the economy but the Laffer Curve for the UK economy kicks in at about 30% and tops out at 35% and after that, starts to fall as the entire economy shrinks in real terms - and one realises that we are very far up that creek and the paddle floated off ages ago!
Yes, Truss is right when she says that the economy must be restructured - BUT
all restructuring must be done carefully and gradually.
Shooting your mouth off to please the more biliously rightwing members of the Tory backbenches was always going to alarm the money markets. It may have brought joy and sunshine to the Colonel Blimps of this world, but it took minutes for the bond market to realise that T-bills were now unfunded and for the sell-off to begin.
By the time the FT went into print on the subject with the famous shitstorm statement, 30-year T-bills had lost almost half of their value!
Yes, you did read that correctly - long-term government bonds were heading rapidly towards becoming worthless when the BoE stepped in and began buying them up.
Pension funds had to sell those bonds as a result of margin calls. It was not brokers and fund managers selling off to earn a buck, it was AI algorithms being forced into a sell-off because the pension funds had been forced into leveraged margin accounts to get the returns that those buying those pensions were expecting.
Or as Ray Dalio said on the Today Programme "There seems to be a total lack of understanding by the British Government of how the money markets work."
Or to quote our esteemed PM, Ms. Truss, "The quality of my cabinet shows the depth and breadth of talent within the Parliamentary Conservative Party today!"
