Posts Tagged ‘David McWilliams’

Labour conference 2022: The Mersey wind of change

28/09/2022, 11:08:56 PM

by Jonathan Todd

The turbulence around Labour conference was much more than the Mersey wind. Sterling hitting an all-time low versus the dollar. 900 mortgage deals pulled by banks and building societies. Criticism of last Friday’s “mini budget” from the IMF.

The collapse in sterling means rising inflation, higher interest rates, and more pain for already suffering households. Government capacity to ameliorate this is limited by higher borrowing costs than Greece and Italy.

Dramatic changes in the UK’s economic fortunes are often driven by global events. It was OPEC and the oil price in the 1970s. American subprime mortgages and collateralised debt obligations in the 2000s. It takes a special kind of budget to crash the economy outside of global events – such as Nigel Lawson’s tax cuts in 1988 that overheated the economy and precipitated the 1990s recession.

The Tories will try to blame our economic problems on global events (Covid-19 and Putin’s war in Ukraine). “Global financial markets,” said the Treasury’s statement in response to new purchases of government debt by the Bank of England, “have seen significant volatility in recent days.” That the Bank of England acted after the “mini budget” reveals blame much closer to home.

“Panics do not destroy capital,” according to John Stuart Mill, “they merely reveal the extent to which it has been previously destroyed by its betrayal into hopelessly unproductive works.”

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