Sterling collapses as investors fly into dollars | Hacker News Reader

Sterling collapses as investors fly into dollars

reuters.com

Years of working to make our country worse have led to our country getting worse. Who could have foreseen that!

The UK is in such a weird place right now. There are a group who legitimately want things to get worse because it serves their personal interest, and a group who think no matter how dumb we are, things will not get worse because we are the best country ever. They're conspiring to wreck the whole place. From Brexit to the last few PMs, to education cuts and wasteful spending, to energy "policy".

It's like watching a much smaller version of the fall of rome only without the class or sophistication.

/Rant

Would you mind sharing changes you feel on the ground? I am from Canada, and feel we are facing unprecedented problems in our society. What is global, and why is created by bad policy ?

Biggest issues in Canada:

1) stupidly priced real estate due to decade plus of factors (rates, building starts, land use, immigration, tax policy quirks)

2) since last year, inflation accelerated making all costs of living too high.. this lack of living wage is a key reason for the great resignation in the service sector imho.

3) tax incentives kill incentive to work. High end rates too high, support at margin seems too generous (CERB)

4) govt services being neglected .. e.g. healthcare. Stuff that remains is bloated ( civil servants getting massive raises relative to others)

I hear from the news, the tax cut being proposed in the uk at least addresses #3 above. I agree that the Econ implications on inflation don’t seem to have been thought through.

The UK has very unstable economic policy. Despite one party being in charge for the last 12 years, each prime minister has wrought radically different economic policies. Under Cameron was austerity, services were cut and much pain was endured to “get the deficit down”. Under Johnson we had an investment-based economic policy, and then under Truss we are seeing tax cuts for the rich funded by borrowing which is an economic policy that I’m not sure has a name because it’s so stupid (Trussonomics?).

Already there are some calls from within the Conservative party to remove Truss and she has only been in the job for a matter of weeks.

All this time wages and services have suffered, because the political class is obsessed with ideology over the boring work of governance. I realise this is not a unique phenomenon around the world, but what seems to set apart the political class in the UK is the heady mix of egoism and delusion, that blinds them to their own incompetence until they are removed and someone else is instated.

Thanks for the insight. In Canada, things have been more consistent politically at least. Good point that the same party in power can still result in diverging directions. I don’t feel this as much despite changes in parties at the federal and provincial level over the last dozen years.

E.g. federally, big changes were relaxation of immigration, govt support for lower income earners and cannabis legalization. Provincially (Ontario) govt services like schools and healthcare are being starved, and privatization of previously public services is on the agenda.

Perhaps the water is being boiled slower than I can feel :)

Provincial leadership, while it’s shown sparks of both good and bad policy during covid, is conservative. Federal leadership is a liberal minority. They have been at odds at times, sometimes significantly.

> under Truss we are seeing tax cuts for the rich funded by borrowing

Any reduction in government income is funded by borrowing for a budget that is not in surplus, which seems to be the default state of things these days.

And what's stupid about government reducing income and borrowing in a downturn?

>And what's stupid about government reducing income and borrowing in a downturn?

Government finances are not like your household's, reducing spending is exactly the opposite thing the government should do in a recession.

I don't know what that has to do with what I wrote though.

Reducing revenue is also one of those things that conventional wisdom says a government "should do" during a recession, so I'm asking why it was stupid.

That is not correct.

Spending is the appropriate response when faced with a demand driven recession. This is a supply driven recession and reducing govt demand may not be a bad idea.

> Truss we are seeing tax cuts for the rich funded by borrowing which is an economic policy that I’m not sure has a name because it’s so stupid

So far the government has announced income tax and NI reduction for everyone, removal of the 45% income tax rate, and cancellation of a plan corporation tax increase.

Only the removal of the 45% income tax rate is targeted at the rich and I suspect that this might be the cheapest of the 3 measures, but indeed symbolically it does not look that good.

Changes on the ground are gradual but basically:

* spiralling taxes on income for anyone above the bottom 20% of earners

* housing policy that actively stops construction, mis-allocates housing, maximises debt etc.

* collapsing public services due to lack of spending (NHS, Education, Local government provision)

* gold plated, very inefficient spending on certain benefits (housing and pensions and now energy)

The UK is the poster child for a lot of what Americans complain about with Boomers. When house prices go up 50% people shrug because boomers already own, when food prices go up 1%, government immediately offers anyone over 60 a huge subsidy. Then we realise there is no money so we defund health and education and increase taxes on working people. Rinse, Repeat.

The tax changes this week are nice (I will get an extra 2% in my pay packet) but they mostly just reverse the tax increases last year. Meanwhile I need to earn about 8% more this year just to keep up with inflation and because the allowances/bands don't change that will basically wipe out any gains from the "cut".

And we will need to vastly increase taxes very soon as we just decided to throw as much money at energy as we spend on education for under 18s. And that's not to solve the issue, it just paying people NOT to cut their use or insulate their houses...

/RantOnSteroids.

> What is global, and why is created by bad policy ?

Every country has problems caused by the pandemic, by war, and by climate change. The energy issues in Europe this winter are downstream of that.

Only the UK has chosen problems caused by Brexit.

> the tax cut being proposed in the uk at least addresses #3 above

It doesn't address it in any meaningful way. That tax cut only benefits the significantly well-off while doing nothing about the lower classes.

In the lower class, this cut doesn't give you any further incentive to work (you're screwed and won't be able to afford your rent or energy bills regardless so may as well not even bother), and the upper class never really needed an incentive.

IMO, it shouldn't been the opposite - completely abolish tax on anything under 50k or so and make it up by taxing company profits higher.

Of course, you could say "fuck the poor" and not care about them as long as the "rich" are doing fine, but the problem is that a lot of "rich" stay there only because there's there's a steady supply of "poor" that buys their goods/services (not saying this in a bad way) - now if all those "poor" are too poor to have money for discretionary spending, a lot of businesses from the "rich" will no longer have any customers to stay afloat and close, leading to job losses, etc - furthermore businesses that serve those businesses will also see a downturn, etc - essentially a cascading failure, and this doesn't even mention the other downsides that tend to come with extreme, widespread poverty such as people resorting to crime as they're out of options.

The suggestion you propose is interesting .. no tax on first k dollars where we raise k from existing levels. Helps rich and poor. I’d be fine with this if it was time limited. E.g. until the war is over and things have adjusted from the pandemic. This would fan inflation due to increase in demand but if time limited to 1 year or 2, it could be palatable.

The tax cuts announced benefit everyone in employment even if indeed the top earners benefit the most because the 45% income tax rate (which didn't exist before 2010, btw) is abolished.

The cancellation of the planned corporation tax increase is absolutely the correct thing to do, IMHO. Increasing from 19% to 25% would have made the UK's rate one of the highest in Europe at a time when looking not business friendly is the last thing the country need

Peter, is that you? Reads like any of the provincial or federal conservative websites. Don’t forget that people have agendas. Dislike public services, strange they have funding and staffing issues…. And how can one lower house prices without lowering the value of people’s houses? Yeah, it’s all paper money, but they react far differently during a run up rather than a run down.

And I don’t think any one country (even China or the us) is capable of causing the current inflationary trends. Googling suggests CERB ended in 2020. Pick the current acronyms to keep your political ads up to date.

Truss isn't exactly inspiring optimism to say the least, and this is when Europe as a whole already had a pretty bleak outlook.

Times like these you remember those (what feel like an eternity ago) days back in '07 where 1GBP would buy you 2USD...

A lot, if not most, of the movements on currency markets right now is actually the US Dollar getting extremely strong. Pretty much all currencies are recording lows against the Dollar right now, as mentioned in the article.

Also note that the article does not use the word 'collapse', which is click-baity editing by the poster.

The headline was changed from the original, not an uncommon practice by Reuters.

Pound/Euro is wobbling within regular limits. So this is Euro crisis, long overdue, because Eurocrats do not follow their own rules and use euromoney to save PIGS-countries.

Not really. It is energy crisis and countries that import fossil fuels are affected. I mean it might trigger the eurozone debt crisis but we are not seeing it yet.

This is happening because, 14 years ago, France and Germany intervened to bail out French and German banks by loading Greece with a generation of debt? That's one theory I guess.

How does this follow? If it was a Euro crisis, then the euro would be down against sterling which would be stable against the dollar. That's not what we're seeing.

It seems more like this is a global crisis against which the US is better sheltered than most, possibly due to its geographical position, fuel reserves, strong military and more hawkish monetary policy.

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