Trickle Down Economics Explained

[wellyfish]

Seems to have turned into,
"I know something I bet you don't ,
go on then what's this then".
"No it's not that so you haven't answered my question
nya nya nya".

Nope. He was wanging on about:

Instead, UK PLC is totally broke!

If you understand how fiat economies work then you wouldn't be wanging on about that sort of thing, it's pure bs. So I asked them what their understanding of how fiat economies run and he got all butt-hurt.
but hey, seems par for the course on here, lol.

 

[denso13]

You havent yet actually said or explained anything

Was leverage mentioned?

 

[ajohn]

In turn, that tends to push up on the value of shares, making households and businesses holding those shares wealthier. That makes them likely to spend more, boosting economic activity.

Actually I read the same report. However to spend more the shares need to be sold. They wont accept them at lidl.
What happens when they are sold?

It just tends to elevate listed prices. End of.

 

[wellyfish]

Was leverage mentioned?

Ah, denso, wrong again.
But thanks for playing, keep trying, eh.
Can't be wrong all the time, can you?

 

[wellyfish]

Actually I read the same report. However to spend more the shares need to be sold. They wont accept them at lidl.
What happens when they are sold?

It just tends to elevate listed prices. End of.

I think you've misunderstood that section.
The idea was QE would
1. raise asset prices - check, done that, then
2. people holding those assets would think everything is great and automatically go out and start spending - nope, didn't happen.
It was a truly dreadful policy, a pathetic attempt at monetary policy (interest rate manipulation).

 

[ajohn]

I'm fond of reading BofE reports. I love the one about maybe starting a Britcoin while pointing out that they already handle electronic money. Masses of it actually as physical money is mostly for us with ever declining usage.

An attempt to find out how many USD of all sorts failed other than more outside the US than in it, GBP, no info at all.

There recent report was interesting - it mentioned the increase in economically inactive. Nothing from the gov on that subject. However as I retired early was I economically inactive as I was spending money that comes in every month.

 

[wellyfish]

I'm fond of reading BofE reports. I love the one about maybe starting a Britcoin while pointing out that they already handle electronic money. Masses of it actually as physical money is mostly for us with ever declining usage.

An attempt to find out how many U|SD of all sorts failed other than more outside the US than in it, GBP, no info at all.

There recent report was interesting - it mentioned the increase in economically inactive. Nothing from the gov on that subject. However as I retired early was I economically inactive as I was spending money that comes in every month.

Yeah, the BoE releases, particularly their Quarterly Bulletin can be very informative can't they?

 

[ajohn]

2. people holding those assets would think everything is great and automatically go out and start spending - nope, didn't happen.

Didn't I mention that LIdl wont accept assets and the implication of selling them to spend. Thanks for repeating what I said.

Actually though it's done what was expected - pushed up asset price during a depression. The current doubts about this aspect is that it's difficult to be really sure it achieves anything other than maybe help prevent the markets going crazy and ditching everything. Just makes the "books" look better really. Note the bunny rabbits and their meaning. You might be feeling pedantic.

Actually I am inclined to feel emergency interest rates have damaged the UK more than anything else. In terms of business investments it doesn't seem to have done much and then the consequences when something happens - like now where it looks like they have to go up. Maybe it has created more jobs but I have my doubts. Things generally pick up after disastrous events anyway. The last one was covid. Prior to that the banking crisis and even Brexit figured in decisions,

However what would happen if other countries dropped base rates and we didn't?

 

[Deleted member 18243]

Denso and Wellyfish discuss Quantitative Easing:

 

[ajohn]

The beeb came up with a graph showing GBP behaviour against other currencies. There is some way of doing this by normalising them. I think it's something the worldbank or imf etc do. We have been at similar levels before.

Germany can borrow at ~2%. we are at 4.5% which is higher than both Greece and Italy. It seems the markets think the actions can't boost the economy enough for the debt and yet more undisclosed tax cuts to come. Some one from the BofE has said that they will be increasing the base rate by more than they usually do in Nov. I'm wondering if it will be to similar levels to what the FED are using. Say 3.5%.

 

[fillyboy]

Germany can borrow at ~2%. we are at 4.5% which is higher than both Greece and Italy. It seems the markets think the actions can't boost the economy enough for the debt and yet more undisclosed tax cuts to come.

Applicable to 5 year bonds, 10 year bonds are still cheaper than Italy and Greece.

 

[ajohn]

Applicable to 5 year bonds, 10 year bonds are still cheaper than Italy and Greece.

LOL Does that really matter? Rates are high what ever the period is.I'd like to see proof of that too.

However I will agres that media can be picky about what they choose to show. Also irritatting. C4 interviewed an ex BofE man yesterday. Not enough time given so cut off mid sentence even during the interview. That appeared to be down to time to ask about need for an IMF bale out. Currently that is just rubbing salt into the wounds. A sort of worrying factor that may be a possibility.

Actually I wonder if there is a project fear going on. Mention high numbers and then find reality turns out to be higher but lower than the ones being mentioned we'll all be relieved and they can say look it isn't that bad after all.

The BofE man was asked if people would get help with mortgage payment increases. He frowned and said that would be highly unusual. Yet more debt maybe? Is that feasible? He was an ex member. Current members don't want to say anything at all. I suppose most have heard that video clip.

 

[fillyboy]

Actually I wonder if there is a project fear going on. Mention high numbers and then find reality turns out to be higher but lower than the ones being mentioned we'll all be relieved and they can say look it isn't that bad after all.

Something a little odd about all this. Truss had stated weeks ago that there would be tax cuts so markets would have costed this in prior to the event.
The 45% drop to 40% higher end tax is going to cost about 2 billion this year, more next year, but talk of sparking a global economic crisis, IMF intervention and now Moodys threatening to downgrade the UK credit rating seems bizarre, especially given that these tax drops are a drop in the ocean compared to the cost of helping people with their energy bills.

The 'budget' is designed to hopefully support growth but it goes against the orthodoxy of what's been done for the last 12 years, and somebody doesn't like that.

 

[ajohn]

No one seems to have heard about a BofE intervention. Buying UK debt?. The first mention - using foreign currency reserves but don't quote me.

The Bank of England said it would buy long-term government bonds over the next two weeks to combat a recent slide in British financial assets. The bank's actions are focused on long-term government debt, where yields have soared in recent days, pushing up government borrowing costs.

So it seems borrowing costs are now down but still high. Done in part to try and protect pension funds. It seems the action gives the gov more time. It also seems to have made the bond market more volatile in other countries. No details given on that.

Is this economic incest?

Forgot A pundit reckons that the gov will blame the BofE for problems and make them less independent.

 

[carmanmemoranda]

The 'budget' is designed to hopefully support growth but it goes against the orthodoxy of what's been done for the last 12 years, and somebody doesn't like that.

The only people I have seen that are suggesting the budget was designed to support growth is Kwarteng, and his partner Truss. Think she is the PM, but she isn't the 1 in charge apparently ?

Everybody else, markets, bank, IMF, Tory MP's and others all seem to think it's wrong