British pound touches record low as investors dump U.K. assets.

[brooklynite]

Source: New York Times

The market’s resounding rejection of the new British government’s plans for tax cuts and borrowing continued Monday as the pound briefly fell to its weakest level against the U.S. dollar on record.

After a historically bad day on Friday, the British currency plunged as low as $1.035 in the early hours of Monday morning, before recovering to about $1.08, down 0.5 percent for the day. It also weakened slightly against the euro.

On Monday, prices for British government bonds plummeted, and yields surged, sending borrowing costs to new highs. The 10-year yield, which influences mortgages, business loans and other types of debt, hit it highest level in more than a decade. It traded at around 4.15 percent on Monday, double the rate from just over a month ago.

As traders dumped British assets, analysts have said the government’s plan to quickly grow the economy through deregulation and tax cuts, which will require tens of billions of pounds in additional borrowing at a time of rising interest rates and high inflation, was a gamble.

Read more: https://www.nytimes.com/2022/09/26/business/british-pound-dollar-gbp-usd.html?smid=url-share

[Ray Bruns]

1. Tax cuts apparently cures everything. Recession. Covid. Toe nail fungus.

[maxsolomon]

5. nothing cures nail fungus.

tax cuts cure nothing.

[Earth-shine]

13. nothing cures nail fungus -- Try tea tree oil

Some people, including me, report good results.

Like any fungus medication, it takes constant application over months.

[Nasruddin]

14. Oil on inflation

I tried tea tree oil on inflation, but it just slid right off
Maybe fungus would work

[Ray Bruns]

16. Ha!

[Earth-shine]

17. Tea trea oil can help with physical inflamation, but not fiscal inflamation.

If monetary inflation were caused by bacteria, fungus, or viruses, tea tree could help.

[Escurumbele]

8. Hehe...that is funny and yes, it seems that is how they want to sell it...The cure for everything.

[edhopper]

2. A gamble?

it's a proven failed economic policy. It would be like National Health saying they are going to start blood letting and leeches.

[Farmer-Rick]

3. Exactly right

A proven failed economic policy for fighting downturns.

Next the new conservative government will be pushing austerity.

[edhopper]

4. That is a given

she is going to be as bad as Thatcher. The Tories have lead the UK to their ruin. Next year Scotland leaves for the EU.

[DBoon]

21. Isn't that her ambition?

To be as evil as Thatcher?

[edhopper]

25. Pretty much

The way each GOP Pres we get is worse than Reagan.

[3Hotdogs]

6. We all know that tax cuts improve the economy. But only tax cuts for the 1% achieve that goal.

Don't'ja know? It's the rich who are the job creators. Give 'em all the money they need. They spend it on cars, boats, vacations, grass cutting and stuff like that. And they hire the middle and lower class workers to make and do that stuff. Then the little people (Leona Helmsley) get jobs by being hired by the upper class.

It's called "Trickle Down" economics.

[Escurumbele]

7. Margaret Thatcher 3.0 (Liz Truss) ready to destroy the UK, though her plans it should only take

one year for the total collapse of the British economy.

[speak easy]

10. Who was Thatcher 2.0 ?

[Earth-shine]

18. I'll bet she uses Windows 9.

[speak easy]

19. with the MS-15 update

[Warpy]

9. Maybe people are starting to realize "trickle down" is bed news because it doesn't

and cutting off the demand side of an economy will make it grind to a halt faster than anything else will. People at the bottom turn to bbarter, exchanging used but serviceable goods and services and shops that require money start to go under.

Truss is obviously a blinkered ideologue who dismisses everything that doesn't fit the ideology.

[Justice matters.]

11. They did it to themselves.

Why Brexit is Screwed...

We did warn them. They didn't care (well, a majority of 'em didn't).

[muriel_volestrangler]

12. Pound comes under new pressure after Bank of England fails to raise rates

The pound came under renewed pressure on Monday afternoon after the Bank of England failed to announce an emergency interest rate hike.

Anticipation was building among investors that the Bank would raise interest rates in response to the weak pound, which hit a record low against the dollar over the weekend. The pound had regained some ground earlier on Monday, but the Bank failed to calm markets when it stopped short of announcing a rise, saying instead that it would monitor markets closely and assess the situation at its next policy meeting in November.

The pound was down nearly two cents at $1.0675 after the statement,

The central bank said: “As the MPC [monetary policy committee] has made clear, it will make a full assessment at its next scheduled meeting of the impact on demand and inflation from the government’s announcements, and the fall in sterling, and act accordingly.

https://www.theguardian.com/business/2022/sep/26/pound-comes-under-new-pressure-after-bank-england-fails-announce-rate-hike

UK government bond prices are tumbling even further, pushing up the yield (or interest rates) even higher.

The cost of borrowing for a decade has now hit 4.2%, from 3.5% in the middle of last week (before the mini-budget).

Another sign that the twin statements from the Treasury and the Bank of England have not immediately calmed the markets….

Link to tweet

https://www.theguardian.com/business/live/2022/sep/26/sterling-record-low-tax-cuts-investors-kwarteng-truss-ftse-stock-markets-business-live?page=with:block-6331cf738f08d07ba0ad6708#block-6331cf738f08d07ba0ad6708

Financial Times journalist:

Link to tweet

"Got to be said that if @bankofengland wanted to look like it was willing to take dictation from @hmtreasury - the first substantive paragraph here could not do a much better job"

[cstanleytech]

15. So do the cuts vastly benefit the wealthy far more than the average person like they do

here in the US?

[muriel_volestrangler]

24. Hell yeah:

https://www.theguardian.com/uk-news/2022/sep/23/kwasi-kwarteng-announces-sweeping-tax-cuts-in-mini-budget

Top 5% gain an average £9,187 a year; 90%-95% about 1,600; 45-50% about £250; 0-5% £22.12.

This is why Labour have rightly said it replaces "level-up with trickle-down".

[GB_RN]

20. Another Predictable Outcome Of Brexit:

A tanking economy and currency.

It’s not like they weren’t warned or anything. But they listened to that numbskull Nigel Farrage, who was backed by Putin and Cambridge Analytica (owned by the tRump humpers, the Mercers, and I think, was run by Steve Bannon).

[brooklynite]

22. UPDATE: Pound comes under new pressure after Bank of England fails to raise rates

The Guardian

Sterling came under fresh, heavy pressure on the world’s financial markets after the Bank of England ruled out an emergency rise in interest rates to defend the struggling UK currency.

Sterling lost two cents against the US dollar after investors were left unimpressed by Threadneedle Street’s decision to adopt a wait-and-see approach rather than act immediately.

The pound hit a record low against the greenback in Far East trading overnight but had recovered as the markets anticipated action from the Bank’s nine-strong monetary policy committee (MPC).

However, the attempt by the Bank’s governor, Andrew Bailey, to play for time left the pound once again looking vulnerable to selling pressure and within minutes of the Bank’s statement it was trading within three cents of its all-time low of just above $1.03.

[DavidDvorkin]

23. Meaning that there are some rich investors quietly buying those assets at bargain prices

Not that that was part of the plan, or anything,

[BigDemVoter]

26. Back to Thatcherism. . . .

It didn't work then, and it won't work now. . . .

And I used to feel sorry for the Brits being stuck with her, but they just don't give up, do they? Of course, it isn't as if we have a lot of room to talk given the stupid motherfuckers we have put in office.