The Bank of England has intervened in the Gilt Market to buy longer dated UK bonds, as it warned of a risk of a "Gilt Crash", due to speculators selling UK bonds, and implementing calls. A "call" is an option to sell at a given price, and is utilised when speculators think that the future price of an asset is going to be lower than it is now. It is the oppposite of a "put". It is an indication that global markets have lost faith in Truss's Brexitory government and the British Brexit Banana Monarchy.
The Bank in its statement said,
"As the governor said in his statement on Monday, the Bank is monitoring developments in financial markets very closely in light of the significant repricing of UK and global financial assets. This repricing has become more significant in the past day – and it is particularly affecting long-dated UK government debt. Were dysfunction in this market to continue or worsen, there would be a material risk to UK financial stability. This would lead to an unwarranted tightening of financing conditions and a reduction of the flow of credit to the real economy. In line with its financial stability objective, the Bank of England stands ready to restore market functioning and reduce any risks from contagion to credit conditions for UK households and businesses.
To achieve this, the Bank will carry out temporary purchases of long-dated UK government bonds from 28 September. The purpose of these purchases will be to restore orderly market conditions. The purchases will be carried out on whatever scale is necessary to effect this outcome. The operation will be fully indemnified by HM Treasury.
On 28 September, the Bank of England’s financial policy committee noted the risks to UK financial stability from dysfunction in the gilt market. It recommended that action be taken, and welcomed the Bank’s plans for temporary and targeted purchases in the gilt market on financial stability grounds at an urgent pace. These purchases will be strictly time limited. They are intended to tackle a specific problem in the long-dated government bond market.
Auctions will take place from today until 14 October. The purchases will be unwound in a smooth and orderly fashion once risks to market functioning are judged to have subsided. The monetary policy committee has been informed of these temporary and targeted financial stability operations."
Commentators on Bloomberg noted that the policy of the Bank of England now is neither QE nor QT, but QC, Quantitative Confusion. We are more or less exactly 30 years on from the previous Black Wednesday in September 1992, when John Major's Tory government was in the process of crippling the UK economy, and despite massive intervention by the Bank of England, to buy Sterling, and huge rises in Bank Base Rate, the Pound was forced out of the European Exchange Rate mechanism. That exit ended the run on the Pound, and enabled Base Rate to be reduced, but no such option exists today. The Pound will continue to crater, and interest rates to rise, because it is the insane Voodoo Economic policies of the Brexitories that is the reason for the crisis.
As Bloomberg's Tom Keene put it, it is Truss's government that is the centre of this crisis. As I put it some days ago, Truss has set out her agenda to bankrupt Britain, and the markets have responded accordingly. The logical response to that condition is a General Election. The Brexitories could ditch Truss, just days into her Prime Ministership, but that unlikely, unless they bring back Boris by popular acclaim. The bank's intervention will only stoke further panic, and increased selling of UK Gilts, and Sterling, and will be an expensive failure just as it was in 1992. Global speculators will make a mint, just as George Soros did in 1992, when he made a $1 billion capital gain in a single day.
But, what actually would a General Election do, either? Firstly, Starmer is unlikely to win an outright majority, and despite his protestations will be held captive by the SNP and Liberals. Both the SNP and Liberals are likely to increase their seats at Labour's expense, due to the reactionary, English nationalist and jingoist nature of Blue Labour. The Liberals will certainly advance against the Tories. So, its hard to see how Starmer's English Nationalist/Monarchist Party will make an easy alliance with these more progressive parties. And, for the same reason its hard to see how such a reactionary English nationalist Party under Starmer offers much to satisfy global markets, let alone British workers.
Indeed, the only places he has come up with anything approaching a concrete proposal rathe than just criticising the Tories for not being jingoistic enough, it is to burden the economy with even more debt and taxes, with vague proposals on Green energy that will soak up resources for years before returning any value back into the economy. A fundamental factor at the heart of the failed policies of the Brexitories is Brexit itself, but Starmer has adopted the mantra of Boris Johnson, as an ardent Brexiter, and the ridiculous claims of having cake and eating it, with his nonsensical claim that he would "make Brexit work". The trouble is, no matter how hard you polish a turd, you will not change the fact its a turd.
So, prepare for a General Election amid economic chaos in the next week or so, just don't expect it to resolve anything.
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