Thread by @RichardJMurphy

It is not clear what the Governor of the Bank of England wanted to achieve through his intervention in markets last night. The signals overnight are confusing and deeply worrying. The likelihood of a massively turbulent and costly day is very high. A thread…..

By turbulent I mean politically and economically. The second part is the easy bit. Given the total confusion the pound may well fall again and interest rates may rise. Politically, Truss and Kwarteng have been left with no choice but withdraw their budget by Bailey.

Whether Bailey intended that is not, however, clear. As @D_Blanchflower has said, his intervention saying that pension funds must sort themselves out by Friday was as logical as a doctor saying get better in three days or I will withdraw your drugs, which were working.

What is likely is that Bailey implied that he does not believe in QE and does not wish to use it when its use is essential this coming year to help fund the energy price support package. If so then he is playing deeply dangerous political games. The City is demanding austerity.

I think it likely that there is a power struggle going on. Bailey says his, the Bank, and the Treasury view, that the economy is like a household must prevail and politicians must not fight the misery recessions cause, but most tell the country to live with the pain.

We have seen Bailey doing this all year, telling people that they must not ask for inflation matching pay rises. Now he is saying if pension funds fail, so be it. That is a price worth paying to prevent QE and to let him actually reverse it, which was his stated plan on 22 Sept.

I stress, Bailey could not be more dangerous in saying this. He clearly does not understand QE. He is not consulting the monetary policy committee, so is acting beyond his remit. I suspect he is seeking to deny that the Bank can even create the money to solve this problem.

Intellectually Bailey is also denying the role of a modern central bank in that case. He also appears to be shredding good governance at the Bank, which markets will not like. It is as if he is staging a coup for an old guard City elite.

By staging this coup he is saying that his view must prevail over the decisions of elected politicians. As a result he has deliberately refused to use the powers he has to force them to back down instead. I think that the most massive abuse of his position.

Section 19 of the Bank of England Act 1998 lets Truss and Kwarteng over-rule him. But I think he is gambling on them not doing so, due to their weakness in office, which is very obviously real.

I strongly suspect Truss and Kwarteng will cave in. But if so, have no doubt that power will have shifted to the City. The result will be even higher interest rates, the imposition of massive austerity, and deep recession.

Neoliberal madness, beyond the wildest dreams of Tufton St will prevail if Bailey, a man of remarkably little intellect and even less apparent understanding or empathy prevails.

What if Labour replaced the Tories? Rachel Reeves is a Bank of England person to her core. Would she challenge this or play the role of the National Government in 1931, with all that followed? I can’t be sure, but nor am I optimistic.

If Labour caves Truss and Kwarteng’s legacy will be a depression in the UK, imposed by a callous City on this country as a whole, unless there was civil unrest to stop it. Things are that serious now.

The furthest right economic right wing in the form of Bailey is fighting the economic right wing in the form of Truss and Kwarteng today. No one else will get a look in. The idiots are in charge. It’s very hard to find anything optimistic in this scenario.

Bad as Truss and Kwarteng are, Bailey is intent on using the Bank to make things very much worse for people in this country. This is a madness that is almost incomprehensible but for me this is the only explanation that makes any sense.

Watch events today, realising you may well be watching a coup in real time as the age old rivalry between the cities of London and Westminster play out, with the scale of suffering they can impose being the prize they wish to win.

This is worse than I ever expected, and detest Truss and Kwarteng as I do, they have to beat Bailey. That is some indication of my concern, and what I suspect is that they won’t do that. Worry, because Bailey wants to ruin us all.