🚨🚨 Nerd alert......🚨🚨

How (not) to report a bank run that hasn't happened....

Journalism on potential bank runs is very difficult territory because reports can be self-fullfilling

The only rule is to be v v v v v careful

So I was surprised to see this Is it contagion?
Was it large?
Did it even happen?

All good questions

Let's have a look...
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Apt

Hard cheese (cheddar) prices up more than any other dairy product in the UK

#HardCheese Buy peanut butter

Today I am a pig in sh*t...

I've been given access to the @FinancialTimes wizzy newish graphics package.

I'd like to know what you think is the best presentation of the same data...

It is the UK's poor post-covid economic performance (incl latest data today)

Base chart

1/ You can see this is real time because I've messed up the height of that chart

@theboysmithy who gave excellent training yesterday warned us not to make that rookie error

Fixed that

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The UK has gone from the best performing economy in the G7 to an also ran.

Why has this happened?

New big read

enterprise-sharing.ft.com/redeem/c17e9be…

In a single chart

1/ After the period of the financial crisis, which hit the UK very hard with its large financial sector…. There were 2 periods

2010-2016 where growth was lower than before but still internationally strong

2016+ when growth fell further and UK dropped down the G7 league table

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I've written an explainer on why the public finances are in much better shape than expected in November

A 🧵Does this vindicate Liz Truss' cconomic policy?

tl:dr NO

1/

ft.com/content/22e1f7… First: Interest rates were lower in the autumn statment than when Truss was in office (and wasn't U-turning), so the public finances would have had to cope with the continued "moron premium" - now gone

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Today’s UK labour market figures were remarkable.

Everyone appears to think the figures show their prior views were correct

The chancellor Jeremy Hunt said they showed the need to stick to his plan The Centre for Ageing Better said it was all about the over 50s

Sunak promises action on growth and waiting lists ft.com/content/a9e783…

The 3 econ pledges are to
- halve inflation this year
- grow the economy
- get debt falling by 2024-25

1/ Everyone expects inflation to halve this year - even if it is still problematic by the end of the year it'll halve (almost certainly)

Getting growth by end 2024 is a pretty weak commitment (which is my reading of it as written).

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BREAKING. Chancellor Kwasi Kwarteng leaves Washington to take care of UK emergency UK economic situation Source close to chancellor says he needs to take care of the medium term fiscal plan as chancellor races to airport to catch the last flight

After £43bn of permanent tax cuts blew a hole in the UK's public finances

One question is when will Kwasi Kwarteng come up with a plan to put the situation right

Who knows...

But these are five ways he can reduce the UK debt budden in the medium term ft.com/content/a848ee… This is the problem - the permanent tax cuts have left UK debt probably rising as a share of GDP

Why "probably"?

Because this ratio is incredibly sensitive both to the initial amount of debt and the NGDP growth rate...

While the UK is definitively in a financial crisis, if @bankofengland intervention works and policy becomes more credible internationally, it does not necessarily lead to an economic crisis @bankofengland BoE action is designed to stabilise the bond market - although temporary, the big stick it's wielding - carries the threat of further action later.

The BoE hopes this will be enough

It also knows it has to raise interest rates to offset the unfunded tax cuts

🚨🚨The Conservative leadership election has been a bad period for UK public finances 🚨🚨

Already worse than in March when it kicked off

All headroom agains 2025-26 has gone now…

That is before any of Liz Truss’ tax and spending pledges

ft.com/content/e60d3f… UK public finances are very sensitive to inflation on the spending side
- pensions and benefits are updated by CPI
- £500bn of index-linked debt liability linked to RPI

Inflation forecasts have got much worse (these are far from the highest around)

Guess which type of school most fiddled A-level grades when they graded themselves?

Hint: the colour in the chart

A* edition

1/ Guess which type of school most fiddled A-level grades when they graded themselves?

A grades and above edition

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TRUSSONOMICS: a thread

In her interview on @BBCr4today, Liz Truss made 3 economic propositions

1) Her tax cuts will decrease inflation

2) Tax cuts boost growth and prevent recession

3) Tax cuts increase government revenues

It would be great if these were true

1/ @BBCr4today "My tax cuts will decrease inflation", Truss said, because "reducing NI and reducing corporation tax increases the supply side of the economy".

Problem is that these might improve the supply side, but they also increase demand.

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Back to the issue of public finances in a new world of higher interest rates.

A new report from ⁦⁦@NEF⁩ calculates taxpayers would save up to £57bn by not paying interest on reserves.

1/ on.ft.com/3aWGUsF Let’s be clear. This would be a tax on the banking system.

But it could enhance monetary transmission mechanism - if rate rises were passed on more to borrowers

And worried about setting rates are overblown.

Our splash on debt management and @NIESRorg calculating an £11bn loss for taxpayers has raised important issues today - here are some thoughts on the implications...

I would note this is complicated and simplification was required to tell the tale

1/

ft.com/content/90025f… @NIESRorg The calculation is essentially simple - if the government had taken out insurance against interest rate rises last year - it would mean £11bn less in debt servicing costs over the past year.

This is because interest rates on the QE debt have risen from 0.1% to 1%

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A 🧵on monetary policy communication after Ben Broadbent's "MPC at 25" speech today, which was pretty whingy in the form "Oh, we central bankers are soooooo misunderstood"

Most of this is popycock, I reckon, but read it for yourself

bankofengland.co.uk/speech/2022/ma…

1/ Broadbent makes 2 serious points amid many trivial ones

1. That pre-committing to interest rate paths is not credible in the real world
2. That if people only listened to central bankers and lost all other critical faculties, that would be a bad world...

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**** HOW THE SPRING STATEMENT ADDS UP***

tl:dr -

Sunak's taking a stealthy public finances windfall from people paying more tax - banking a bit, giving a bit back in highly visible tax cuts - and want people to thank him...

Longer version follows

ft.com/content/317863… First - there is minimal help with the cost of living crisis. If you're poor, a school, a hospital, the army you have to deal with it in pretty much your existing budgets.

Hence the drop in household disposable incomes - they don't return to pre-andemic levels until late 2024

NEW - the cost of ageing for the UK has fallen dramatically.

Far fewer babies, people dying earlier than expected and more immigrants (none necessarily good news) is v good for the public finances

1/ on.ft.com/3LzzXf5 We have put the new @ONS population projections into the @OBR_UK model for long term public finances.

Dramatic fall in additional tax revenues to balance the books by 2030. Now only £13bn compared with £69 BNY using the 204 population projections

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There is a large amount of interest in differential infltion rates.

To see what the ONS published before the pandemic and will again on Friday, follow this link

ons.gov.uk/economy/inflat…

1/ As today's ONS blog says, generally this data got little coverage because it shows small differences between different groups

(The one big exception was 2008, but also in 2011 when food and energy prices dominated inflation stats)

Table 7 is where you see that result.

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It is almost certainly the case - with all due respect to @BootstrapCook - that inflation measures are not underestimating cost of living pressures for those with the least (at the moment)

Let me explain - a 🧵

1/

https://twitter.com/BootstrapCook/status/1483778776697909252

@BootstrapCook I've spent the morning seeking the evidence from the official data for inflation being higher for the poorest - and in fact came up with the opposite

5.1% for the poorest tenth
5.5% for the richest tenth

The real story is that it is high for everyone

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The annual @financialtimes UK economists' survey is pretty gloomy
- falling real incomes
- lingering effects of Brexit barriers to business
- higher taxes & interest rates

But context is important and they still expect the recovery to continue

1/

ft.com/content/e8f45d… @FinancialTimes The purpose of the survey, as ever, is to get behind the point estimates and look at what economists think are the underlying important issues

UK underperformance amid falling real incomes is one of them

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