Sunday 25 September 2022

Courting Ruin

What's the lay of the land like three weeks in? Already upset and rumours of upset are making their way into the press about Liz Truss. Just a quick run down from this week. We've had the Telegraph fantasising about what might have been had Ben Wallace not lost his bottle. The Mirror reports on noses put out of joint after two whips refused to debase themselves before Truss's cult of the non-personality. The Telegraph (again) talks of open revolt on the government benches if the pound sinks to parity with the dollar, or dives below it. And Tory MPs complain about the disloyal mood among parliamentarians. It's not only Ken Clarke saying Truss's schemes won't work. The patron saint of remainia and imagined Tory decency is only saying words that are common currency on the parliamentary estate.

Truss also has another feather in her cap. No Prime Minister taking office in mid-term without immediately turning around their party's fortunes in the polls has gone on to win a general election. She has the unique distinction of being the first in such a position. Truss and her outriders are masochistically leaning into this. Having stripped the Tories of all pretence that her government is anything other than an instrument of the ruling class, Truss is staking her premiership on whether her natural voter coalition and Conservative-leaning swing voters are gullible enough to buy it. Levering more money into the already bulging pockets of the rich is entirely reliant on the ideological legacies of past governments for its justification - it assumes the past neoliberal commonsense continues to frame such questions. That the mass purchase is still there. Having peddled the view that enriching the wealthy is correct and proper economics, it says a great deal about the exhaustion of Toryism that Truss isn't playing the legitimation game beyond the already accomplished. Why dig further when Thatcher, Blair and co. have already done the spadework?

Just saying what her government is doing is necessary for economic growth won't work, politically speaking. When Dave embarked on his ruinous programme of cuts 12 years ago, he did so with the same commonsense behind him. And also the unanimity of the Tory party, their press operation, broadcast journalism, and the acceptance and meek support by Labour. Oppositional voices were almost entirely sidelined, and therefore the Tories were able to mobilise just enough support to keep them on track and win a majority in 2015. The situation could not be more different for Truss. The cost of living crisis is seeing even the better off counting the pennies. There is widespread anger toward the energy companies for their profiteering. The background presence of socialist ideas and sympathies is the lasting consequence of the Corbyn interlude. Labour movement mobilisations and victorious strike action is on the up, and significant layers of journalistic, professional, and political opinion oppose the naked class project of Trussonomics. And, as we can see, there are jitters on the Tory benches: pump primed by a summer of denunciation by Rish! Sunak. Can Truss rely on a diet of scapegoating and mass sadism? It's seems rather doubtful.

There is nowhere else for her to go. Having declared a protectorate around fossil fuel profits, the eye watering borrowing costs of her energy price freeze and tax cuts for the wealthy leave no room for anything else. For Tory MPs nervously eyeing the polls and despairing that Boris Johnson's levelling up wheeze has been abandoned, it won't be long before the mood turns even more sour. Especially when the unforced errors crop up, along with the whiff of corruption, supposedly confined to the Johnson era, catches in the press's nostrils. It's rare for a Prime Minister to begin their tenure with as pressing a set of problems, and even rarer for one to actively make matters worse within their first few weeks in the job.

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Old Trot said...

The BoE and numerous international banks, (see Sky, BBC, The Guardian, Financial Times today) etc, are now suggesting that in the UK (and don't forget the expert opinion is that a major stagflation wave is due globally too !) domestic inflation could peak at 17%, the Bank Rate could reach 6% , and the direct knock-on impact on the housing market could well be a 30% to 40% fall in house prices. All this was already on the cards as inflation took off recently , but the Trickle Down Theory and Ayn Randist nutters around Truss have certainly now created a 'perfect economic storm'. And of course the very Hedge funds that nowadays are such major Tory Party funders will have already made a killing through shorting the pound. And What has Labour got to say, as the resistance of workers produces a strike wave of 1970's dimensions ? A rousing chorus of the National Anthem, and lies and soft soap by the ton at the now Blair-style, purely decorative, Labour Conference. But, wait, opportunistically, now that even a majority of Tories want the railways renationalised - they might well, for now, back that - if the Daily Mail doesn't cut up rough !

As a humungous property crash and mega general inflation, looms I await word from 'Blissex', that tiresome monomaniac ' housing property values will forever tie the home owner to the Tories' mantra purveyor on countless btl comments here, for any sort of recognition that his one big analytical idea is now kaput. We are in a new era of politics folks - in which the organised Left is utterly crushed within Labour, and utterly disorganised outside Labour. Grim years ahead for everyone but the rich - and unfortunately, some new populist Far Right movement with a pseudo radical siren call to hoover up the now politically abandoned poorer working class and collapsing small business owner petty bourgeoise citizens. Look at Italy today, and be very afraid. The UK's FPTP electoral system will preserve the two/three (really all Tories), party monopoly for a while - but only for a while as the rising deprivation of masses of citizens crashes up against the fact that we are really, with the Blairite recapture of Labour, just a'facade democracy' one party state today, with no democratic electoral route to even mildly radical leftward change at all.

RobertD said...

Old Trot writes:

'As a humungous property crash and mega general inflation, looms I await word from 'Blissex', that tiresome monomaniac ' housing property values will forever tie the home owner to the Tories' mantra purveyor on countless btl comments here, for any sort of recognition that his one big analytical idea is now kaput.'

I think this is arse about tit. If a crash in property values is briskly followed by a crash in the Tories' electoral fortunes, that fits exactly with Blissex's analysis.

Blissex said...

«inflation could peak at 17%, the Bank Rate could reach 6% , and the direct knock-on impact on the housing market could well be a 30% to 40% fall in house prices»

Note that this is weird: if the BoE base rate reaches 6% and therefore mortgage rates reach 8-9%, with inflation at 17% that means that City speculators can borrow at a real rate of -11%, and residential housing speculators at a real rate of -8-9% (at the same time that inflation shrinks the real value of mortgages by 17%), that is an amazingly expansionist credit policy, which would usually mean a fantastic boom in property prices.

Truss and Kwarteng to avoid any risks have halved stamp duty permanently, a policy that Starmer could have proposed to show that he is truly and fully a "centrist" who “championed aspirational voters who shop at John Lewis and Waitrose”. He should now propose the deductibility of mortgage payments from tax or at least from taxable income, knowing that the Conservatives could not follow him on that having already put other massive tax cuts, less targeted to propertied voters, in their programme.

Anyhow there are signs that everybody with cash or other investments are frantically buying property to avoid the real value of their cash or other investments to be shrunk by inflation, while taking advantage of deeply negative interest rates to be subsidised by mortgage lenders. That mortgage lenders would lend at deeply negative interest rates is of course peculiar, but they are just taking a 2-3% margin on the BoE rate.

The problem might be that there are not enough people or hedge funds left with cash or other investment able to put together a deposit, but that's unlikely; in the USA for example private equity are buying lots of residential real estate, thanks to a similarly wildly expansionist Fed credit policy.

Old Trot said...

Pay Attention RobertD - Blissex resolutely denies that any such housing property price collapse could happen (see his post above and on the next article). His 'data' is obviously much superior to the modelling of the BoE , Goldman Sachs , and sundry other global financial analysts quoted across the media in recent days ! So, the property price crash, and mega inflation IS very likely to happen (up to 22% next year according to Goldman Sachs !). This may well cause the Tories to be booted out of office . and in comes , possible a Labour/ Lib Dm coalition. And their predictable 'solution' ? Undoubtedly massive extra austerity to 'rebalance the public finances' - and they WILL continue to privatise the NHS and will NOT refinance vital local government services - an wil hold down public sector wages. The 'political centre' has no strategy to the ever-rising global and domestic stagflation crisis . as Starmer's Labour is just a less bonkers than the Ayn Randist current Tory Party, reserve neoliberal capitalist status quo party. Unfortunately the status quo is now unsustainable for ordinary folks. Forget the obsessions of Blissex , Robert D - but then you obviously haven't been following and understanding his ever complacent over-regular , 'guaranteed ever rising house prices' posts anyway.