tag:blogger.com,1999:blog-4486641877026778105.post3794261469308950304..comments2024-03-27T09:14:27.496+00:00Comments on All That Is Solid ...: The Delusion is Strong with This OnePhilhttp://www.blogger.com/profile/06298147857234479278noreply@blogger.comBlogger2125tag:blogger.com,1999:blog-4486641877026778105.post-73391439931468287572023-02-07T18:56:56.323+00:002023-02-07T18:56:56.323+00:00«The subsequent carnage on the markets was volatil...«<i>The subsequent carnage on the markets was volatility already baked into the system, she claims.</i>»<br /><br />A realistic piece by the FT makes clear how right she is:<br /><br />https://www.ft.com/content/dd9ecef4-8881-42d2-bdb9-2f017bd286fe<br />«First, there is a world of difference between Liability Driven Investment and “Leveraged LDI” — and it is the latter, not plain LDI, which caused the problems.<br />LDI is just jargon for matching pension assets and liabilities, exactly what Boots pioneered 20 years ago. … But with “Leveraged LDI”, a pension scheme is effectively borrowing to buy assets which don’t match liabilities — equities, PE, hedge funds, property — betting their value will increase more than the value of liabilities. The Bank of England Deputy Governor, Sam Woods, recently told the Treasury select committee:<br /><br />Q311: “[T]here is a bit of having your cake and eating it: you keep the returns from the higher returning assets you have and you leverage for the gilts part that you need for matching purposes.”<br /><br />With Andrew Bailey, the Bank Governor, adding:<br /><br />Q314: “[W]hat started as a means of managing asset liability positions became a means of actually increasing the return to the fund … that is the leverage point.”<br /><br />First things first: unlike LDI — hedging — “Leveraged LDI” is speculation, increasing risk for members, the sponsor, the PPF, and the whole financial system (see my earlier Alphaville on BT’s Leveraged LDI). Second, leverage was hidden from members, shareholders, and bondholders, because accounting requirements are poor — pension schemes and companies don’t have to disclose details of their Leveraged LDI.»<br /><br />The aim seems to me to have been that placing huge bets on the markets would result in big bonuses for the bettors if that worked (plus big fee income for the mates of the bettors in the City), and a bailout if it did not work. There was a small risk that "true believers" Truss and Kwarteng might not have bothered with the bailout, so they had to go, plus they were kippers like Johnson. Briefcase politicians are pragmatists, not ideological:<br /><br />https://www.thenation.com/article/mr-obama-goes-washington/><br />«“I don’t think in ideological terms. I never have,” Obama said, continuing on the healthcare theme.»<br /><br />http://averypublicsociologist.blogspot.com/2022/12/wes-streeting-vs-nhs.html?showComment=1670944323523#c5685324252015284575<br />«Starmer on the Andrew Marr show. He was asked what had happened to the Ten Pledges. The answer, “Look, I’m a pragmatist, not an ideologue.”»Blissexnoreply@blogger.comtag:blogger.com,1999:blog-4486641877026778105.post-25907961021062012742023-02-06T20:20:30.180+00:002023-02-06T20:20:30.180+00:00«Or, to be more accurate, those who removed Boris ...«<i>Or, to be more accurate, those who removed Boris Johnson then did the same to her.</i>»<br /><br />Totally realistic: the tory press does not do a vicious campaign of personal attacks against two Conservatives PMs by "mistake".<br /><br />«<i>As far as she's concerned, her diagnosis of the situation was sound and the prescription would have worked</i>»<br /><br />And here I can understand one additional reason why she was thrown under the bus by the "whig" faction of The Establishment: "trickle down" and "free markets" are for them just silly propaganda to fool the gullible masses, but they know very well how silly they are, and it scared "The Establishment" that Truss seemed to be earnest in believing in them. She might not have bailed out the LDI speculators because of an earnest belief in the "free markets" and "minimal state intervention", for example.<br /><br />«<i>The subsequent carnage on the markets was volatility already baked into the system, she claims.</i>»<br /><br />That's indeed quite realistic. The system is utterly dependent on continuing support by the BoE providing massive amounts of very cheap debt to "friends of friends", for as long as that can last. So the "deep state" main principle is "don't make waves", and she did make a very small wave. Here is official confirmation:<br /><br />https://www.ft.com/content/cfd6a8e7-ae8d-4f45-b180-30b89f6bf308><br />«UK financial crisis<br />Andrew Bailey: I ‘would never’ stage a coup»<br /><br />«<i>The critique of her position by well known enforcers of social democratic orthodoxy, the IMF, were "politically motivated" - a point Truss sadly does not expand on [...] Sunak's briefcase Toryism</i>»<br /><br />It is Sunak's briefcase Conservativism of the "whig" (with tory vote pandering) variety, aligned with the "whig" IMF consensus. It is unfortunate that "Tory" (upper case "T") is used as a synonym for "Conservative", because the Conservatives are mostly "whigs" (most of the leading figures, while most the base is "tory").<br /><br />However Truss is right in one respect: Sunak is too left wing for the Conservatives, and he should be exchanged for Starmer. Smarmy Sunak is a much better fit for New New Labour, and ultra-brexiter, hard-authoritarian, plastic-patriotic Starmer is a much better fit for UKIP, oops I mean the Conservatives :-).Blissexnoreply@blogger.com