Any recommend readups like that? The Big Short certainly both entertained and horrified me with the insane games these sort of gamblers find.
https://www.pensions-expert.com/investment/ldi-and-the-liz-t...
However, I think the episode illustrates how economic policy can be overly constrained by the short term reactions of markets. Though I think Liz Truss's economic policy was stupid, she was PM and should have been able to execute it. It's good that the policy was reversed, but this happened for the wrong (undemocratic) reasons.
But keep talking like this and maybe they will join Reform so you can try them out again.
No, go read up on it. There was a chain reaction in the pensions market caused by over-leverage. Similar issue to 2008. Truss wasn't aware of it.
Now that doesn't excuse over-spending. Of course she should have been cutting costs rather than just lowering taxes. But apparently there aren't any British political parties willing to lower costs. Eventually the IMF will have to force the issue.
Why hasn’t the same thing happened under Labour? For various reasons, (not least that their economic policy isn’t stark raving bonkers), but largely because they’ve taken very explicit care to reassure the markets and make sure that no-one is surprised or alarmed: https://www.theguardian.com/uk-news/2024/oct/18/infrastructu...
Same thing hasn't happened under Labour because steps were quickly taken to end the crisis in the pensions sector. But the underlying problem remains that high spending isn't viable forever.
FWIW, Labour's economic policy is much worse than Truss' ever was. UK is heading for a massive crisis that makes the mini-budget LDI blowup look like a storm in a teacup. Labour have not only not reassured the market, they are actively antagonizing it as can be seen in the yields that are now persistently higher than during Truss. Labour backbenchers won't let the UK cut spending and bondholders are starting to think they won't get their money back. They are right to worry.
Whether or not someone was able to foresee the exact specifics is irrelevant. Everyone who knew anything knew that the budget would have catastrophic consequences.
You don’t have to like Labour’s economic policy, but it’s rather a weak argument to insist that it will eventually lead to an even bigger crisis that the Truss-induced crisis that has actually happened. So far it hasn’t. Isn’t economic policy essentially the art of delaying crises, in any case?
If I had to pick one obvious economic problem with the UK it would be the vast economic disparity between London and most of the rest of the country and the unwillingness of successive governments to invest any significant amount of money in tackling it.
There is no cheap solution. Cutting taxes on the rich won’t magically grow the economy. That requires actual investment. However, as Liz Truss showed while trying to do something different, it’s very hard for the government to invest when any increase in borrowing leads to panic and a crash in the markets.