Comment on Liz Truss leaves stage in Beccles as 'lettuce' banner unfurls
Saledovil@sh.itjust.works 5 weeks agoSo, this minibudget included tax cuts, coupled with a massive increase in government spending, which then caused the currency to devalue. Still don’t fully understand how it got this bad, though.
cRazi_man@lemm.ee 5 weeks ago
The tax cuts were huge (billions). She didn’t increase spending, but didn’t decrease it either; so it would leave a huge hole in government finance that would require massive government loans. The “market” freaked out. The pound and UKs credit rating plunged. The main crisis became the gilt market crisis. This itself is well explained here:
www.youtube.com/watch?v=5-FdX0djxAE
(In case you haven’t noticed, I think TLDR news make absolutely fantastic videos and would recommend checking out their videos if you are interested in high quality news).
Saledovil@sh.itjust.works 4 weeks ago
Thanks, but how did the pension funds hedge against interest rates in a way that they had to pay up when the interest rate went up?
cRazi_man@lemm.ee 4 weeks ago
I have no idea man. My knowledge extends as far as that video. After watching “The Big Short”, I’ve learned that there are a lot of ways that finance bros play the economy in ways that we cannot comprehend.
Saledovil@sh.itjust.works 4 weeks ago
My hypothesis is that they put the gilts up as collateral so that they could borrow money to invest. So, interest rate goes up, and the value of existing gilts goes down, because why buy a gilt with 1% interest when you can get a new one with 2% interest? Pension funds need to add more collateral to their accounts, because the gilts became less valuable.
Theme@lemmy.blahaj.zone 4 weeks ago
Good movie
Saledovil@sh.itjust.works 5 weeks ago
Thanks. I’ll check it out in the evening.