This weekly roundup thread is intended for all culture war posts. 'Culture war' is vaguely defined, but it basically means controversial issues that fall along set tribal lines. Arguments over culture war issues generate a lot of heat and little light, and few deeply entrenched people ever change their minds. This thread is for voicing opinions and analyzing the state of the discussion while trying to optimize for light over heat.
Optimistically, we think that engaging with people you disagree with is worth your time, and so is being nice! Pessimistically, there are many dynamics that can lead discussions on Culture War topics to become unproductive. There's a human tendency to divide along tribal lines, praising your ingroup and vilifying your outgroup - and if you think you find it easy to criticize your ingroup, then it may be that your outgroup is not who you think it is. Extremists with opposing positions can feed off each other, highlighting each other's worst points to justify their own angry rhetoric, which becomes in turn a new example of bad behavior for the other side to highlight.
We would like to avoid these negative dynamics. Accordingly, we ask that you do not use this thread for waging the Culture War. Examples of waging the Culture War:
-
Shaming.
-
Attempting to 'build consensus' or enforce ideological conformity.
-
Making sweeping generalizations to vilify a group you dislike.
-
Recruiting for a cause.
-
Posting links that could be summarized as 'Boo outgroup!' Basically, if your content is 'Can you believe what Those People did this week?' then you should either refrain from posting, or do some very patient work to contextualize and/or steel-man the relevant viewpoint.
In general, you should argue to understand, not to win. This thread is not territory to be claimed by one group or another; indeed, the aim is to have many different viewpoints represented here. Thus, we also ask that you follow some guidelines:
-
Speak plainly. Avoid sarcasm and mockery. When disagreeing with someone, state your objections explicitly.
-
Be as precise and charitable as you can. Don't paraphrase unflatteringly.
-
Don't imply that someone said something they did not say, even if you think it follows from what they said.
-
Write like everyone is reading and you want them to be included in the discussion.
On an ad hoc basis, the mods will try to compile a list of the best posts/comments from the previous week, posted in Quality Contribution threads and archived at /r/TheThread. You may nominate a comment for this list by clicking on 'report' at the bottom of the post and typing 'Actually a quality contribution' as the report reason.
Jump in the discussion.
No email address required.
Notes -
Inspired by a comment from Twitter;
Everyone is talking about the US relative decline, but they are really flexing his power in a way that we have not seen from Iraq
In one year they;
Destroyed every possible reconciliation between Europe and Russia
Became a next exporter of natural resources and the ones from who a lot of allies depend
They basically sent a fuck off to Germany, and the Germans not only are not complaining, but are applauding
They strongly limited the military of power of Russia with few money.
China is slowing her growth, and they created a ring of allies in the Pacific
The cultural grip on the West is becoming stronger, and the US successfully fused Neoliberalism and Leftism in a zombie ideology who is, against all odds, successfully working
The pro-Atlantist view have never been so strong.
I doubt that these strategies will work or be healthy in the long term, but it is incredible to see how an ill and polarized country can still do whatever it wants without any reaction.
Also , the collapse of Euro, Yen, AUD, and Pound, and the surge of US dollar. Even when things seem to be going badly here, things are worse overseas, like higher inflation, worse energy shortages , more unrest (like in Iran now).
I was hoping one of the resident fin* people here with connections to London would have a top level on what's going on with the pound in particular. Seen some analysis that the new governments financial policies were a mismatch for ground level economic realities especially combined with energy subsidies for the coming winter. Then a much further downstream technical analysis of how a volatile bond market might have almost nuked pension funds.
At a very high level, the sterling/gilt crash is mostly driven by what finance Twitter is now calling MRP (short for Moron Risk Premium). The UK Deep State has a reputation for basic competence (Dominic Cummings thinks this is undeserved, but most investors disagree with him), whereas the clique of right-wing Brexit-supporting Tories that put Truss into power has a reputation for badly botching the technical aspects of Brexit. So when the Truss ministry publicly blows off the Deep State while simultaneously embarking on a questionable economic policy, investors worry that the British government is no longer going to display basic competence. It doesn't help that bankers can see the UK regulators visibly struggling to cope with onshoring financial regulation post-Brexit, which also creates a stench of Brexity incompetence. (This isn't actually a competence issue, it is a workload issue. The UK needs more bureaucrats as a fully sovereign state than it did as an EU member, but it is politically unacceptable to hire them).
When the government doubles down by saying the crisis is everywhere and not just the UK, blaming the remoaner IMF, attacking bond markets as woke etc. this obviously makes things worse.
At a semi-technical level, https://ukandeu.ac.uk/whos-afraid-of-fiscal-dominance/ is a good essay explaining to laymen what the scenario is that investors dumping the pound are worrying about.
I will do a separate post on the gilt market problem.
More options
Context Copy link
The short version of what happened to the pension funds is:
Pension funds have future-dated liabilities. Falling interest rates raise the NPV of these liabilities, potentially causing the pension fund to become accounting-insolvent.
UK regulation makes it a bad idea to allow a pension fund to be accounting-insolvent, so pension funds want to manage this risk. The main way they do this is using long-dated interest rate swaps. Effectively this is a side bet on interest rates - if interest rates fall, you win enough on the swap to cover the increased liability.
Market interest rates rose, fast. This meant that pension funds lost money on the swaps, and faced margin calls which needed to be paid in cash in the very short term (days, not weeks). But the offsetting gain from a falling NPV of liabilities is a purely paper gain. So pension funds were in danger of becoming cash-insolvent.
In addition, rising interest rates reduce the value of long-dated government bonds, which are a popular form of collateral. The 50-year gilt was briefly trading at 40p in the £ (not because anyone was afraid of a default, just because the interest rate suddenly became below-market). If you were using this gilt as collateral, you would be facing a margin call even if you hadn't lost money.
Whatever you call it, the BoE was forced to print money to cover government (planned) deficits that the bond market couldn't bear. This is bad.
More options
Context Copy link
Oh, it's getting real bad here. The £2 billion 45%->40% tax cut that the proles have gotten into a tizzy over really isn't causing much of the issue, it's more the huge additional borrowing for nat gas without enforcing a windfall tax plus the fact that the BoE is gonna start selling their QE gilts back into the market at a lower rate than it bought them at very soon (the costs are indemnified by the Exchequer, it's gonna add another £150bn plus to their outgoings, more than 2x the gas subsidies too).
The UK has fucked up big time, and you can't even say it's all the fault of Truss+Kwarteng, those gilts purchased during the pandemic were going to have to be sold at some point given how bad inflation was getting.
The big problem with the 45% tax cut is that it makes it politically impossible to cut spending (certainly, investors think it does, which is what is moving markets). If Kwarteng had announced only the corporate and middle class tax cuts while promising to find offsetting spending cuts in the next couple of months, he might have been believed.
More options
Context Copy link
More options
Context Copy link
Didn't they also ditch their fiscal rules? I remember people 10 years ago in the UK saying that austerity was a waste of time. Turns out it wasn't: markets really do care about the management of an economy and they don't like massive debasement of its value.
More options
Context Copy link
More options
Context Copy link
More options
Context Copy link
More options
Context Copy link