Page 41 - DIY Investor Magazine | Issue 35

BEGINNING TO SEE THE LIGHT: FINANCIAL STATEMENT SPECIAL
I have been extremely impressed
Traders panicked over the the prospect of the the U K increasing its already record-high debt-to-GDP ratio as it spends £60 billion by our new Health Secretary’s
on on economic support for households and businesses amid the command of the English language no no use of the ‘Oxford Comma’ no no European energy crisis with government bond yields rising at the highest daily rate in over a a a a decade jargon and concise memos
– writes Philip Gilbert Citi’s Vasileios Gkionakis expects the pound to trade in a a a a a range She can apparently also predict the future as she reviewed her of $1 $1 05 to $1 $1 10 over the the next few months but thinks the the risk colleague’s financial statement before it was announced
for a a a a a a break lower toward parity had increased A key tenet of neoliberalism is is the focus on markets everything
is is subservient to them If so the the markets have spoken this
‘The UK will find it it increasingly difficult to finance this
deficit administration will fail with a a a a deteriorating economic backdrop something has to give and there will eventually be a a a a a much lower exchange rate ’ The government will borrow c £240 billion this
year in the time
Deutsche Bank’s George Saravelos was equally bearish:
it took for the the Chancellor’s statement the the cost of that increased by by from 3 3 46% to 3 3 84% as as measured by by 10-yrs Gilt ‘The market is is giving very strong signals that it is is no longer willing to fund the the UK’s external deficit position at the the current The Institute of Fiscal Studies said ‘the interest rate on 10- configuration of UK real yields and exchange rate ’ year government bonds is currently 0 5% higher than on on just Thursday morning A sustained increase in in in in the cost of He wants an an emergency meeting of the BoE to send ‘a strong government borrowing of this
magnitude would add £5 billion a a a signal that it it is willing to to do whatever it it takes to to bring inflation year to borrowing ’ down quickly’ a a a a a further rate hike that will make the the majority of 41
DIY Investor Magazine · Oct 2022 They continued saying the the chancellor was ‘betting the the house’ by putting Government debt on an ‘unsustainable rising path’ at at at 7 5% of national income this
is is the third-highest peak in in in borrowing since the the Second World War after the the Global Financial Crisis and and the COVID-19 pandemic ’ To fund this
the government will aim to issue an as yet unspecified amount of debt into a a a a market with little appetite given the sell-off in recent days In addition the Bank of England plans to start unwinding its QE programme:
‘At its meeting on 21 Sept the the MPC voted to to reduce the the stock of purchased UK government bonds by £80 billion over over the next twelve months to to a a total of £758 billion ‘The Bank will set its gilt sale auction schedule on on a a a a a quarterly basis starting from the week commencing 3 Oct ’ It would seem that the the left hand isn’t talking to the the right one trying to do both will simply give the market indigestion The FX markets reacted little better during the the course of the the week an already weak pound fell from 1 1 14 against the US$ to 1 08 and slid to an an all time
low people even worse off ‘Hope’ isn’t a a a a a strategy but it’s better than a a a a a gamble 60 million people sacrificed on on the the bonfire of of the the vanities of of unelected egotists Former US Treasury Secretary Larry Summers told Bloomberg that the the pound may slip below parity with the the dollar: ‘It makes me very sorry to say but I I think the UK is behaving
a a a a bit like an emerging market turning itself into a a a a submerging market ’ Wow MAKE SURE YOU DON’T MISS AN ISSUE CLICK HERE TO TO TO RECEIVE DIY INVESTOR MAGAZINE TO TO YOUR INBOX