I noted yesterday my suggestion that the supposed crisis surrounding gilt prices might have been created by those in the City of London who wished to fulfil Elon Musk's demand that Keir Starmer's Labour government in the UK be brought down.
Last night, this was the FT homepage headline:
The story about the markets has already been covered on this blog, and will be again today.
The Musk story, according to the FT, is:
Elon Musk has privately discussed with allies how Sir Keir Starmer could be removed as UK prime minister before the next general election, according to people briefed on the matter.
Musk, the world's richest man and key confidant of US president-elect Donald Trump, is probing how he and his rightwing allies can destabilise the UK Labour government beyond the aggressive posts he has issued on his social media platform X, the people said.
They added:
“His view is that western civilisation itself is threatened,” one of the people added.
Let's ignore the absurdity of that. A megalomaniac, far-right oligarch thinks he must save Western civilisation - which is characterised by democratic rule - from a democratically elected government.
Instead, just ask why the FT juxtaposed those stories in the way they did. Might they think there is a conspiracy going on, as I do? I suggest that is the case. In fact, they say it is the case. And that is what is crazy about what is happening. I don't have to prove that this conspiracy is happening because it is occurring in plain sight.
And, as I will explain in another post, coming soon, that is the whole point I am making. I have not suggested there is a fraud happening, or that traders are breaching market rules set up for another era, where a conspiracy was hidden from view. This conspiracy is being publicised and even promoted in the media. Plain sight is the key phrase here. The City is doing what Musk wants, just as blatantly as Badenoch is, and for the same reason. They are desperate to secure favour from the new power they think is shaping their reality. They aren't acting illicitly. They are openly encouraging talking of instability, and whilst I am no fan of Rachel Reeves, they are also deliberately blaming her when the Bank of England is largely to blame. And because everything is in plain sight they can conspire openly around a supposedly rational, but very obviously artificially manufactured position, which is that Labour must go. As a result, and as I suggested yesterday, they are doing what Musk wants, just as banks in the USA are queueing to appease Trump by backing away from climate and diversity commitments.
A conspiracy, and even a coup, might be happening, as the FT suggests it is. But what is weird - and new - which makes this politically economically interesting, and vital to note, is that the conspiracy is happening in the open, and so banks, traders, hedge funds, and others can all take part if they wish under the guise of risk management when that supposed risk is being created by the conspiracy against Labour of which, I have no doubt, some in the City approve, as I have suggested.
It's not crazy to note this. It's pointing out what I think is happening. The phenomenon might be new, unprecedented even, and certainly unanticipated by regulation, which is why I have never suggested any has been breached (and it never even occurred to me to do so). Political economy is witnessing previously unknown patterns of behaviour. Existing models do not, and cannot, explain the consequences. All I am doing is exploring new explanations in real-time. No wonder that might upset some.
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I think the coup began with the ousting of Corbyn.
Yes, I feel tou are right @ Ian Tresman, it began with the onslaught against Corbyn.
Richard, I read the comments today, from your post yesterday, about the idea of a coup by the City of London. I noted that there was a great deal of pushback ref collusion or the idea of many working in concert, together.
I think you are correct in your assertion.
Let me add this link to an interview by Andrew Marr, of Noam Chomsky.
https://www.youtube.com/watch?v=lLcpcytUnWU
It is about press censorship, which Marrs finds hard to comprehend, but Chomsky’s point is that coercion is not needed, if the “right” people are in position.
You can apply this to very many things, from “yes men” in business, to politicians (see Labour’s removal of the “wrong type of candidate” before the last election) and yes to bond traders. No coercion is needed. no notes or messages, just make sure the “right people ” are in place, who will do the “right thing” at the required time. All that is required is a first step – I would suggest that is Musk. Influential people are called that because they really do influence others!
Thanks
Stewart Lansley’s The Richer the Poorer is an illuminating read. The ‘fifth columnism’ has been underway since the turn of the last century. Vested capital interests are a long way down the road in front of us.
First, lets look at the market moves that seem to be generating such fevered coverage in the FT and elsewhere.
Trade weighted Sterling index was 83.4 at the beginning of July 2024 (as Labour won the election) and today it is, err….. 83.4 (from the BoE website yesterday). What’s the issue with the currency? NONE.
In the US, 10 year US Treasury yields are up from 4.45 to 4.70 (+25bp) and policy rates are 75bp lower; German yields are unchanged at 2.56% and ECB policy rates are 85bp lower; UK gilt yields are 52bp higher with the base rate 25bp lower.
Yes, gilt yields have risen by more than US or German yields but not massively and this underperformance is probably best explained by the fact that rate cuts have come much more slowly in the UK than elsewhere. Is the gilt market in melt down? NO.
Is there a problem? Yes, the BoE has tightened policy relative to other major blocs since the election by failing to cut the Base Rate by much and also by selling gilts via QT.
Is this (a) a MUSK led conspiracy embraced by City traders? Or (b) is it BoE incompetence? Or (c) a BoE agenda to force government to change policy?
My guess is (b); (c) is an outside chance, (a) is nonsense… although I do think the currency might have been impacted as some folk do seem to care what he thinks.
We know we agree on b and c
Your claim on (a) cannot in any way be supported by what is happening in the world. Sorry, Clive, but that claim is not credible.
Listening to Nick Robinson tell Lisa Nandy on radio 4 this morning that the government will have to cut spending and raise taxes because of higher gilt yields it is clear that what’s happening in the gilt market is being used to undermine the government. Higher yields mean higher borrowing costs, but they don’t make gilts less attractive to buyers – quite the reverse. So there should be plenty of appetite for however much issuance the government does. The problem is the fiscal rules Reeves insists on sticking to. And no doubt the stickier things get the more she will insist on sticking to them. The other problem is that the Bank of England is not helping the government, but again, Reeves is not going to do anything about that. So she’s stuck.
There was a good piece in the FT yesterday by Toby Nangle (who worked in asset management for years) on why gilt yields are behaving as they are, which said, as have others, it was mainly a reflection of the US Treasury market. https://on.ft.com/3BYJw7r
“In both markets, the simple reason why bond yields are higher is that markets expect the Federal Reserve and the Bank of England to have higher interest rates over not only the next year, but over the next five, ten, even thirty years than they did in mid-September.”
However, he also confesses that “None of this really helps you understand the intraday moves in bond markets that occurred yesterday — variously interpreted as some sloppiness from investment banks in managing rate locks, to the results of a meh five-year gilt auction, to bond vigilantes testing the Chancellor’s mettle. But we hope it provides some useful context.”
Other market commentators are free with their interpretations of what the market movements mean for government decision making, as you say Richard. So yes, plenty of people are taking aim at the government, but they probably would anyway, regardless of what Musk or Trump says. They might feel more entitled to heir views than usual though, and shout them more loudly.
I know nothing about banking so nothing to offer on that, but:
On “conspiracy” – prohibiting collusion/mobile phones/whatsapp OK. but presumably there are news tickers streaming the latest pronouncements or events? And people with similar vested interests operating in the same markets with similar mindsets operate in a similar way (shout bomb in a theatre, almost everyone reacts in the same way, announce a potato or toilet roll shortage, there is a run on potatos & toilet rolls) without any collusion at all.
On the threatened “damage” to “wealth/growth” producers:
Has inequality been increasing or decreasing over the last few decades?
Have pay ratios gone up or down?
Do public sector workers earn
more or less than 15 years ago in real terms, after lengthy pay freezes?
How many traders use foodbanks?
Are investment bankers doing better or worse (in terms of their income & wealth) than in 2009 when the rest of us provided them with a massive public subsidy?
On regulation: when gov’t last created lots of money to spend (2020/21 covid) but without much regulation, where did it go and how much was lost, to corruption, particularly PPE contracts?
Is gov’t money creation & spending on the real economy (not corrupt PPE firms) as disastrously inflationary as suggested?
Are there countries where they do things differently from the City of London?
What is missing from these long posts about banking, is mention of the lower deciles of the population, who know nothing of bonds or trading, but are wondering how to pay the rent, keep warm or buy food. For they have been subsidising the City for years, as their wealth has trickled upwards and now they have nothing left.
The party is over.
Whether the aftermath will be destructive or creative remains to be seen.
PMs in the past have won big majorities ‘only to exit mid parliament because of their waning popularity’. Basically saying it wouldn’t be unusual for Starmer to resign. Honestly it’s scary. Why is there no pushback to a foreign billionaire trying to overthrow our democracy. It’s the opposite, they appear to be trying to normalise it like it is something that is possible.
Cuckoo Musk is too stupid to see that Starmer isn’t actually a Labour politician!
Imagine how incandescent he would have been if Corbyn got in!!
Much like the democrats in the US most politicians have no idea how to deal with the Trump’s and Musk’s of this world. The politicians are used to doing things the “proper” when Trump and Musk have ripped the rule book up and are using as toilet paper. The only way to deal with fascists is with force. You cannot use politics or finesse. These things do no work. The only thing that stopped Hitler was complete and utter destruction of his armies and his country. To think Trump/Musk would stop at much less is really wishful thinking. I hope I’m wrong and people laugh at me later for this but if I’m not we are in for some very interesting times.
I know nothing about finance but this all makes sense in a macabre and deeply concerning way, I’ve come to the conclusion there needs to be a way to educate people so they at least know what is going on
Basically you are asking the question ‘What the hell is going on?’ and that is legitimate.
We have not been here before you say?
Hmmm……..I keep going back to the crisis in the 1970’s for the Labour government then and asking what are similarities? Dennis Healey looked back and felt Labour had been panicked into action then, had not had time to think and were being pushed into ideas that were contrary to what Keynes and others had taught us in the post war period. This seems remarkably similar – the manufacturing of a crisis perhaps to de-stabilise a sovereign government for a change of culture. Worrying.
Thanks
If there is a conspiracy, then it is pretty galling to think that the savings of the British people are being used against both their economic and democratic interests. Certainly raises the question of how on earth to regulate these people in the future.