I was asked yesterday by someone I met whether I believed we were facing the risk of another financial meltdown on the scale of 2008, and if so, whether it would be in a year, five years, or twenty years' time? As a follow-up to the question, I was asked what might cause it?
My answer was that we were facing such a risk.
As to when it might happen, I suggested before 2029, and quite possibly sooner rather than later within that timeframe. I doubted that it was imminent, but it would happen sooner rather than later.
And what was the cause? It would undoubtedly be caused by Trump. As in 2008, this will be made in the USA. Tariffs, the resurgence of inflation, and consequent economic policy mess as he fights the Fed; the likely loss of confidence in the dollar, and the probable capital flight out of US markets will precipitate all this, aided and abetted by a loss of confidence in his Presidency in the USA, probably caused by a non-economic event, such as the Epstein files and his violent backlash against those criticising him. It will then be exported very quickly.
It will, however, be very much worse in the UK than it need be if this does not happen for a year or so, and that will all be the fault of Rachel Reeves and the desperate policy of deregualtion to pursue growth hat she is now promoting that has the single goal of seeking to, wholly inappropriately, drive money into stock markets that are already heavily over-valued and which will, consequently fall precipitously when the US crashes.
I am not alone in thinking this. As Larry Elliott has to say in the Guardian today, when discussing her Mansion House speech, and the focus on deregulation within it:
If Reeves seriously believes this stuff she is heading for a rude awakening. Chancellors don't need a crystal ball to tell them where financial deregulation leads; they can read the many books detailing what happened last time this was tried. The global financial crisis of 2008 came about because policymakers bowed to the pressure from big finance to sweep away “burdensome” regulations, pledging that more funds could be channelled into productive investment as a consequence.
Now Larry (who is a smidgen older than me) and I have an advantage here. We are old enough to know from bitter experience that what Reeves is doing is not just wholly unnecessary but deeply unwise. Apparently, she lacks that experience at the age of 46, which apparently means she was 29 back in 2008, and so totally unaware of what was going on all around her.
We, however, did take note. And we have come to remarkably similar conclusions. As Larry notes:
It is also absurd for the government to be proposing cuts in welfare while the commercial banks are being paid interest at 4.25% on their risk-free reserves being held at the Bank of England. In 2023, NatWest, Barclays, Lloyds and Santander received more than £9bn between them – a rise of 135% on the previous year. There are far better uses for this money.
Reeves could order the Bank to halt QT and she could stop the payouts to the commercial banks. Judging by her Mansion House speech she would rather rely on the financial sector to dig her out of a hole. Good luck with that, Chancellor.
I, unsurprisingly, agree with all that as I have been saying it for longer than Larry.
But Reeves is not paying attention, and the price for her not doing so is going to be very high indeed.
The price for Reeves and Labour might be higher still. All those who now put their money into markets because she said they should will not forgive her, probably ever.
Moreover, Labour cannot survive being for a second time the party in power that deregulated in a way that facilitated a crash. This will be curtains for it.
A crash will rewrite the political landscape, but we just do not know how, as yet.
Thanks for reading this post.
You can share this post on social media of your choice by clicking these icons:
There are links to this blog's glossary in the above post that explain technical terms used in it. Follow them for more explanations.
You can subscribe to this blog's daily email here.
And if you would like to support this blog you can, here:
Buy me a coffee!
I think that Reeves and Labour are being set-up to fail making them unelectable like the Tories.
That leaves Reform as the BBC and mainstream media’s choice.
Unless a left-ish socialist party can assert itself before then.
Mr Tresman, perhaps what the Uk needs is a “Radically Normal Party” able to deliver what most Brits want (fairly priced energy, clean rivers, an education system fit for all citizens, ditto a health system, ditto transport etc etc.) We could apply the words “left wing” or “socialims” to these – but that fashions a stick for the right whingers to beat those proposing such societal goods. We need a reset to what was accepted in the 1960s and 1970s as normal & what was normal then was most definitely not left wing or even socialism.
I agree with your view, Mike. What we need is a real, progressive social democratic party – one that prioritises the needs of the country as articulated by you, and is committed to ridding the body politic and economy of the neoliberal nonsense that has brought us to such a sorry state. And unlike the other pre-existant social democratic parties of modern Europe, is innoculated against the evils of careerism and the betrayals over the decades of labourism, which ultimately brought us Mandelson and Blair.
I almost fell off my seat when he mentioned the CBRA – in the Guardian!
Political consequences may indeed come about but Neo-liberal life is nothing but a groundhog day. Markets will get bailed, voters will pay the price, I have little hope of anything else happening to be honest.
PSR: What the heck is CBRA?
I just scanned Larry’s article (which I had read & noted yesterday) and see nothing that could fit (certainly he didn’t use that acronym). In any case, it was a good article (and I fail to see what you found it so startling about it appearing in the Guardian).
Sorry to pick on you over this. You are just one of an increasing number of commenators here who use abbreviations which – however I hard I try – I just can’t fathom and yours was just the straw that broke the camel’s back.
So this is a plea to all concerned to please define any non-standard acronym you wish to use?
CBRA = central bank reserve account, which is the blog glossary
Thanks Richard.
But, if such little-used acronyms are to be used (and I would prefer they were not), it would help if there was a way to search for them in the glossary. Maybe I’m not very good at this, but all I could appear to do was to click ‘C’ on the list of glossary entries, where – among a long list of topics – there is indeed ‘Central Bank Reserve Account’, but no ‘CBRA’ as such.
Sorry – but that would take a lot of work
But I know of the concern and usually I try to edit them into comments so they are comprehensible
Here, I failed
If you can’t find the meaning of a term with a normal online search you could try searching this site. For example, put one of the following into your favourite search engine:
site:https://www.taxresearch.org.uk/ cbra
or
https://www.taxresearch.org.uk/Blog/glossary/ cbra
Another option would be to click on the “hamburger” menu top right and select Glossary then navigate to the term you are looking for.
Thanks
“If Reeves seriously believes this stuff she is heading for a rude awakening.”
You cannot awaken a zombie. Reeves is a programmed zombie she does what she is told – by her minders (one wonders who).
Come the crash, certain parties will have seen it coming (well they engineered it) and will have positioned themselves.
(the “Big Short” profiled this for the USA – doubtless similar stuff happened in the UK).
From just observation the economy is seriously slowing down. Rachel taking money out of the economy is not helping.
Trump economics are on track to decimate the US and other nations economies.
No steer trumpets a very poor trade memo with Trump as a major success, whilst the reality is the UK is being stuffed.
No steer is on track to lose the next election badly and let far right in.
Thank you, John.
The people who groomed Starmer from a quarter of a century ago are happy with his approach and what’s likely to happen in 2029. If Starmer wins in 2029, that’s good. If Farage and / or the Tories win, that’s also good. Starmer’s job was to infiltrate the left, destroy it, provide a non-socialist alternative to the Tories and ensure this non-socialist alternative prospers.
I’m also 46, but unlike Reeves I was very aware of the credit crunch impact and then sought to understand the causes, so age is no excuse. And I wasn’t even working in a finance-related job at the time. You can be sure I noticed the sudden change in the markets, though, most specifically the mortgage market.
Even if Rachel Reeves at 29 was “too young” to fully understand what led to the 2008 crash, she should be able to read up on it and take action before it’s too late.
However, such sentiment belies the crux of the matter: everything she’s doing as chancellor is her dogmatic belief, not uninformed incompetence.
[…] of 2008, as I have this morning, I found a post I wrote on this blog right at the start of this year, in which I […]
Agreed.
“Labour cannot be trusted with the economy” will be the epitaph on a once good party. Greed is killing this once great but now just Britain.
I have never really subscribed to an underlying control of the government by dark or elite forces. But even I begin to wonder.
What earthly reason can Reeves have for wanting ordinary people to put5 their savings into the stock market? One of the lazy scrounger tropes is people wasting their benefit money on beer, fags and the betting shop. What is the stok marke4t other than a glorified, elite betting shop? I was told years ago that the stock market price mattered because the company gained by increased stock prices. They certainly don’t gain any investment!
So why has Reeves been told to do this? Another way for the wealthy to take what little the less well off has?
Thank you and well said, Richard.
A couple of signs of the coming crisis: The CEO of one of the US giants is selling stock in the bank he has led for two decades. Smaller banks and investment funds, “dumb money”, are taking greater risk, e.g. funding private equity and piling into data centres and real estate.
The US is often blamed for 2008. The UK would have had a 2008 without the US sub-prime scandal / fraud / blow out.
I note that Gordon Brown is conspicous by his absence in not commenting on Rachel Reeves’s financial deregulation proposals. Here’s Clive Lewis though:-
https://www.clivelewis.org/uncategorised/news-and-updates/2024/12/31/analysis-loosening-financial-regulations-is-risky-and-may-not-produce-growth/
Noted
One rather wonders about the role of Treasury Mandarins in this.
RR: How do I get growth quickly?
TM: Deregulating the City will produce quick results, Chancellor. Here’s what you need to do….
If (when) there is a crash, I can only imagine from past experience that assets that will have dropped in price will be quickly hoovered up by the wealthy – it’s the working (including middle) class that lose out.
It is indeed ‘Working People’ who will lose the most in this next neoliberal choreographed financial crash. A fact which simply highlights the cynicism at the heart of Starmer’s cartel as they politically groom these ‘Working People’ to pay for their carpetbagging privileges.