Austerity Is A Myth To Con The Financial Markets, City Firm Tells Cameron

[geezer466]

The way UK bond yields are heading would suggest not but food for thought. Perhaps that is only because the UK is the best of a bad bunch to park your money?

Tullett Prebon, a bond trader, said that “public expenditures have hardly been reduced at all” and that claims of a “big cut in public spending is bare-faced deception”. Figures highlighted by the firm show that public spending actually rose during 2010-11 and fell by just 1.5 percent last year. Government spending is more than £22 billion higher than it was in 2008 when the financial crisis erupted.

Reading that and actually considering for a moment juts how much they are (or not as the case may be) shaving from the deficit show what a bloody great con trick it is....

The hard facts are the UK will not get back onto a stable road until such time as the system is purged. This will involve huge spending cuts in the welfare state and public spending/services. Clearly there will never be a political will to be able to achieve this so it will be up to the Bond Markets to enforce it

[ska_mna]

The way UK bond yields are heading would suggest not but food for thought. Perhaps that is only because the UK is the best of a bad bunch to park your money?

Tullett Prebon, a bond trader, said that “public expenditures have hardly been reduced at all” and that claims of a “big cut in public spending is bare-faced deception”. Figures highlighted by the firm show that public spending actually rose during 2010-11 and fell by just 1.5 percent last year. Government spending is more than £22 billion higher than it was in 2008 when the financial crisis erupted.

Reading that and actually considering for a moment juts how much they are (or not as the case may be) shaving from the deficit show what a bloody great con trick it is....

The hard facts are the UK will not get back onto a stable road until such time as the system is purged. This will involve huge spending cuts in the welfare state and public spending/services. Clearly there will never be a political will to be able to achieve this so it will be up to the Bond Markets to enforce it

Cool, now we have three "more austerity please" threads.

[Take Me Back To London!]

They got their austerity monies worth by axeing the RAF Harrier squadrons and all the worldwide press attantion it got - UK showcase spending cuts!

[Executive Sadman]

What difference does it make?

In the US the rhetoric is anything but 'austerity' (though the figures are the same) and wall street and the city seem to buy into that too.

I presume its just a 'remember whose boss' kinda thing.

[koala_bear]

Tullett always publish some very good economic papers that are pretty much spot on.

The cuts so far have been trying to put the brakes on the breathtaking increases public spending increases set up by Gordon.

(In parallel with a large reduction in tax take)

The financial year 2012-13 that started in April will be the first year the "cuts" will start to bite as this is the first fulll financial year they could actually start to reduce spending with incurring too much additional cost.

Stopping projects half way is not usually a good idea but they have effectively reduced the number on new projects happening, but it takes a while before current projects finish and now longer need funding etc.

FY 2013-14 will be when people start to notice the cuts.

[Guest tbatst2000]

I would guess this 'bond trader' is shorting government bonds. I guess he's burning.

Nah, not Tullets - they're the archetypal barrow-boy trader types: buy it low sell it high to a mug who knows no better. They don't do prop trading as far as I know. Come the apocalypse all that will be left will be cockroaches and a few Tullets employees.

[kzb]

The huge welfare payments are actually designed to protect the banks. If it wasn't for the benefits system propery prices would have to fall, big time.

[geezer466]

The huge welfare payments are actually designed to protect the banks. If it wasn't for the benefits system propery prices would have to fall, big time.

Yes and................

[ska_mna]

If it wasn't for the benefits system propery prices would have to fall, big time.

Those bl00dy poor people and their benefits causing housing bubbles and financial meltdowns.

[Britney's Piers]

The questions still remains...how can yields be so low when the issuing states are obviously heading for bankruptcy? What are markets waiting for exactly? Are they so habituated to their risk on/risk off paradigm that they cannot do anything else?

Edited May 15, 2012 by Britney's Piers

[wonderpup]

You have to love the financial sector. We throw them a life line because they were drowning in all the debt they created- they then take a knife to the rope.

[drunkincharge]

The questions still remains...how can yields be so low when the issuing states are obviously heading for bankruptcy? What are markets waiting for exactly? Are they so habituated to their risk on/risk off paradigm that they cannot do anything else?

You know as well as me that sovereigns don't go bankrupt, they default either by outright stopping debt interest payments or by inflation. The markets are saying we are the best of a bad bunch along with US who after all control the financial system. Both will inflate along with the rest of the world to keep exchange rates in line. Treasuries/Bunds/Gilts are there only option for now.

[Game_Over]

It's patently obvious that the Government aren't cutting - they are talking tough and carrying on borrowing because they don't have the political backbone to actually do anything radical.

The left whingeing about cuts are just a joke.

Thing is the tactic seems to be working because our 10 year bond yields are now the lowest for 300 years when in reality we are just as screwed as Spain or Italy.

In this context occupy and public sector strikers are just useful idiots reinforcing the idea that the government is imposing harsh austerity measures which it clearly isn't.

[Blod]

The questions still remains...how can yields be so low when the issuing states are obviously heading for bankruptcy? What are markets waiting for exactly? Are they so habituated to their risk on/risk off paradigm that they cannot do anything else?

The money created by the ECBs and then lent to the banks across Europe is charged out at 1% via the LTRO. Those banks then buy bonds which yield say 5% meaning the banks pocket the difference which is 4% in this example. On the surface it all looks good it you factor in that the bonds are junk and the banks are only going to be able to keep the sovereign yield low till the LTRO money runs out. When that happens we'll only get a short time frame to see whose been swimming the nakedest.