So I have been thinking about this. QE has been incredibly good for asset prices - but at its heart its an attempt by central banks to send capital away - and to devalue its currency.
So when I say pro-capital policies, I should really say pro-corporates (as QE policies meant deposits got a low to negative return, we probably not call them pro-capital). Now policy wants rising consumer power, you want a strong currency - so higher interest rates, and also higher taxes to pay for the pro-labour policies. So in UK, cutting taxes led to a weak currency in the most recent mini-budget.
Brexit may be good for the UK in the long run - but they have to renegotiate all the trade deals they were already part of before leaving the EU, and do it from a weaker negotiating position....
If we get this shift to pro labor policy how will debt levels come into play... Wont it be difficult to raise rates? I know before the pandemic the UK had one of the lowest debt to gdp ratios.. Im not sure now. But if it is the lowest still do you think the pound will be the strongest of the major currencies while this trend plays out because the UK has the most room to raise rates? Would the EUR be the worst of the majors?
Russell your political theory seems counter intuitive to me.. Im going to play devils advocate. Doesnt money ultimately flow where it is treated good.? It sounds like the policies Im hearing from the new UK gov are friendly to capital. I am no expert on Brexit but if the UK is able to negotiate trade deals with the UK's best interest instead of the EU best interest wouldnt this also attract capital? Could this be the catalyst for a huge turn in the GBP and going back to where it came from pre joining the EU in the 70s?
So I have been thinking about this. QE has been incredibly good for asset prices - but at its heart its an attempt by central banks to send capital away - and to devalue its currency.
So when I say pro-capital policies, I should really say pro-corporates (as QE policies meant deposits got a low to negative return, we probably not call them pro-capital). Now policy wants rising consumer power, you want a strong currency - so higher interest rates, and also higher taxes to pay for the pro-labour policies. So in UK, cutting taxes led to a weak currency in the most recent mini-budget.
Brexit may be good for the UK in the long run - but they have to renegotiate all the trade deals they were already part of before leaving the EU, and do it from a weaker negotiating position....
If we get this shift to pro labor policy how will debt levels come into play... Wont it be difficult to raise rates? I know before the pandemic the UK had one of the lowest debt to gdp ratios.. Im not sure now. But if it is the lowest still do you think the pound will be the strongest of the major currencies while this trend plays out because the UK has the most room to raise rates? Would the EUR be the worst of the majors?
Russell your political theory seems counter intuitive to me.. Im going to play devils advocate. Doesnt money ultimately flow where it is treated good.? It sounds like the policies Im hearing from the new UK gov are friendly to capital. I am no expert on Brexit but if the UK is able to negotiate trade deals with the UK's best interest instead of the EU best interest wouldnt this also attract capital? Could this be the catalyst for a huge turn in the GBP and going back to where it came from pre joining the EU in the 70s?