Discussion in 'Economics' started by MohdSalleh, May 11, 2010.
looks like huge cuts are coming in the UK
Why would anyone want to get into office anyway?
As that guy from the BOE said, cuts are going to hit so hard, your party will be hated for generations to come.
Who gives a fuck anyway? I seriously don't understand the fascination with public services and I'm pretty much an ordinary middle class person. Ordinary people are going to have to pay for it one way or another, that's the way the world works, frankly I'd prefer private services then at least I don't get robbed through taxes all the time for a service I'm not going to necessarily use all the time. It's like getting a monthly contract on a phone you're never going to use, doesn't make much sense.
Also the conservatives in our country are basically like the majority of Republicans in America, they're neo-cons, they don't give a fuck about the people just like the rest of the main parties. All we're going to see is cuts to everything but the military budget and the taxes will be the exact same as they were before. I am personally hoping that they keep bickering amongst themselves all the time so that the markets correct themselves and life can fucking go on. I've studied history and I've seen it happen through watching situations like Greece, interference from ignorant politicians who don't even visit the areas they govern much just causes nothing but pain to the people.
Which is why it's so difficult to cut government jobs and/or social programs once they are in place. Yet without cuts debt collapse, inflation, currency dabasement are assured.
So, which is worse? The pain and adjustment to cuts now or total wipe-out later? (Everybody always seems to opt for "total wipe-out later"... hoping, I suppose, that somehow it doesn't occur. And of course, it IS "later".) We face the same in the US likely before the Boomers die out... and certainly in the next generation.
Conservative doesn't necessary better for managing national debts, in fact the opposite is often the case. More wars, please.
David Cameron has just walked into no.10, he has been PM for 10 minutes
How this will impact the pound? Firstly, as mohdsalleh says, this pact probably won't be too stable. Clegg is a Europhile corporatist who believes in capping banker bonuses at Â£2,500, hiking taxes, punishing capital, abolishing the UK's nuclear deterrent, and massively increasing immigration, without cutting spending. He is a bit like a Scandinavian politician in terms of outlook and policy. Cameron and the Tories are anti-Europe, they just split from the Sarkozy/Merkel bloc in the EU and aligned with Eurosceptic E Europeans, they want to cut spending and keep nukes, and don't think it's productive to try and crush business or the financial sector. His politics are more mid-Atlantic.
What are the chances of these strange bedfellows lasting 5 years together, let alone passing major unpopular spending cuts without falling out? As for the chance of intelligent financial or regulatory reform - lol. IMO the coalition will show serious cracks within the next few months, a year tops, and probably won't last the full 5 year term. When those cracks appear, the pound will get hit hard.
IMO the pound has major downside here, and only moderate upside. Maybe if the dollar corrects somewhat after its big bull run in the last few months, the pound might get to 1.55, maybe 1.60 at best. But I don't see it going further. Whereas I could easily see it retesting the old lows around 1.35, and in the long-term parity is a clear target. The thing about the pound is that a weak currency would be great for both the Tories and Libs. It would make the UK more competitive in the short-term, lead to more inward investment, exporters picking up business and thus job cuts less needed, profits and tax revenues higher etc. Mervyn King has also practically green-lighted a sterling devaluation. So, you have 5-10 points downside if the pound rallies, which will most likely then revert back as the pound slides again, and your upside is 15 points minimum and quite possibly 40-50 big figures. That is a pretty sweet risk/reward.
Another factor is George Soros's theory on currencies - that the most bullish is fiscal expansion with a hawkish central bank. He saw this in the USA in the early to mid 80s, and again in the early 90s with Germany around reunification. Now, the UK is looking at the EU PIIGS and seeing the problems with lax fiscal policy. It will probably do some kind of cuts at least. At the same time, Mervyn King believes in long-term debt deflation and is sitting with rates at minimal levels for the foreseeable future. So, we have a classic case of the exact opposite of Soros's currency bull market theory - the UK will, for several years, face fiscal contraction combined with an ultra-loose monetary policy. That should be very bearish for the currency.
So, my opinion is be short some pounds here, and ready to double up if it gets to 1.55-1.60. A stop can be placed around 1.65ish. Hold for the long-term. If the pound does reach parity, that is a fat 45-50% return from current prices.
May I hazard a guess that you aren't a public sector employee? They tend to be fairly interested in the level of income and pension that they get paid. They are not so interested in how much the private sector has to pay to fund those public sector incomes and pensions - at least not in the short-term.
Here comes the first salvo:
"The increase will be paid for by raising capital-gains tax to 40 percent from 18 percent on non-business assets"
Bad news for investors - tax on gains is going up 120%.
Because in a few years it may be different people at the helm of the party taking the office.
Separate names with a comma.