{"id":36102,"date":"2022-10-17T05:32:27","date_gmt":"2022-10-17T05:32:27","guid":{"rendered":"http:\/\/www.brandon.ddtest.info\/multisite-test\/so-much-for-taking-back-control-britain-is-tumbling-into-a-full-blown-sovereign-debt-crisis\/"},"modified":"2022-10-17T05:32:27","modified_gmt":"2022-10-17T05:32:27","slug":"so-much-for-taking-back-control-britain-is-tumbling-into-a-full-blown-sovereign-debt-crisis","status":"publish","type":"post","link":"http:\/\/www.brandon.ddtest.info\/multisite-test\/so-much-for-taking-back-control-britain-is-tumbling-into-a-full-blown-sovereign-debt-crisis\/","title":{"rendered":"So much for taking back control \u2013 Britain is tumbling into a full-blown sovereign debt crisis"},"content":{"rendered":"

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When I was a small boy at school, Andrew Bailey<\/a> was a prefect and, then as now, a distant figure of authority. We called this stout disciplinarian \u201cBastard Bailey\u201d because he showed little mercy towards any pupil he discovered enjoying an illicit Rothmans behind the science labs. Entreaties for clemency based on fictional bereavements or medical conditions were routinely ignored. Names were obtained, noted and passed on for appropriate action.<\/p>\n

Seems he hasn\u2019t changed that much. The distressed pension funds begging him to buy their devalued British government bonds have been met with that same stony resistance. He\u2019s right, in the sense that propping up pension funds in trouble isn\u2019t the role of the Bank of England. It\u2019s not their fault that they\u2019re in trouble \u2013 that\u2019s because the panic-inducing effects of the mini-Budget are still being felt throughout the financial system and the economy.<\/p>\n

Maintaining financial stability is the task of the Bank, which is why the Bank ended up buying the funds\u2019s gilts, but it couldn\u2019t do so endlessly or across the entire \u00a31 trillion industry. It seems Bailey concluded that there\u2019d be no \u201ccontagion\u201d from his move. It\u2019s up to the government and the pension fund trustees and regulators to order any rescues, and the Bank will no doubt advise on making them work.<\/p>\n

In effect, like it did with the failed banks in the financial crisis of 2008, Britain may need to effectively nationalise some of these final salary funds, if the deficits become that large. If that happens, then final salary scheme pensioners will have some or all of their income guaranteed by the UK taxpayer, which some might find odd.<\/p>\n

More to the point, the resulting debt taken on by the government will add to the national debt, along with the massive liabilities racked up over a couple of world wars, the global financial crisis, the Covid furloughs and Brexit.<\/p>\n

There are hints that Bastard Bailey may, unusually, relent and carry on propping up these pension funds, but the dilemmas remain. It\u2019s not financially sustainable for the Bank; and it\u2019s not easily consistent (if at scale) with selling gilts to push interest rates higher to push inflation down.<\/p>\n