There is about $3 trillion of US debt maturing in 2025, a very large portion of that is in short-term notes (30 days to 1 year). But those Treasury placements aren’t in the Fed’s control, they are in fact when the market grades the Fed’s homework. If the Fed has to step in to buy those Treasury bills to make the auction work, well, that is quantitative easing. That will hit the inflation rate and the exchange rate in real time. If the Fed doesn’t, the market is going to set the yield rate, and the Fed doesn’t have much choice but move into alignment with what the market is saying.
That scenario is more or less what Truss inflicted on the UK with her rate spike, though the US one would be more driven by the sheer size of the debt refinancing needed. That is likely why the US yield curve is flat out to the one year mark, the market really doesn’t know what to expect next month, but there are worries.
I got a letter this week from a Tory voter in a Labour seat, I hope they don’t mind me saying who it was, it was Liz Truss. She was complaining that saying she crashed the economy was damaging her reputation. It was actually crashing the economy that damaged her reputation.
Wrote a post about this and Local Council spending yesterday - in response to a comment someone made - but decided against it. After today’s call for a review, I thought it was worth posting the link to show the potential problems with giving Local Authorities more control over their budget.
Nb. I am not being critical of anyone here, just wanted to highlight the risks of this. BCC are and were already in massive debt at the time of the Commonwealth Games.
Isn’t the point simply that such major events are often a net economic negative? I presume that’s part of the reason why so few countries seem to be interested in bidding for them nowadays.
This Birmingham one is a bit tragic to be fair. Unable to complete the village in time for the games the cost appears to have been a noose round their neck.
They often end up giving the infrastructure away (e.g. City and West Ham inheriting stadiums on the cheap). Even the 2014 Glasgow Commonwealth games, which came in under budget and used existing infrastructure, required a chunk of public money to stage. I think the legacy there was 1,000 new houses and an old people’s home.
I suppose that events like this have rather taken the place of the garden festivals in terms of economic development.
We can’t pick and choose when to ignore the effects of COVID or use it as an excuse.
It was a noose they chose to put around their neck.
To host the games it required BCC to find £184m of funding, the Central Government funded the rest.
From your trusted Guardian newspaper;
“The council has spent £325m on the development, of which £292m was borrowed. After selling off the homes, it is expected that £142m-£152m of debt will remain unpaid, costing £8m-£9m a year over a 40-year period to repay, taking the projected total loss in the region of £320m.
The report said: “This will be an additional pressure to the already strained financial position of the council, and compensating savings will need to be made elsewhere in the council’s budgets.”
It’s just mismanagement, no other way to put it.
How can the Council take on a Financial burden when already in debt, be required to find £184m worth of funding (central Government providing the other £500m+) and then end up with an estimated loss of £320m on their spreadsheet.
I can understand why BCC would want to host the Commonwealth Games. Money from the Government to invest in local infrastructure, a short term local economic boost and potentially a long term gain by raising Birminghams profile.
I live in Birmingham, and don’t get me wrong, the City was buzzing. So many people enjoying themselves, my Nieces loved it.
As I have said, I’m not trying to point fingers, shit happens. I’m just trying highlighting recent inadequacies with giving Local Governments extra powers to manage their budgets.
Is this possibly related to the Audit Commission being disbanded? The Commonwealth Games losses appear to be mainly related to this athletes’ villiage. Obviously, the lack of completion was out of their control but they should have still been able to sell the housing as originally intended. In fact, I’m not sure why they couldn’t.
Shaping up to be a pretty good week for Reeves, it began with speculation that gilt could go over 5% and the government would be on its knees by March, and it might well end with the rate below 4.6%. Doesn’t sound like a high difference, but it represents time, credibility, and a greater ability to make one’s own decisions.
It is a fascinating glimpse into the human psyche, imo, when cities/countries commit to spending billions to host major sporting events.
It rarely ends well, for the reasons outlined above, and at the end of the day, everyone just wants to be able to rub shoulders with the cool jocks in their letter sweaters.
I love the idea of a society that’s doing so well that it can afford to absolutely celebrate the peak of human achievement both fully able and fighting physical adversities. Watching the fastest, the highest, the furthest etc is a truely inspiring and energising experience. We all would like to emulate these people who can do the things we dream of. We’re all football fans after all. But in these times of austerity, poverty, destitution and misery, the money that’s spent could be directed in so many better ways. Of course one could argue that the motivation to strive for gold is worth the cost but cold hard accounts have to be paid and if that’s at the expense of the majority, not so sure.
