Speaker 1: Bloomberg Audio Studios, Podcasts, Radio News. Welcome to the Marine
Speaker 1: Talks Money Market Rap, where we talk about the biggest
Speaker 1: moves in markets this weekend, what is driving them. I'm
Speaker 1: marin someums that we're better at large for Bloomberg UK Wealth.
Speaker 2: And I'm joined Stepead, senior reporters of Bloomberg and author
Speaker 2: of the Money Is Still News Later. I was just
Speaker 2: carried a week because this is an emergency podcast.
Speaker 1: It's not an emergency podcast. There's a regular podcast that's
Speaker 1: done slightly more quickly than usual. That's spoiling all right
Speaker 1: now coming on. There's a lot going on. And we
Speaker 1: are speaking on the thirteenth of May, mid afternoon. And
Speaker 1: normally I don't bother telling people exactly when we're speaking,
Speaker 1: but I'm telling them today because there is a lot
Speaker 1: going on. We're just sitting here are we were waiting
Speaker 1: for a resignation from Gastarma or a mention of a
Speaker 1: resignation or a possibility of resignation, And at the moment
Speaker 1: we are hearing that possibly he might denounce a possible
Speaker 1: resignation tomorrow or something like that, or maybe next week,
Speaker 1: or maybe in a month, for maybe in two.
Speaker 2: Months, what I've heard is the way Streeton is considered
Speaker 2: in resigning tomorrow and then launching leadership battle. Just to
Speaker 2: be very clear and maybe completely wrong. Yet I'm not
Speaker 2: a political expect but I don't think your Stamma's ever
Speaker 2: going to resign as involuntarily or I think.
Speaker 1: Giving as I read them, by this morning, he's given
Speaker 1: giving all the kids of great lessons and resilience and
Speaker 1: him are finally finding out what he's good at the
Speaker 1: face of adversity. Ghostmer.
Speaker 2: They also of trying to make this sort of like
Speaker 2: a big thing of him being ruthless and then the
Speaker 2: surprise when he is actually literally ruthless in terms of
Speaker 2: protecting his own possession.
Speaker 1: But yes, he's not going to go by himself, probably not,
Speaker 1: and even if he did, political uncertainty isn't going anywhere
Speaker 1: because you knows who comes next, and if it ends
Speaker 1: up with the party being shoved further left, even further
Speaker 1: left than the bone market is not going to like
Speaker 1: that either. So it's hard to see how his resignation
Speaker 1: or his forced resignation anyway would improve matters.
Speaker 2: I mean, not from the blind market's point of view.
Speaker 2: It depends on I mean, I think that people object
Speaker 2: to this because you know, they think, oh gosh, it's
Speaker 2: more infighting. But the end of the day, the country
Speaker 2: has actually given its verdict quite strongly and the local election,
Speaker 2: And if I'm onre Ines Sad, I don't really have
Speaker 2: a big issue with parties changing leaders in the middle
Speaker 2: of the game if it is clear that the population
Speaker 2: is not happy with the way things are going. Yeah,
Speaker 2: and I don't think we need to necessarily can have
Speaker 2: a general election that gave them a mind date. But yes,
Speaker 2: so we've streeting the candidates so far that we're aware
Speaker 2: of us streeting possibly Angela Ray and are A those
Speaker 2: she seems to be falling in behind Andy Burnham. So
Speaker 2: basically that's it. You get Andy Burnham, who isn't an MP,
Speaker 2: but they're all trying to find some convoluted way to
Speaker 2: let him stand and streeting and streeting is regarded has
Speaker 2: been on the right of the Labor Party to most
Speaker 2: listeners who may have a more kind of neutral political perspective.
Speaker 2: That doesn't mean his right wing. It just means that
Speaker 2: he's less addicted to spend and than the people.
Speaker 1: It's definitely a little bit more pro market. He's being
Speaker 1: more pro market on public services. You know, he's been
Speaker 1: talking about using the private sector in the NHS. He's
Speaker 1: a little bit less pro relentless expansion of welfare than
Speaker 1: some other people, a little bit more more hardline or
Speaker 1: crime there. He's kind of hiny bit more pro business.
Speaker 1: You know, you could call him slightly right of the
Speaker 1: rest of the Labor Party.
Speaker 2: Yeah, he still believes in a decent sized state by
Speaker 2: he's not going to set there and go Yeah, the
Speaker 2: Boyd market, you know, whatever that can go away. You know,
Speaker 2: somebody who actually understands roughly how things work. Andy Bondum
Speaker 2: clearly keeps sort of trying to allude to a way
Speaker 2: to get around the Boyd market. It's clearly aware that
Speaker 2: it matters, but it's not clear I would say from
Speaker 2: what he says or from what his supports or say,
Speaker 2: particularly that they really get what it's for or you know,
Speaker 2: why it's there or why it's a constraint. And I
Speaker 2: think that's something that can make the obviously will make
Speaker 2: the gelt's market can of you know, worry.
Speaker 1: Yeah, and we awould be very clear on what's going
Speaker 1: on here already, and the UK guilt market is there's
Speaker 1: lots of talk about, oh, maybe our debt to GDP
Speaker 1: races aren't on that bad relative to other people, and
Speaker 1: you know, maybe there's stability ahead, et cetera, et cetera.
Speaker 1: But you can't get away from the fact that net
Speaker 1: public debt to GDP is pushing one hundred percent in
Speaker 1: the UK. You can't get away from the fact that
Speaker 1: Rachel Raves has pushed up spending massively since you got
Speaker 1: in both on current spending and what we might call
Speaker 1: or not call the investment spending.
Speaker 2: And there is the tax take that's also shot of
Speaker 2: that is keeping that in check. It's not careful.
Speaker 1: So you know, there is there is a reason why
Speaker 1: UK debt is priced at a much higher level with
Speaker 1: a higher yield than other debt inside the G seven
Speaker 1: what sixty plus basis points above everybody else. And the
Speaker 1: reason for that is that we have horrible debt levels
Speaker 1: and absolutely no expectation in the minds of most people
Speaker 1: that anything is going to change.
Speaker 2: Yeah, and also we have consistently too high inflation, which
Speaker 2: is basically because the same in friendship part Liberal and
Speaker 2: keeps pointing that we basically ration every part of the
Speaker 2: economy that we need to grow without inflation.
Speaker 1: And this debt level is hideous for public spending. So
Speaker 1: at the beginning of the pandemic, we were spending well
Speaker 1: under five percent of government spending was on debt interest
Speaker 1: and last year was eight percent. And now it's going
Speaker 1: to be significantly higher than keeps going up and up
Speaker 1: and up. When you're suddenly spending ten percent of government
Speaker 1: spending is on interest payments alone, you know you're in trouble.
Speaker 2: Yeah, it's not sustainable, and so yeah, you can see why.
Speaker 2: So I think the main reason the guilt market is
Speaker 2: a bit more worried about the politics than it might
Speaker 2: have been is because of this idea that they may
Speaker 2: throw what little fiscal caution they've got to the wins.
Speaker 2: And as far as I can see, the other problem
Speaker 2: is that whether or not, but we don't know that
Speaker 2: anyone's going to stand in challenge Starmer. But if street
Speaker 2: Thing does it, there's already talk from the left of
Speaker 2: the party that, well, if he if he gets into
Speaker 2: powerble one of them said, we'll kick him out faster
Speaker 2: than they get rid of his trust. And you're like, okay,
Speaker 2: So it's not even as if the next leader is
Speaker 2: necessarily the final leader for this particular parliament. I get
Speaker 2: why guilt markets are at the moment unsettled rather than panicing,
Speaker 2: and we don't. I think it's really important to emphasize
Speaker 2: that this is not like twenty twenty two in the
Speaker 2: Liz Trust situation, because that was a very different set
Speaker 2: of circumstances and you don't have the same level of
Speaker 2: instability and leverage that creates a kind of doom loop.
Speaker 2: But in some ways that's worse because actually what we're
Speaker 2: getting now is just a repricing that says that well,
Speaker 2: cable Britain is really kind of unreliable. We're a bit
Speaker 2: worried about. It's not so much achieving. It's not its
Speaker 2: capacity to repays, it's the desire. There are ways, and
Speaker 2: I'm certainly not the first person to say this, but
Speaker 2: there are ways that this does echo the Jim Callahan
Speaker 2: labor government of the nineteen seventies, which is a group
Speaker 2: of people refusing to confront reality with that it was
Speaker 2: the IMF that created the external shock that gave Jim
Speaker 2: Callahan the permission to stand up in front of his
Speaker 2: party and say, look, you get a grip. We can't
Speaker 2: spend money the way we've been spending it, and we
Speaker 2: obviously still get kicked to it of the next election,
Speaker 2: and perhaps we need something similar to some kind of
Speaker 2: market I guess kilt market strike or an FX. I
Speaker 2: don't like using the what crisis being a pound falling
Speaker 2: a lot to make people wake up and realize act,
Speaker 2: you know, we need a change of direction. And that's
Speaker 2: regardless of who they put in at the top.
Speaker 1: It is you here. There's more and more john people
Speaker 1: saying well, you can need an existential crisis to help
Speaker 1: it put itself together. It was not going to just happen.
Speaker 1: Something horrible has to happen before this ridiculous grubbling stops
Speaker 1: and things change, which.
Speaker 2: Is unfortunate, but yeah, I mean, I mean that's it.
Speaker 2: Crises create the opportunity to change things, and I guess
Speaker 2: they always do. It's very rarely see proper change happen
Speaker 2: in the absence, say a crisis, certainly, you know, and
Speaker 2: in our history and also the history of Europe more widely.
Speaker 2: Maybe that's the by signal, you know, whenever everything goes
Speaker 2: horribly pair shaped.
Speaker 1: I don't know, wait for the crisis. Wait for the crisis.
Speaker 1: The crisis be the catalyst. Yeah, Okay, and it's not
Speaker 1: that far away. One would guess at this right.
Speaker 2: Well, you got hope, So it would be nice to
Speaker 2: get it all on before we have another partly in Power, an.
Speaker 1: Entire podcast based on the idea that the best possible
Speaker 1: outcome is a full crisis.
Speaker 2: Yeah, I always saw it's how to Really, I'd say
Speaker 2: a thing overcome is just kind of lumbered in along
Speaker 2: the way that we've been going.
Speaker 1: That can't go on. And definitely you can't go on
Speaker 1: with this, you know, anti growth stuff, and definitely at
Speaker 1: some point something has to change and at some point
Speaker 1: the UK has to be let loose to grow again,
Speaker 1: and all the wonderful things that we often talk about
Speaker 1: about the UK. You know, there's this great base that
Speaker 1: we have, our amazing technology sector, astonishing ability to innovate,
Speaker 1: our great education sector, the factors we've talked about a
Speaker 1: couple of times recently, the very high levels of savings
Speaker 1: that the UK population has, et cetera. We are, we
Speaker 1: are ready to go, if only we're going to have
Speaker 1: a politician who could put in place the policies to
Speaker 1: allow the UK to succeed. Let's not talk ourselves around
Speaker 1: in circles to get up so we're just going to
Speaker 1: have to leave it there before we upset ourselves. Right now,
Speaker 1: the best we can hope for is the kind of
Speaker 1: crisis that lets us restart everything.
Speaker 2: Yeah.
Speaker 1: Control, Yeah, And right now, the next few weeks we
Speaker 1: don't see any particularly good outcomes, and nor do we
Speaker 1: see any particularly good candidates. No, but we have all
Speaker 1: learnt about how amazingly resilient caseddarmor is, and that's something
Speaker 1: that is something. Thanks for listening to this week's Marin
Speaker 1: Talks Money Debrief.
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