Discussion about this post

User's avatar
Mark Heywood's avatar

When I retired I took half my pension in cash to buy my house and the other half in monthly payments. It is a state pension so it might be the last to fold but it looks like that might have been a wise decision.

Expand full comment
Peter Nayland Kust's avatar

What is often getting overlooked in the UK pension meltdown is the use by the pension funds of a niche derivative product "liability-driven investing" (LDI).

https://newsletter.allfactsmatter.us/p/the-breaking-begins-boe-intervention

Yes, derivatives are still the same weapons of mass financial destruction in 2022 as they were in 2007 and 2008.

The US derivative market amounts to about $200 Trillion notional value, which means that as Powell raises interest rates, margin calls and refinancing costs rise accordingly, forcing either defaults or liquidations--precipitating the liquidity crisis the BoE is hoping to prevent with their buying of 30-year gilts. The Powell obsession with the Volcker playbook on fighting inflation very likely means the policy of kicking the debt can down the road has finally run out of road.

The sad irony is that Powell's use of Volcker's tactics aren't even working on inflation. We're getting the liquidity crisis AND the demand destruction AND the inflation all in one go.

Expand full comment
23 more comments...

No posts