Henry Curr
@curr.bsky.social
Economics editor @TheEconomist. Visiting Fellow of Nuffield College, Oxford. Views mine only. www.henrycurr.com
If only they could achieve primary balance
November 7, 2025 at 9:58 AM
If only they could achieve primary balance
If you think inflation was "truly transitory", do you think that interest rates should have followed the June 2021 SEP, which projected they would still be at 0.6% at the end of 2023 on the basis of the "transitory" theory?
Or even 1.6% at the end of 2023, which was the December 2021 SEP view?
Or even 1.6% at the end of 2023, which was the December 2021 SEP view?
November 6, 2025 at 7:45 PM
If you think inflation was "truly transitory", do you think that interest rates should have followed the June 2021 SEP, which projected they would still be at 0.6% at the end of 2023 on the basis of the "transitory" theory?
Or even 1.6% at the end of 2023, which was the December 2021 SEP view?
Or even 1.6% at the end of 2023, which was the December 2021 SEP view?
From an economic perspective, I'd run things much tighter. From a political perspective I don't claim to have the answer to what we called the deficit-populist doom loop (though clearly Hunt shouldn't have cut taxes). My report is arguing against holding the long-term bonds of these economies.
October 24, 2025 at 12:55 PM
From an economic perspective, I'd run things much tighter. From a political perspective I don't claim to have the answer to what we called the deficit-populist doom loop (though clearly Hunt shouldn't have cut taxes). My report is arguing against holding the long-term bonds of these economies.
That consolidation risks a populist victory is in a sense exactly my point. The political constraint on consolidation. is growing too tight to ignore. That is true in the US, the UK and France
October 24, 2025 at 11:21 AM
That consolidation risks a populist victory is in a sense exactly my point. The political constraint on consolidation. is growing too tight to ignore. That is true in the US, the UK and France
I mean more, but that is not to say the budget brings about an immediate crisis. The past 15 years show the rules do not stop debt-to-GDP ratcheting up. It will grow high enough that the political cost of responding to, eg, an interest rate shock will be to great to bear, even if we cling on in 2025
October 24, 2025 at 11:21 AM
I mean more, but that is not to say the budget brings about an immediate crisis. The past 15 years show the rules do not stop debt-to-GDP ratcheting up. It will grow high enough that the political cost of responding to, eg, an interest rate shock will be to great to bear, even if we cling on in 2025
Reposted by Henry Curr
The question on everyone’s mind in the market is ‘will the government actually cut spending if it gets a negative fiscal shock’ and the revealed behaviour is that western governments find this extraordinarily hard to do.
October 23, 2025 at 8:40 AM
The question on everyone’s mind in the market is ‘will the government actually cut spending if it gets a negative fiscal shock’ and the revealed behaviour is that western governments find this extraordinarily hard to do.
The trouble for the UK is not right now; it is when the next pandemic style crisis hits, or when populists win because hitting the rules is no longer politically sustainable. Because markets are forward-looking, the bond market response could happen in advance if they come to share my view
October 24, 2025 at 10:45 AM
The trouble for the UK is not right now; it is when the next pandemic style crisis hits, or when populists win because hitting the rules is no longer politically sustainable. Because markets are forward-looking, the bond market response could happen in advance if they come to share my view
I did not argue that there is a crisis now. I warned of one to come (or specifically, of inflation to come) if there is no course correction. And a course correction looks very hard. As Mankiw said in his speech on US fiscal, all paths forward look unlikely, but some combination must happen.
October 24, 2025 at 10:45 AM
I did not argue that there is a crisis now. I warned of one to come (or specifically, of inflation to come) if there is no course correction. And a course correction looks very hard. As Mankiw said in his speech on US fiscal, all paths forward look unlikely, but some combination must happen.
The rule does not guarantee sustainability. It is easily gamed. The UK does not issue the world's reserve currency; has insurgent populists; had a mini crisis in 2022. The market also views the UK as more fragile than the US, which is why its 10-year bonds yield ~40bp more, despite slower growth
October 24, 2025 at 10:00 AM
The rule does not guarantee sustainability. It is easily gamed. The UK does not issue the world's reserve currency; has insurgent populists; had a mini crisis in 2022. The market also views the UK as more fragile than the US, which is why its 10-year bonds yield ~40bp more, despite slower growth
I'd like to read Simon address the facts I set out: that AE debt- and interest-to-GDP is heading out of historical bounds; that AEs run big deficits even while unemployment is low; that debt ratchets up with each crisis but rarely falls; and that debt forecasts are chronically over-optimistic
October 24, 2025 at 9:05 AM
I'd like to read Simon address the facts I set out: that AE debt- and interest-to-GDP is heading out of historical bounds; that AEs run big deficits even while unemployment is low; that debt ratchets up with each crisis but rarely falls; and that debt forecasts are chronically over-optimistic
(As an aside, when I go to Washington DC, everyone, on both sides of the aisle, expects Congress to fail to correct course fiscally until a crisis forces it to do so. The idea that US politicians are "[not] being irresponsible" is wrong: they are, and they know it.)
October 24, 2025 at 9:04 AM
(As an aside, when I go to Washington DC, everyone, on both sides of the aisle, expects Congress to fail to correct course fiscally until a crisis forces it to do so. The idea that US politicians are "[not] being irresponsible" is wrong: they are, and they know it.)
This is similar to what fiscal doves often do, in my experience: deny there is a problem, while also denying they deny there is a problem. If there is a fiscal issue in the US, as Simon concedes, then what happens eventually if it is not fixed? A crisis. So why is warning about one silly?
October 24, 2025 at 9:04 AM
This is similar to what fiscal doves often do, in my experience: deny there is a problem, while also denying they deny there is a problem. If there is a fiscal issue in the US, as Simon concedes, then what happens eventually if it is not fixed? A crisis. So why is warning about one silly?
But a UK crisis is surely more likely than a US one, owing to the dollar's reserve-currency status. And the UK already faced a crisis in 2022.
October 24, 2025 at 9:04 AM
But a UK crisis is surely more likely than a US one, owing to the dollar's reserve-currency status. And the UK already faced a crisis in 2022.
I agree with @marketscalpel.bsky.social , @martinsandbu.ft.com . The trust fund outgoings aren't interest. However, for argument's sake, this metric is still going way out of historical bounds:
October 23, 2025 at 6:42 PM
I agree with @marketscalpel.bsky.social , @martinsandbu.ft.com . The trust fund outgoings aren't interest. However, for argument's sake, this metric is still going way out of historical bounds:
Federal net interest payments minus Fed profits is already the highest on a record going back to 1962
October 23, 2025 at 4:15 PM
Federal net interest payments minus Fed profits is already the highest on a record going back to 1962
Correction to the above: I mean if you want to deduct interest paid to the Fed, the way to do it is by deducting Fed profits from the interest bill, thereby accounting for the IOR bill, IOR being an interest expense paid to the private sector.
October 23, 2025 at 3:30 PM
Correction to the above: I mean if you want to deduct interest paid to the Fed, the way to do it is by deducting Fed profits from the interest bill, thereby accounting for the IOR bill, IOR being an interest expense paid to the private sector.
(In fact I worry more if tiering is the mechanism chosen, because it is a clear step on the path to the inflation/financial repression way out of debt)
October 23, 2025 at 3:26 PM
(In fact I worry more if tiering is the mechanism chosen, because it is a clear step on the path to the inflation/financial repression way out of debt)
If you deduct payments to the Fed, you should add back in Fed profits, which are 0 until the losses are recovered, so would make the trend look worse. Tiering is a policy choice in the same way raising any tax is--thinking you might have to do it I put in the category of worrying about public debt
October 23, 2025 at 3:25 PM
If you deduct payments to the Fed, you should add back in Fed profits, which are 0 until the losses are recovered, so would make the trend look worse. Tiering is a policy choice in the same way raising any tax is--thinking you might have to do it I put in the category of worrying about public debt
This forecast was before both the Trump tax bill and tariffs, which are roughly offsetting. But the tax bill contains many measures with sunset provisions. So, implicitly, this forecast already includes tax rises!
October 23, 2025 at 11:27 AM
This forecast was before both the Trump tax bill and tariffs, which are roughly offsetting. But the tax bill contains many measures with sunset provisions. So, implicitly, this forecast already includes tax rises!