How Kwarteng’s mini-Budget plunged the UK into financial crisis
Hello from London, where a new government managed to provoke a financial crisis in a matter of days. Prime minister Liz Truss and chancellor Kwasi Kwarteng were betting their mini-budget of last Friday would kick-start UK economic growth. Instead, it has triggered a collapse in the value of sterling and a surge in the country’s borrowing costs. It’s hard to find anyone with any understanding of economics who is not scathing about the mini-budget. In a rather extraordinary move, the IMF joined the chorus, issuing a strong rebuke of Kwarteng’s ￡45bn in debt-funded tax cuts, and warning the plan could stoke soaring inflation.
The Bank of England was left to pick up the pieces?yesterday, halting plans to tame inflation by selling its bond holdings, and instead issuing a ￡65bn bond-buying programme to protect the UK’s pension and mortgage sectors from spiralling gilt markets. We explain?what the bond rout could mean for your pension.
So can Kwasi Kwarteng survive the fallout? Liz Truss is sticking by her chancellor, vowing this morning to push forward with their tax-cutting plans. But?Tory MPs are in despair, reports our political team. I’ll be at the Conservative party conference in Birmingham next week, and eager to learn whether the government has a chance of restoring the UK’s economic credibility.
Finally, don’t miss chief political commentator Robert Shrimsley on why?the “fantasy economics” of Brexit hardliners is the true culprit?behind the week’s economic turmoil.
My choices this week
1.?Mysterious explosions, methane leaks and giant bubbles of gas in the Baltic Sea — alleged sabotage of the Nord Stream pipelines linking Russia with Germany have fuelled anxiety about a new stage of hybrid war with Russia.?Here’s what we know about the leaks.?(Free to read)
2.?Since President Vladimir Putin mobilised army reservists to bolster his forces in Ukraine,?tens of thousands of Russians are refusing to enlist. Moscow bureau chief Max Seddon reports from Russia, where long queues are forming at land border crossings as men flee conscription.?
3.?“The financial tide is going out: only now do we notice who has been swimming naked.” In his column this week Martin Wolf explains?why the strength of the US dollar matters?to the global economy — even when it is the source of its troubles.
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4.?How did Giorgia Meloni, set to be Italy’s new prime minister, drive the arch-conservative Brothers of Italy from the country’s political margins to a decisive general election victory? Rome bureau chief Amy Kazmin charts?the rise of the far-right wild card.?(Free to read)
5.?The fate of the UK’s fragile automotive industry is riding on electric battery start up Britishvolt. But the company has no working prototype, no factory and no customers. In this brilliant read,?we lift the bonnet on the struggles inside Britishvolt.
6.?Ukraine’s lightning offensive in September decimated Russia’s defences in the north-east of the country. The FT’s visual storytelling team plots?the 90km journey that changed the course of the war, and explains what it means for Russia’s faltering invasion efforts.
Thanks for reading,
Roula
PS?Don't miss our new app, FT Edit, which gives you access to eight articles that are handpicked by our editors every weekday. Invest your time in the stories that matter with our expert selection for just ￡0.99 per month for first six months.
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Operations. Retired
2 年Bright spark he was
DGCCRF
2 年Mal-barrés les Anglais…?? !
@LyndonX | Financial Education | Investing | Money | Cryptocurrency. Started Insurance company at the age of 19 and sold to Private Equity at 51
2 年Agenda 2030 in game! Create desperation so people rely on the state for help and booom total control over every aspect of your life from food to energy to health.
Trickle down economics does not work. Einstein's definition of insanity, doing the same thing over and over again. The same results occur. Instead, both PM Truss and Mr. Kwarteng have crashed the UK economy. Rather than creating a severe recession, the need to reform and implement Keynesian economics. As many understand, Keynesian economics is based on two main ideas. First,?aggregate demand is more likely than aggregate supply to be the primary cause of a short-run economic event like a recession. Second, wages and prices can be sticky, and so, in an economic downturn, unemployment can result. Overall, the goal of Keynesian economics is to reduce the magnitude of “boom and bust” cycles that are inevitable in a free market economy.