by Bernhard at Moon of Alabama
In late September I stated that Liz Truss is the bad prime minister everyone expected her to be. The chaos her chancellor’s mini budget caused continues to endanger pension funds. To recap:
As soon as the deceased queen was buried Truss went to work. Chancellor Kwarteng announced a ‘mini-budget’ that will lower taxes for people with high incomes while increasing the deficit to cover the promised energy cost subsidies:
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As soon as the ‘mini budget’ was announced the British pound sterling tanked. This not only against the overvalued U.S. dollar but also compared to the rather weak Euro.Interest rates on British government bonds (Gilts) increased sharply.After two days the British central bank, the Bank of England, had to intervene to prevent a Lehman like crisis that would have killed many British pension funds. The bank, which had just increased its interest rate to tighten money supply, reverted to quantitative easing by buying gilts in the open market. This will further increase the already runaway inflation.
On October 3 Truss had to trash her plans to lower taxes for rich individuals:
In a major U-turn, Prime Minister Liz Truss said Monday that the proposal to scrap the 45 percent rate for people earning more than 150,000 pounds ($168,000) had become a “distraction.”Reacting to the news of the reversal, the pound rebounded Monday morning against the U.S. dollar, returning to where it was before the government’s tax-and-borrowing plan sent it plunging.
But Britain will still have a major budget deficit and gilts soon started to fall again. Three days ago the Bank of England again stepped in to save the nearly bankrupt pension funds.
Some saner members of the conservative party were finally preparing to oust her:…
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