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UK Economy Collapsing Amid Political Disaster

October 14th, 2022 Comments off

The unfolding Global Economic Crisis has stricken most economies, large and small, with the bitter twins of high inflation and recession. This phenomenon of stagflation, amid the destabilizing war between Russia and Ukraine and broken supply chains resulting from both war and Covid restrictions, is spreading like wildfire. Record levels of inflation are occurring in virtually every developed economy, including the United States. However, it is in the United Kingdom that the most disastrous repercussions are unfolding.

After Boris Johnson was forced to resign as British prime minister, he was succeeded by Liz Truss. Her hand-picked Chancellor of the Exchequer, Kwasi Kwarteng, released a proposed budget that immediately sent the British pound plummeting, sovereign bond rates soaring and fear and loathing manifesting in all leading UK financial circles. This is amid annual inflation exceeding double digits and an ongoing retraction within the UK economy.

 

Sheldon Filger-blogger for GlobalEconomicCrisis.com

 

 

The key component of Kwarteng’s budget package was major tax cuts targeting high net-worth taxpayers, to be financed by substantial borrowing despite the British government already facing large budget deficits. The whole ill-conceived package was an example of political ideology triumphing over economic reality. The markets swiftly provided a painful response, making the proposed budget untenable.

Truss has now fired her financial minster, a desperate move to save her weeks-old prime minister tenure by making Kwarteng the scapegoat. Already there is talk of a palace coup to remove Truss by desperate members of her Conservative Party. All this is another example of incompetent politicians doing everything possible to make a very bad economic crisis into an unmitigated global catastrophe.