29-09-2022, 04:43 PM
Aditya Chakrabortty
I covered my first financial crisis 25 years ago, in 1997, and I have never before seen one so entirely avoidable as this is. It began with the Tory leadership election in the summer, when Liz Truss promised tax cuts of £30bn in order to win the keys to No 10. It picked up last Friday, as Kwasi Kwarteng unveiled his “plan for growth”, which turned out to be a further £15bn of handouts – and mainly to people who didn’t need them.
It wasn’t just bad economics, it was bad faith. And when it bombed in the next day’s papers, the chancellor promised yet more tax cuts. This was on top of the emergency support on energy bills, costing £60bn for just this winter. The difference being that the energy package was essential and temporary, while these permanent tax cuts were supposed to buy voters and influence party donors.
What was intended as mere bribery has turned out to be a gigantic financial bomb. The pound dived so far that it won a new name: shitcoin.
......
Lending rates in the markets soared, so Halifax and other big mortgage firms had to pull some of their products. The Bank of England essentially lost control over interest rates, while pension funds and other investors began scrabbling around for cash. Finally, today, the Bank started buying government bonds in a bid to quell panic.
A week is a long time in financial wreckage. Thanks to Kwarteng and Truss, you have just got a lot poorer. If you’re a homeowner on a standard variable mortgage or looking to renew, your bills have spiralled. If you have a money-purchase pension or a nest-egg Isa, you probably don’t want to check your balance. Prices for pretty much anything from overseas – from food to T-shirts to cars – have just gone up.
Read the full article at: https://www.theguardian.com/commentisfre...sis-poorer
I covered my first financial crisis 25 years ago, in 1997, and I have never before seen one so entirely avoidable as this is. It began with the Tory leadership election in the summer, when Liz Truss promised tax cuts of £30bn in order to win the keys to No 10. It picked up last Friday, as Kwasi Kwarteng unveiled his “plan for growth”, which turned out to be a further £15bn of handouts – and mainly to people who didn’t need them.
It wasn’t just bad economics, it was bad faith. And when it bombed in the next day’s papers, the chancellor promised yet more tax cuts. This was on top of the emergency support on energy bills, costing £60bn for just this winter. The difference being that the energy package was essential and temporary, while these permanent tax cuts were supposed to buy voters and influence party donors.
What was intended as mere bribery has turned out to be a gigantic financial bomb. The pound dived so far that it won a new name: shitcoin.
......
Lending rates in the markets soared, so Halifax and other big mortgage firms had to pull some of their products. The Bank of England essentially lost control over interest rates, while pension funds and other investors began scrabbling around for cash. Finally, today, the Bank started buying government bonds in a bid to quell panic.
A week is a long time in financial wreckage. Thanks to Kwarteng and Truss, you have just got a lot poorer. If you’re a homeowner on a standard variable mortgage or looking to renew, your bills have spiralled. If you have a money-purchase pension or a nest-egg Isa, you probably don’t want to check your balance. Prices for pretty much anything from overseas – from food to T-shirts to cars – have just gone up.
Read the full article at: https://www.theguardian.com/commentisfre...sis-poorer