{"id":115512,"date":"2022-09-29T07:31:41","date_gmt":"2022-09-29T11:31:41","guid":{"rendered":"http:\/\/kendallharmon.net\/?p=115512"},"modified":"2022-09-29T07:34:47","modified_gmt":"2022-09-29T11:34:47","slug":"economist-cover-how-not-to-run-a-country-liz-trusss-new-government-may-already-be-dead-in-the-water","status":"publish","type":"post","link":"https:\/\/kendallharmon.net\/?p=115512","title":{"rendered":"(Economist Cover) How not to run a country: Liz Truss\u2019s new government may already be dead in the water"},"content":{"rendered":"

It was meant<\/small>\u00a0to usher in an era of economic growth. Instead the 25-minute statement that Kwasi Kwarteng, Britain\u2019s new chancellor of the exchequer, gave on September 23rd kickstarted a crisis. By unveiling \u00a345bn ($48bn) of unfunded tax cuts, alongside temporary measures to help with energy bills, Mr Kwarteng\u00a0spooked financial markets<\/a>\u00a0in spectacular fashion. Most of the tax cuts and emergency spending had been signalled, but the vaunted supply-side reforms needed to pay for them were vague and the new government\u2019s approach to the public finances was cavalier. Worse, the backdrop to Mr Kwarteng\u2019s\u00a0epic budget-busting<\/a>\u00a0was a slump in bond markets that raised borrowing costs for even the most creditworthy governments.<\/p>\n

As investors took fright, gilt yields surged, prompting the Bank of England to say on September 28th that it was ready to buy unlimited quantities of long-dated bonds to restore order to financial markets. Earlier, the pound had crashed to its\u00a0lowest level ever<\/a>\u00a0against the dollar. Although sterling has since rebounded, markets still imply a 40% chance that it will reach parity with the dollar. Comparisons between Britain and emerging markets swirled; the\u00a0imf<\/small> slammed Mr Kwarteng\u2019s plan. After the worst start to a new administration in memory, people are already asking how long the new prime minister, Liz Truss, may last.<\/p>\n

Yet another Conservative leadership contest would be ridiculous rather than ruthless. And Mr Kwarteng\u2019s budget is unlikely to lead to a balance-of-payments crisis. Britain has a flexible exchange rate, it has minimal debt denominated in foreign currencies and its central bank is independent from the government. Even so, the economic and political damage from the past week is immense\u2014and immensely frustrating.<\/p>\n

Read it all<\/a>.<\/p>\n

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Britain\u2019s new government may already be dead in the water. It has shredded its own reputation and poisoned the politics of growth https:\/\/t.co\/3lhvemDjZA<\/a> pic.twitter.com\/4EtZ1fydzd<\/a><\/p>\n

— The Economist US (@EconUS) September 29, 2022<\/a><\/p><\/blockquote>\n