The answer to 10+% inflation and economic stagnation in the UK? Why, a tax cut slanted toward the rich, financed with more printed pounds.

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Britain’s new prime minister, Liz Truss, has been in office for less than a month, but her premiership is already deep in crisis, while Britain teeters on the brink of recession.

… Determined to quickly make her mark, Truss announced a radical new economic agenda of tax cuts and spending worth tens of billions of pounds funded by borrowing…

As well as a huge energy support package for businesses fearing they would be unable to afford soaring bills this winter, a number of controversial measures were also announced – including abolishing the top rate of tax and scrapping the cap on bankers’ bonuses.

Well, that will certainly address Britain’s economic problems.

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Truss’s drive for growth proved too radical for traders. The pound was sent spiralling to reach its lowest value against the US dollar, an embarrassing intervention from the central bank – the Bank of England – was made to avoid a raid on pension funds, and rebukes from foreign observers, including the International Monetary Fund, were swift.

Now pundits are talking about a “doom loop” (ie British for “death spiral”) for the pound, as the later droops toward parity with the dollar. The UK public has noticed as well, with some polls showing Labor soaring to a 33 point lead over Conservatives in a recent poll.

I recognize that there is a bit of the pot calling the kettle black here, with US inflation remaining stubbornly high (although considerably less than the UK) and economic growth stalling. But our annual deficits have been decreasing, GDP growth last year was 5.9%, and government money has been going to infrastructure and aid to folks that are likely to spend it, not sock it away in uncertain economic times, like British bankers.

As one pundit said First there was Brexit, then there was Boris; we were hoping Truss would return us to normalcy.

Yeah, sorry. But it’ll be another good test of trickle-down, supply side economics.

She is just what Great Britain needed.

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Saint Cloud, Minnesota, where the weather is wonderful even when it isn't.

Listen,

if trickle-down isn't working, it's only because the super-wealthy don't have enough money.

Just keep giving them more.

It will trickle down.

Eventually.

Sounds like the spirit of the '70's returning from the grave.

This image (also from the '70's) describes the spirit of those times:

And the sprit of the 80’s when Pres. Reagan trickled on most all of us.

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Saint Cloud, Minnesota, where the weather is wonderful even when it isn't.

One of the commentators on last night's BBC News suggested that an economic recovery might not be possible for a very long time because the market for English goods went from 300 million (EU) to 60 million (UK).

As a result, the Conservative party has no way to stimulate the economy sufficiently to win the next election which is two years away.

My impression is that he was strongly implying that they're selling whatever political favors they can without regard for the damage they're doing because the outcome will be the same for the party, regardless. Doesn't matter whether it's Liz Truss or a rock titularly in charge. They're milking every favor they can get to make bank ahead of the bloodletting.

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Edited 1 time(s). Last edit at 10/02/2022 11:44AM by Tiangou.

Truss et al do an abrupt about-face on the tax cut for the topmost bracket:

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In a major U-turn for the British government, Prime Minister Liz Truss said Monday that the proposed scrapping of the 45 percent rate for those earning more than 150,000 pounds ($168,000) had become a “distraction.”

A distraction. Yup, that’s all it was.

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The reversal is a huge blow to the authority of the young Truss government, in office for less than a month. Its plans to offer Britain’s highest-paid people a tax cut [and only the highest-paid people] — at a time when millions face a financial squeeze from a cost-of-living crisis — were widely condemned.

Not only did it prompt stormy financial weather, but the Conservative Party’s popularity plummeted as well.

“The flaw in [the Conservatives’] strategy is that people in financial markets aren’t idiots. So if you say to the OBR, ‘don’t give us a forecast, because you might show our numbers don’t add up,’ obviously the markets will conclude that their numbers don’t add up, making things considerably worse than even a bad forecast would have. That level of stupidity, frankly, is difficult to explain,” he said.

Not that difficult, really. Just more conservative orthodoxy colliding with reality. Sadly amusing that these new people get thrown in, they do what they’ve always been taught as conservatives is the right thing to do, and then they’re shocked when it blows up in their faces.

What about the banker’s bonuses? Are they hoping people won’t notice those?

BTW, Turkey’s conservative leader is not to be outdone:

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Turkey’s inflation climbed to a new 24-year high of more than 83% for September, the country’s official body for statistics reported Monday.

Consumer prices month on month grew by 3.08%, and annually by 83.45%. The domestic producer price index was up 4.78% from the previous month, and up a whopping 151.5% year on year.

Inflation for the country of 84 million people has soared in the last two years, in particular as Turkish President Recep Tayyip Erdogan insists on continuing to cut interest rates rather than raise them — deviating from the conventional way of controlling inflation.

Well, why not? It’s not that far a leap from “tax cuts pay for themselves and reduce deficits” to “when inflation is high, don’t increase central bank rates - reduce them!”

And he’s not done:

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“My biggest battle is against interest. My biggest enemy is interest. We lowered the interest rate to 12%. Is that enough? It is not enough. This needs to come down further,” Erdogan said

Unfortunately, much of the rest of the world operates under the constrictions of reality.

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The Turkish lira is currently trading at a record low of 18.56 to the dollar, and has lost roughly 28% of its value against the greenback this year.

Look out below!

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pdq

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The Turkish lira is currently trading at a record low of 18.56 to the dollar, and has lost roughly 28% of its value against the greenback this year.

Look out below!

As an aside, one U.S. dollar will currently get you:

- 23,507.29 Vietnamese Dongs

- 42,300.00 Iranian Rials

- 248,487.64 Venezuelan Bolivars