Economist Podcasts Gilt trip: Liz Truss’s hobbled leadership
Oct 13, 2022
Andrew Palmer, Britain editor for The Economist, dives deep into the chaos surrounding Liz Truss's shaky leadership and the fallout from controversial tax cuts. He reveals how these decisions have sent markets into a tailspin, exposing the fragile state of Britain’s economy. The conversation shifts to Cuba’s dire economic struggles, fueled by inflation and supply shortages, prompting migration and social unrest. Palmer humorously compares Truss's authority to a lettuce's lifespan, showcasing the challenges her government faces in regaining public trust.
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Truss's Economic Plan Fallout
- Liz Truss's economic plan, involving unfunded tax cuts, has caused market turmoil.
- This has led to a decline in the pound and bond prices, prompting intervention from the Bank of England.
Market's Reaction to UK Fiscal Policy
- The market reacted negatively to the UK's increased borrowing amidst rising inflation, perceiving it as a risky investment.
- This spooked pension funds, forcing the Bank of England to intervene to prevent a market crash due to fire sales of long-dated gilts.
Bank of England's Intervention and Gamble
- The Bank of England's bond-buying program offered temporary stability but faces uncertainty after its planned end date.
- The governor's insistence on ending the program is a gamble, potentially damaging his and the bank's credibility if intervention becomes necessary again.