Conservatives just get more and more destructive
When you’ve lost the IMF…
The International Monetary Fund has openly criticised the UK government over its plan for tax cuts, warning that the measures are likely to fuel the cost-of-living crisis.
In an unusually outspoken statement, the IMF said the proposal was likely to increase inequality and add to pressures pushing up prices.
Markets have already raised alarm over the plans, sending the pound plunging.
The government says the measures will kickstart economic growth.
On Wednesday morning, sterling fell by 0.7% to $1.06 after the IMF raised its concerns. It comes after the currency hit a record low of around $1.03 on Monday.
Chancellor Kwasi Kwarteng unveiled the country’s biggest tax package in 50 years on Friday. But the £45bn cut has sparked fears that government borrowing could surge along with interest rates.
First Brexit, now this. WTF?
They’re not the only ones freaking out over this:
In a series of tweets Tuesday morning, Harvard professor Summers said that although he was “very pessimistic” about the potential fallout from the “utterly irresponsible” policy announcements, he did not expect markets to capitulate so quickly.
“A strong tendency for long rates to go up as the currency goes down is a hallmark of situations where credibility has been lost,” Summers said.
“This happens most frequently in developing countries but happened with early (Former French President) Mitterrand before a U turn, in the late Carter Administration before Volcker and with Lafontaine in Germany.”
The policy announcement from Prime Minister Liz Truss’s administration last week included a volume of tax cuts not seen in Britain since 1972, funded by borrowing, and an unabashed return to the “trickle-down economics” promoted by the likes of Ronald Reagan and Margaret Thatcher. Truss and Kwarteng maintain that the policies are focused on driving economic growth.
The sudden sell-off in the pound and U.K. bond markets led economists to anticipate more aggressive interest rate hikes from the Bank of England. The central bank said Monday night that it would not hesitate to act in order to return inflation toward its 2% target over the medium term, but would appraise the impact of the new economic policy at its November meeting.
If Donald Trump was in office he would put Peter Navarro and Larry Kudlow in charge and they’d probably do exactly the same thing. When you elect right wing zealots and cuckoo ideologues, this is what you get.