Truss’s exit highlights America’s free pass 21 Oct 2022 U.S. fiscal policies, based on tax cuts for the rich and widening budget deficits, have been fairly similar to those of Britain’s ousted prime minister. Only the dollar’s status as the world’s reserve currency keeps the laws of economics from applying in the United States, too.
Delusions of grandeur are root of Britain’s chaos 21 Oct 2022 “Trussonomics” followed hot on the heels of Brexit. Both are symptoms of a country that hasn’t fully come to terms with the loss of its empire, says Hugo Dixon. If the UK now realises it can’t defy the laws of economics and geopolitics, it may emerge wiser albeit weaker.
Britain’s next leader will be on a short leash 20 Oct 2022 Prime Minister Liz Truss is out after just 44 days in office. Whoever replaces her will have to endorse fiscal discipline or risk a similar fate. The ruling Conservatives have little in common except fear of an early election. But only a national vote can restore political order.
Britain’s bond crisis reverses over the government 20 Oct 2022 New finance minister Jeremy Hunt has scrapped most of his predecessor’s unfunded tax cuts, scuppering Prime Minister Liz Truss’s growth plan. In this Viewsroom podcast, Breakingviews columnists debate what the U-turn means for markets – and whether Truss can survive.
Massive fiscal U-turn leaves UK in political funk 17 Oct 2022 New finance minister Jeremy Hunt soothed investors by reversing most of Prime Minister Liz Truss’s “growth plan” and cutting short her generous energy subsidies. But he still needs extra tax hikes or spending cuts. Persuading parliament to support the switch will be a challenge.
Capital Calls: Italy’s next finance minister 14 Oct 2022 Concise views on global finance: Rightist leader Giorgia Meloni is likely to pick a pro-European politician as finance chief.
Central banks get sucked into financial black hole 14 Oct 2022 Bank of England Governor Andrew Bailey and his peers are raising interest rates to fight inflation. But indebted households, governments and companies make it hard to break free from ultra-easy money. The turmoil will force central banks to change course, says Edward Chancellor.
Punishingly strong dollar is still a fair trade 13 Oct 2022 The strong greenback looms over economic policymakers in Washington this week as it pummels emerging markets, causing capital outflows and weighing on growth. The Federal Reserve has to keep hiking rates; the government can’t stop it. For all the pain, it’s better that way.
BoE drawn into risky game of financial whac-a-mole 11 Oct 2022 The Bank of England said it would buy more bonds to avert a fire sale by pension funds. Its plan to end such support on Oct. 14 is hampered by a distressed bond market, and wayward government. Governor Andrew Bailey risks either backtracking again, or letting the economy suffer.
Capital Calls: Trustbusters’ metaverse gambit 10 Oct 2022 Concise views on global finance: The Federal Trade Commission dialed back some of its arguments against Meta’s latest VR deal – but still faces a difficult needle to thread.
UK mess bolsters case for Italian budget prudence 6 Oct 2022 Market turmoil forced British Prime Minister Liz Truss to partly ditch unfunded tax cuts. The humbling saga should help Italian would-be premier Giorgia Meloni resist her allies’ spending requests. Picking a technocrat as finance minister would give investors further comfort.
The end of cheap money reveals global debt problem 3 Oct 2022 Borrowing has risen to more than 250% of world GDP, far more than before the 2008 financial crisis. Rising interest rates and low growth make this burden harder to bear, causing economic stress in Europe, China and the Global South. This will poison geopolitics, says Hugo Dixon.
Tax U-turn leaves UK’s Truss with credibility gap 3 Oct 2022 Prime Minister Liz Truss’ move to scrap a tax cut for high earners lowered government bond yields and boosted the pound. But her policies still rely on unfunded giveaways and rosy growth hopes. Investors’ loss of confidence from the crisis makes her agenda even harder to achieve.
“Help to Refi” could be UK’s next financial wheeze 30 Sep 2022 Prime Minister Liz Truss’s rash tax cuts have rattled the government bond market. She needs to attract investors and bring yields back down. The “Help to Buy” scheme to subsidise mortgages offers a template. Breakingviews imagines a fictional adviser taking up the challenge.
German energy bailout belatedly outclasses Europe 30 Sep 2022 Berlin will borrow 200 bln euros to help consumers cope with rocketing energy prices. It’s not the first state to go for a shock and awe approach, but Germany’s ample fiscal space gives it way more scope to go big. Unlike the UK, it can also do so without spooking investors.
BoE remedy can only be partial cure for UK ills 29 Sep 2022 The UK central bank launched $70 bln of bond-buying after PM Liz Truss’s budget triggered market chaos. That has stemmed a financial crisis among indebted pension funds. Stopping the market exerting economic pain requires a fiscal rethink from politicians, not more BoE action.
Behind Britain’s self-inflicted financial crisis 28 Sep 2022 Sterling fell to a record low and gilt yields soared after finance minister Kwasi Kwarteng unveiled a raft of unfunded tax cuts. In this Viewsroom podcast, Breakingviews columnists explain the long-term damage to the UK’s credibility and what will rebuild investors’ confidence.
BoE’s bond-buying U-turn is worth the risk 28 Sep 2022 The Bank of England will buy UK sovereign debt and delayed sales of its $915 bln bond portfolio due to market “dysfunction”. The danger is Governor Andrew Bailey looks too close to the government whose tax cuts caused the turmoil. Yet calmer markets make it easier to hike rates.
UK swaps one cost-of-living crisis for another 27 Sep 2022 The Bank of England may raise rates past 5% to stem the inflationary effect of Chancellor Kwasi Kwarteng’s tax cuts. Homeowners, saved by the government’s energy price cap, now face a surge in mortgage costs. That will sap growth and add to pressure for banks to help customers.
Investors strangle UK’s pro-growth budget at birth 26 Sep 2022 Government bond yields soared and the pound slumped following Chancellor Kwasi Kwarteng’s 45 bln pound tax cut package. Higher interest rates will depress demand while costlier energy imports will further weaken the public finances. That risks cancelling out any boost to growth.