By Economic Times Editor: They’ve backed the currency into a corner. Whilst a crashing Pound can be good for equities (as about three-quarters of the FTSE are in international markets), it’s not good for much else. Even those that crow on about exports being easier forget that 70 per cent of raw materials used in exports have to be imported first. The lesson about free markets and Brexit to stimulate growth are on show and will be painful to watch.
The Bank of England is attempting to stem rising inflation – the government is going for growth – which leads to inflation.
The Pound now sits at an all-time low. And whilst many other currencies around the world are suffering from a strong US Dollar – few countries shot themselves in the foot (like Brexit and borrowing) to make matters worse.
Interest rates will go up, inflation will go up and the economy will stagnate. Worse, a recession gains speed.
Liz Truss is not actually well supported within the Tory party and public opinion is not on her side.
The slump in the Pound is a message. Its situation was better than it is today when the dotcom crash happened, when 911 stopped the world – when the financial crisis threatened everything and when Brexit arrived. All of those events were not as bad as it is today. Today is the final straw that broke the camel’s back. Once again, the party that has dominated this country for nearly 13 years have to admit – they’ve failed – and failed big time.
The Tory party has proved beyond doubt that it is not a One Nation party. The same can be said that it is not a party of fiscal responsibility. It cares little about the multiple crises burning at the heels of society. Public health, education, social care, security – you name it, nothing is better after 13 years.
They blamed everything from immigrants to experts and now both are needed more than ever.
As I wrote last week – “this is the economic Brexit that leading right-wing Tories and their political commentators demanded. This is what the right-wing press, such as the Daily Mail, Express and The Sun shouted loudest about. This is what the grey vote was about – a rebuke to the future and our younger generations. It’s here and it’s real.”
Brexit has caused economic activity to fall by around 4 per cent of GDP. It has caused relationships with our trading partners to become terribly strained. The so-called special relationship with the USA has imploded and the Union of Britain has created even greater tensions than ever before. Now that the Pound has crashed, investors are seeking new grounds making our future prospects even more grim. The cost of living crisis now looks like it will only get worse as the government loses control of the economy.
The Tory party, its ideology and its Brexit have been mugged by the reality of the markets and overall sentiment about Britain’s long-term outlook. It’s grim. There’s no good news here. There are ways out of this but Tory politicians have little incentive with the short time horizons of an election looming. Damage limitation is the best they can work on now.