Thursday, 29 September 2022

Run It by Me One More Time: I Still Don't Get It!

I have absolutely no credentials as a 'financial whizz'. Perhaps, the logic behind UK government's plan for economic 'growth', just escapes my tiny intellect. How is growth to be achieved in the UK, by boosting the finances of a tiny percentage of very rich folk, whilst making everyone else very much poorer? The country was already experiencing galloping inflation. Most people were 'feeling the pinch', from the rising energy and food costs. All the mini-budget (or, shades of Putin, 'fiscal event', as it was called) seems to have done, is to make Sterling much weaker against other currencies. This further increases what the country is charged for imports, importantly including oil and gas (costed in dollars). The Bank of England (tasked with controlling inflation) has been forced to quickly increase the interest base rate. This has led to Mortgage companies (who don't know what the final rate will be) to remove many of their schemes for house purchase. The monthly payments of people, who already have a variable rate mortgage, will greatly increase. Experts are predicting a) repossessions; b) declining values of houses and c) increasing charges for rentals. The government's cost of borrowing, reflected in the value of gilts (government IOUs), has also increased. The Bank of England has also been forced to buy up gilts to enable Pension Funds to fulfill their financial obligations. For the vast majority of folk, any tiny 'benefit' from the 'great tax give-away', have been completely swamped by their increasing monthly costs. Are impoverished folk really going to increase their spending? Are entrepreneurs going to borrow to set up new businesses, when costs are so high? The UK PM 'believes' she has the right plan (https://www.theguardian.com/politics/2022/sep/29/truss-says-she-has-right-plan-on-economy-mini-budget). This seems to me, to be faith (rather than evidence)- based economics. One of her supporting MPs said it was their duty to lead the population. Surely, not over a financial cliff!

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