Tagged: interest rates
Liz Drops The Ball
After a month in the job of Prime Minister, Liz Truss is already on the back foot. One huge policy U-turn has already been necessary, and her performance at the recent Conservative Party Conference was uninspiring at best. She must have a bad headache this weekend, as she reads the newspapers. The few politicians remaining loyal to her, mostly to protect their jobs in cabinet posts, are urging the rest of the party to back her to the hilt.
But she has dropped 25 points in the polls below the Labour opposition, giving the leader of that party, the equally uninspiring Keir Starmer, a spring his step, and a smile on his face. Next, she faces action from the fiery Scottish Nationalist leader, Nicola Sturgeon, who is tackling her head on about a referendum for an independent Scotland in 2023. With only just over a year left to make her mark, it seems that Truss may well face a disastrous defeat in 2024, unless she goes back on almost every policy she advocated during her leadership campaign.
Some of her colleagues are already calling for a vote of no confidence, and a new leadership election. The only thing holding them off is the fear that she might call an early General Election, thereby losing most of them their lucrative parliamentary seats, and handing government to Labour on a silver platter.
The U-turn that caused all the fuss was over the scrapping of the 45p in the Pound tax rate for anyone earning over £150,000 a year. One day she defended it, the next day she reinstated it. The Chancellor, Kwazi Kwarteng, defended his decision to scrap it, claiming in had been a ‘distraction’ from more important policies.
But it was too late.
Interest rates had already risen.
The Pound had fallen to an all-time low against the US Dollar.
Monthly Mortgage payments had already increased.
Mortgage availability decreased.
Anyone buying their own home was worse off.
National debt had increased because of the fall in the pound and the rising rates.
The media and various financial pundits were all asking the same question.
Why had that been done in the first place, when a financial guru like Kwarteng must have known it would be a disaster?
I think I know the answer.
Before becoming a politician, Kwarteng had been a successful hedge fund manager in the financial world. As a schoolboy, he won a scholarship to attend the influential Eton College, one of the most prestigious private schools in England. Other famous old Etonians include Boris Johnson, David Cameron, and Jacob Rees-Mogg. All of whom have had Conservative Cabinet posts, or served as Prime Minister.
In other words, Kwazi’s friends.
Kwarteng also worked for JP Morgan Chase as a financial analyst, and was a journalist on the right-wing newspaper, The Daily Telegraph. So his credentials are undeniable. He knows about national finance, he knows about international finance, currency markets, and interest rates. And he is not short of money, with his personal wealth estimated to be close to £3 million.
That means he also knows about ‘Shorting’ currency. Betting that it will fall on the world markets to make those markets nervous and guaranteeing it will fall. He also knows about buying back currency when it has reached all-time lows, and making a small fortune when it settles back to where it was before the fall.
Far be it from me to suggest he did this. That would be ‘Insider Trading’, and is illegal in UK law.
But you can bet he made a few phone calls to his rich friends, and that they are drinking very expensive champagne since Truss was forced to do her U-turn.
Pigs at the trough. Pure and simple. And what of the people struggling to pay increased loans and mortgages?
“Let them eat cake.”