How Long Will Liz Truss Last as UK’s Prime Minister? – Mish Talk
Truss Timeline Synopsis
On Tuesday, September 6, Boris Johnson officially stepped down and Queen Elizabeth II invited Truss to form a government. It’s been downhill for Truss ever since.
On September 23, all hell broke loose in the UK’s bond market when Truss’s Treasury Chief (Chancellor of the Exchequer), Kwasi Kwarteng, announced a “mini-budget” including 45 billion pounds of unfunded tax cuts coupled with huge increases in government borrowing.
The British pound, already pressured since April of 2021, went into a freefall, falling about 10 percent in one day, since recovered.
On October 3, Truss backpedaled on unfunded tax cuts.
British Pound Collapse
In response, the Bank of England announced an emergency bond buying program.
However, on October 11, I noted the Bank of England Warns Pension Funds “You’ve Got Three Days to Wind Up Positions”
The BOE also warned of ‘Material Risk’ to UK financial stability.
30-Year Index-Linked Gilt Cash Price
Gilts are UK government bonds. The above chart is for indexed-linked (inflation) bonds.
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What About Derivatives?
On October 14, Liz Truss fired Kwasi Kwarteng replacing him with Jeremy Hunt. She also cancelled some of the tax cuts, but remained adamant that tax cuts are the right idea.
“I am absolutely determined to see through what I have promised,” Truss said.
Can Truss Survive This?
The US has no equivalent of a vote of confidence, but the Tory party can bring her down if it wanted to.
Their fear is Truss will be in power when the next national elections are held in two years.
With that backdrop, please consider the WSJ article U.K. Prime Minister Liz Truss Battles to Hang On After Budget U-Turn
Having fired her chancellor of the exchequer days ago, U.K. Prime Minister Liz Truss must now battle to save her own job after what many political analysts and members of her own party regard as the worst start to a British premiership in modern times.
Ms. Truss’s popularity rating is the lowest of any British prime minister since the early 1990s, according to polls, after a turbulent few weeks that saw her plan to boost growth through the biggest tax cuts in a generation cause turmoil on U.K. financial markets, forcing the new leader to retreat from her signature economic program—the pillar of her campaign to replace ousted former Prime Minister Boris Johnson just six weeks ago.
Now, Conservative Party lawmakers must weigh a basic calculation: Can the party head to elections, which must be held within two years, with Ms. Truss as the face of the party or is she irreversibly damaged?
“I doubt if she can last long, I give her at most a few weeks, maybe less,” said Vernon Bogdanor, professor of government at King’s College London. Top of mind for many Conservative lawmakers will be whether Ms. Truss is so toxic now that going to the polls would mean an electoral wipeout and cost them their jobs. “They will be motivated by fear of losing their seats,” he said.
The WSJ comments that the rate of collapse in Ms. Truss’s political authority is unprecedented in modern British politics.
This post originated at MishTalk.Com
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