Update: Ooof, what? I was at work today, what's all this about Batocchio adding this article to Crooks & Liars' Mike's Blog Round-Up this morning? Dammit, I didn't vacuum the rug or anything! (hurries to clean up the place) Um, glance around, I got other stuff to read. Also, in a couple of weeks I will find out if any of my blog articles up for the FWA's Royal Palm Awards will win anything, so keep an eye out for more news! Thank ye, Batocchio.
When last we checked in with the United Kingdom, the Brits were coping with the loss of their beloved Queen Elizabeth II while their Parliamentary government had chosen a replacement Prime Minister to take over from scandal-plagued Boris Badhair.
Liz Truss had just recently replaced Boris Johnson in early September, going up to Scotland to Elizabeth's pastoral retreat at Balmoral to present her credentials and perform the ritual - bowing, holding the hand, answering three questions to cross the Gorge of Eternal Peril, that sort of thing - each new PM does with the Crown. Only that within 24 hours of doing so, Elizabeth II fell ill and never recovered, which didn't exactly bode well for Truss.
It was as though Liz II met Liz T, and Liz II decided "Fuck all, this ditz isn't worth it, I'll let Charles handle this nightmare" and got out while the getting was good.
Because Liz Truss is turning out to be even WORSE as Prime Minister than Johnson was. Within a month of being in office, Truss has blundered from one bad mistake to the next, exposing her Conservative leadership to humiliation, creating economic catastrophes that can't be easily undone, and forcing her Tory allies to plot her early removal.
Christ. Even William Henry Harrison lasted longer than this (okay, I exaggerate, but Truss is honestly facing the shortest tenure as Prime Minister in British history).
Let's go to the dirty details with Tom McTague at the Atlantic (paywall):
Today, we had the absurd spectacle of a prime minister, barely a month into the job, abandoning the central tax-cutting purpose of her premiership and sacking her closest political ally, who had implemented this vision. This all in aid of a vain and surely doomed attempt to cling to power, after the markets concluded that her policies were insane. Never before has Britain found itself in such a humiliatingly risible position. It is the stuff of nightmares: the national equivalent of getting caught short onstage in front of your entire school because you chose not to go to the bathroom when you had the chance...
The political ally McTague speaks of was Kwasi Kwarteng, chosen to be her Finance Minister in her Cabinet, who was obsessive about the supply-side/trickle-down fantasies of massive tax cuts as stimulus in a British economy facing inflation and several other woes. When Kwarteng presented his tax-cut plan with Truss' approval, everything went to hell (back to McTague):
What Britain needed, Truss argued, was a tax-cutting bonanza to set it free. Her rival for the leadership was Johnson’s chancellor, Rishi Sunak, who argued for fiscal responsibility and warned that such a reckless policy would lead to a run on the pound and a calamitous series of mortgage-rate rises. Given this choice, the electorate for the Tory leadership—the roughly 170,000 members of the Conservative Party—preferred the magical money tree.
So, on September 23—two and a half weeks after taking over as prime minister—Truss and her new chancellor, Kwasi Kwarteng, announced an extraordinary array of tax cuts without any indication of how they would be paid for. They called this their “plan for growth.”
And then there was a run on the pound and a calamitous series of mortgage-rate rises...
If you've followed my blog, every so often I will come across the Republican Party's obsessions with tax cuts being a cure-all for all ills, and I will scream into the void that TAX CUTS DON'T WORK. Watching the British counterparts of the Tories trying to pull the same trickle-down fantasy and getting smacked by the real world is satisfying in a schadenfreude kind of way. Back to McTague:
The reaction to Truss’s plan was immediate and savage. The markets responded with horror at the sudden gaping hole in Britain’s budget. The pound collapsed against the dollar, almost reaching an unprecedented parity, and the cost of government borrowing rocketed. Huge interest-rate increases by the Bank of England began to be priced in as the only way to protect the currency, which, of course, meant stepping on the brakes after Truss had put her foot on the accelerator.
This, in turn, led ordinary banks to start hiking their mortgage rates in expectation of what was coming, just as Sunak had warned, which then sent the property-owning middle classes into a tailspin as they rushed to lock in new rates before the numbers spiked even further. Suddenly, the tax-cutting budget to get Britain growing again had turned into a massive hit on Middle England. Even the International Monetary Fund departed from protocol to issue a sharp rebuke to Truss’s government...
Her intraparty rival warned her, the UK banks warned her, and Truss STILL pushed ahead on an unjustified tax cut plan all because - Gods help the Conservative Party - they have no other plans that fit their world-view. Tax cuts are all they believe in much like the American Republicans, because they dare not think about raising taxes on their billionaire corporate allies to fix their government's budget woes. Again to to McTague:
In a single act of stupidity, Truss managed to blow up Johnson’s markedly redistributive election-winning platform—and therefore his coalition, which included disaffected Labour voters from the poorer north of England. Instead of spending more on public services, Truss detonated an economic bomb under the middle classes—first, by lifting the cap on bankers’ bonuses and cutting taxes for the rich, and then, faced with market turmoil, by scrambling around for new spending cuts. It would be hard to design a more catastrophic act of political self-immolation...
Britain has been broke before. It was in this position after the war when it needed U.S. assistance, and then again in the late ’70s when it was bailed out by the IMF. It was battered by the markets in 1992 when John Major’s economic strategy collapsed.
What’s happening now is entirely new: the very real prospect that the markets will force a change of prime minister before an election. They have already forced a change in policy. Truss’s problems are so acute that Tory MPs are discussing removing her as a serious option, perhaps their only one. If Truss is removed any time soon, hers would be the shortest premiership in British history, beating George Canning’s 119-day tenure in 1827. And he died in office...
(That's where I got the comparison to Harrison. My bad)
While McTague is raking Truss over the coals for her blunders, the thing he avoids discussing is how Truss and her Tory allies were hampered by their blinkered devotion to the primary source of all of Britain's current economic woes: Brexit. That disaster - haunting that nation since 2016 - is a very big reason why Truss - and her predecessor Johnson, and his predecessor Teresa May - can't make any other major economic reform needed to rebuild the UK economy.
For that, I go to Chris Grey at his invaluable Brexit & Beyond blog where he points out the flaws in Truss' agenda and how Brexit is going to doom her and any other replacement Prime Minister until the next general election. From his September 30th article:
The political ambitions of the libertarian wing of the Brexit Ultras have always been ambivalent. On the one hand, they have largely preferred to complain of betrayal from the sidelines rather than take any responsibility or, if accepting ministerial office, to quickly resign rather than engage with the pragmatic realities of Brexit. On the other hand, they have hankered to be in charge not just so as to create ‘true Brexit’, but the ‘real Conservatism’ of which Brexit was a part and to which it was a gateway.
With the advent of Truss’s premiership, they have eschewed the sidelines in favour of governing and, with a rapidity that even their sternest critics would have thought it cruel to predict, have been exposed as utterly incompetent, both politically and economically, and in the most basic of ways. It is deeply ironic that this has happened at the hand of ‘the markets’ which they so slavishly fetishize...
The occasion, of course, was last Friday’s tax-cutting ‘mini-budget’. “At last! A true Tory Budget”, the Daily Mail drooled, whilst Nigel Farage simpered about “the best Conservative Budget since 1986”. Yet, whether despite or because of this fidelity to Conservatism, and as anticipated in my previous post, there was an immediate crisis in the currency and bond markets, with the value of the pound falling to its lowest ever level on Monday, and the cost of government borrowing in the form of gilts or bonds rising very sharply. Amongst numerous knock-on effects, pension funds, which invest heavily in such bonds, came within hours of mass insolvency on Wednesday afternoon, threatening a major breakdown of the financial system and requiring major emergency temporary action from the Bank of England. This, in combination, with a clear signal from the Bank that interest rates will rise in due course, which eased pressure on the pound, has effected a degree of stabilization, but markets remain jittery and it’s by no means clear that this crisis has run its course, especially as regards gilts.
These weren’t routine or trivial market movements, but an overwhelming and brutal vote of no confidence in the government’s plans. Specifically, they were a vote of no confidence in the decision to cut taxes, or not implement previously planned tax rises, and to fund this through borrowing. Again as anticipated in my last post, the government’s refusal to allow its plans to be scrutinised independently by the Office for Budget Responsibility added to market alarm. So, too, did Chancellor Kwasi Kwarteng’s casual reaction over the weekend, even suggesting further tax cuts to come. The rout continued on Monday when, as Paul Donovan, Chief Economist at UBS Global Wealth Management, put it, “investors seem to regard the UK Conservative Party as a doomsday cult”...
Re-read the part about Kwarteng's suggestion of doubling down on an economic plan that already caused a meltdown. The wingnut Conservatives can't stop themselves. If tax cuts create a massive economic crisis, well then by God we'll insist on even more tax cuts, because sooner or later the Trickle Down Fairy will grant us our boons. /headdesk Truss firing Kwarteng from his job was the only way to curtail that particular madness. And yet, the cause of every other act of insanity happening in England remains because Truss and her party are still wrapped up in Brexit dogma, as Grey continues to note:
So, given that the Brexiters themselves regard the mini-budget as integral to Brexit, it’s reasonable to say, as Robert Shrimsley of the Financial Times did (£), that “Brexit ideology lies behind the UK’s market rout”. It’s abundantly clear to even the feeblest intelligence that those Brexiters now include Truss, for all the fury of Dominic Cummings’s denials (directed at me!) on the inane grounds that she supported Remain in 2016. As I pointed out during the campaign, she is now a ‘born again Ultra’, perhaps the more fanatical for being so, and was extravagantly endorsed by the leading Ultras, making the fact that she was once a Remainer the most tedious and least relevant thing to say about her.
As so often before, Brexiter responses to the crisis they created have been confused and contradictory. Some in the government prissily said they could not comment on market events, as if some new Trappist ordinance of political propriety has been invented. Others downplayed what has happened, suggesting that the market reaction is either trivial or transient, or even that it has little or nothing to do with the budget but is simply a result of a strengthening dollar (which doesn’t explain why the pound fell against all major currencies, or what happened in the bond market). Outrageously, some, like Crispin Odey, hedge fund manager, Tory and Vote Leave donor, and sometime employer of Kwarteng, blamed “Remainers”. Peak insanity was reached by Daniel Hannan, who blamed the crash not on the mini-budget, but market fears of a Labour government!
Of course much like Conservatism itself, Brexit cannot fail it can only be betrayed. Even with the Bank of England and IMF and various other economic entities telling the Tories that it's their Brexit policies creating these economic meltdowns, the Tories cannot accept that fault and must blame others - the Remainers, Labour, hell even the Teletubbies will get accused next - rather than admit where the Leave movement went wrong. Grey calls them out on that:
That refusal has as its counterpart the distinctively Brexity idea, now taken over wholesale by this Brexit government, that they are beleaguered revolutionaries of true Conservativism fighting the (presumably false) conservatism of ‘the Establishment’. The notion of Brexit as an anti-Establishment insurgency has been a ludicrous one ever since the 2016 referendum was won, and Brexit became adopted as the central policy and national strategy. It is even more so now that the Brexit Ultras are unequivocally in charge of government, though of course it is a standard populist trope, familiar from the Trump presidency.
What we have seen this week is that the Brexiters have added ‘the markets’ to the increasingly long and diverse list – encompassing the ‘Woke’ Blob, the civil service in general and the Treasury in particular, the BoE, Remainers, Rejoiners, the National Trust, the BBC – of enemy forces they must confront in the name of revolutionary purity...
So my own view is that, in their arrogance and delusion, this Brexit government, and its cheerleaders, really do believe it has found a new ‘unconventional’ economic model and did not expect the market reaction, and that although a full November budget was certainly planned, including the announcement of the deregulatory ‘supply side reforms’ that will supposedly deliver the growth to pay for tax cuts, it was not going to include significant spending cuts which, instead, were anticipated for after Truss had won the election on the back of what they expected to be a growing economy. Then, with the legitimacy of a fresh mandate and a compliant parliamentary majority, she would declare it was time to shrink public spending but without coupling that with the tax cuts that would already be in place.
If my interpretation is right, the government’s plan is now in tatters, and the expectation is that the November budget will feature huge spending cuts (£) (and perhaps reversing the tax cuts, as some Tory MPs want, which can’t be ruled out though it seems unlikely at the moment)...
For this government was already politically weak, and as a result of this crisis is now much weaker. Although the libertarian cabal has taken control of the government, both it and Truss have many opponents amongst MPs and, as I remarked in a post during the leadership campaign, the current Tory Party is so riven by factions as to be unleadable, with rebellions an ever-present possibility. This week’s crisis has laid that bare, with, almost astonishingly given how new her premiership is, reports of letters of no confidence in Truss being submitted by some MPs and threats of backbench revolts...
There is already talk of a No Confidence vote happening by Monday.
They're already pressing the 1922 Committee that oversees such matters to force her out as soon as possible.
But this maneuver exposes the Conservatives with the painful reality that they have ousted two Prime Ministers within within 6 months of each other, and creating a leadership crisis among factions who are fighting amongst themselves for high office. A situation that will consume the next unlucky soul who signs up as PM because their party's Brexit platform will condemn that fool to more failure.
Seriously, who will be next to replace Truss? It's looking like it will be Sunak, who warned of the collapse of the pound and housing costs skyrocketing, but he didn't win over the party earlier this year, and he's viewed as being weak on Brexit meaning the extremist factions will rebel against him anyway.
The entire Conservative Party in the UK is stuck in a downward spiral of self-inflicted defeats, all because they can't change course on their Brexit policies and dare not open themselves to the possibility that the Remainers were right all along. But in the meantime, they'll fight against any calls for a emergency election in order to stay in power until 2024 when the general election happens anyway: Two more years of nightmarish intraparty fighting while the British Isles falls apart.
The only way that election happens is if the Tories finally break apart into their own party factions: If the Tories go to a Minority government, they may not have enough votes to stop Labour forcing new elections.
It then becomes an issue of how angry the British voters will be, and if they abandon Conservatives to switch to Labour - or even Liberal Dems - in a final rebuke to Brexit madness that has broken their nation the last six years.
That's the only hope the British have left.
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