Matein Khalid
Investor | Family Office CIO | Portfolio Strategist | Board Advisor | VC | Finance Professor
Liz Truss will go down in history as the worst Tory PM in a past century that includes Chamberlain (Munich), Eden (Suez), Macmillan (Profumo sex scandal), John Major (Black Wednesday) and Bo Jo (Brexit). She has gutted the UK’s credibility in global finance, degenerated its macroeconomics into moronomics, and turned the Conservative Party into a joke.
Truss has sacked her Chancellor after only 38 days in office and done a U-turn on her signature economic policy without a shred of an apology to a Britain whose politics/finances now resemble a banana republic. The game is up for Liz Truss as Tory MPs in Westminster are in open revolt. Labour will win the next general election by a landslide and Sir Keir Starmer will be the next UK PM even if guts sterling and the property market.
The financial fiasco triggered by Liz Truss is only comparable to sterling’s humiliating exit from the ERM on Black Wednesday in September 1992 and the Tories lost every general election for the next 18 years until Cameron narrowly beat Gordo to become PM in a coalition with the Lib Dems in 2010.
Truss’s 8-minute press conference on Friday has re-priced UK sovereign risk in the global market and triggered a new spasm of distress in the gilt yields. Something is dangerously wrong in a world where the yield on the 10-year bellwether gilt note rises 27 basis points in a single trading session to 4.81%. This is Black Wednesday 2.0 all over again and the Tories have now lost the mandate of Anglican heaven to govern the sceptered isle for the next generation.
Cry, Britannia! The UK’s borrowing costs now exceed those of Greece, Portugal and even `Italy. UK was once the land of hope and glory but it now pays more to borrow than Italia, the land of Pope and gori. What next? An IMF bailout as in 1976? Liz Truss aped Margret Thatcher but she has now taken the UK back to a pre-Thatcher decade of despair, discontent, labour strikes and energy shocks.
Jeremy Hunt is a safe choice as Chancellor, but the carnage of the gilt market demonstrates that global investors are not convinced that the U-turn on the corporate tax cut does nothing to fix the UK’s fiscal black hole. We could easily see a crash in the global markets as contagion risk from a broken British PLC/gilt panic spreads at the speed of light across an embattled global banking village.
Liz Truss has demonized the BOE and HM Treasury’s mandarins. She showed her petty vindictiveness when she forbade King Charles III to go to a climate summit. Oh dear! This lady is a political disaster for the Conservative Party, who have never shied from regicide, as the ghosts of Heath, Eden and Mrs. Thatcher can attest.
The current account deficit is 8.3% and sterling is in a terminal ICU. Spending cuts alone are futile and UK taxes will have to rise. UK pension funds are in a crisis and Britain’s poorest can either “heat or eat” this winter. The kingdom by the silver sea is in deep macro doo doo.
Also published on Medium.
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