Truss obviously didn't learn anything real in Oxford, and if he did, he knew that it was impossible for the capital market to rashly cut taxes and issue bonds under such circumstances.
Contributing Writer of Glacier Thought Tank丨Lao Feng 1974
This buddy is going to laugh at me to death.
He said his son had gone through four chancellors, three interior ministers, two prime ministers and two kings, and that his son was only four months old.
▲Netizens commented on the resignation of the British Prime Minister (Photo/Screenshot)
Yes, these four months have experienced unparalleled turmoil in British politics, and this period may be particularly titled in future British history, such as the autumn and winter shocks.
01
Just now, on October 20, British Prime Minister Elizabeth Truss issued a resignation statement, announcing her resignation as leader of the British Conservative Party. This also meant the end of Truss's short premiership, becoming the shortest serving British prime minister since World War II.
From becoming prime minister on September 5 to resigning as party leader, Truss has only been in office for 45 days, and during these 45 days she has not been idle, and some people have commented on her 45 days in office:
She sent off the Queen in a month, as well as the pound, the Chancellor of the Exchequer and the Conservative Party...
▲British King Charles meets with Truss (Photo/PA)
Indeed, in more than a month, the pound has experienced a sharp decline, and the borrowing program in the financial markets has been ruthlessly rejected, causing the entire British financial system to be shaken violently, affecting even the most insured pensions, and shaking the economy.
So, what did Truss do to cause these consequences?
Perhaps she admired Margaret Thatcher too much, learning from Thatcher everywhere, and even her clothes and expression when she spoke had the shadow of the Iron Lady.
My assessment of this is only one sentence: drawing a tiger is not an anti-dog.
02
Truss made an economic revitalization program that resembled what a Conservative leader should have introduced.
I'm talking about shape, just likeness.
Her plan is tax cuts + expanded government investment.
Cutting taxes is part of what liberal economists like to do, but expanding government spending is not.
If you want to cut taxes, tax cuts are equivalent to expanding the consumption power and investment potential of the private sector, but the government does not reduce expenditure, and still has to do those completely inefficient, even market-distorting investments and welfare payments, so what can you do? This contradictory economic policy can only be accomplished through borrowing.
The reason is simple: fiscal expenditure = fiscal revenue + new debt
Graph/Network
This is not a new way of playing, it is the one that many countries often choose after the 2008 global financial crisis. But what does this have to do with Margaret Thatcher? Margaret Thatcher's economic policy of that year not only cut taxes, but also resolutely reduced expenditure.
At that time, Britain also experienced the same economic difficulties as other European countries, starting with the pension problem: the generation born during the post-war baby boom period has entered middle age. They are the most populous, the most privileged living conditions and the longest life expectancy in Europe's history. Once they reach retirement age, they become pure consumers.
From Churchill to Heath, no one dared to touch the British pie, although the prime ministers knew the problem, but whoever touched was finished. It wasn't until Callahan came to power that some reforms were made. Callahan, the leader of the Labour Party at the time, also engaged in a plan to cut taxes and expenditures. But it was immediately opposed by workers whose living standards were declining, and in 1979 Callahan stepped down in a mass strike demonstration and Thatcher came to power.
After Thatcher came to power, he was skillful, tough, and resolute, all the spearheads were directed at those ineffective government investments, and while reducing the burden on society, he did not hesitate to cut down those bloated British-style state-owned enterprises.
In 1984, Thatcher resolutely closed state-run loss-making coal mines and stopped government subsidies for coal mining, which was fiercely resisted by the national mining unions. In this confrontation, Thatcher was resolute and forced the protests.
As a result of the elimination of a number of loss-making enterprises and the reorganization of industrial alliances, the competitiveness and production efficiency of enterprises have been greatly improved, and economic profits have increased significantly. The huge income from the sale of state-owned assets also fills the state treasury. Under Thatcher, the British economy emerged from the quagmire and embarked on a healthy upward path.
So you see, the difference between Truss and Thatcher is definitely not something that superficial imitation can make up for and cover.
03
Of course, this may not be to blame Truss, she lived in a very different era from the situation of the 80s, Europe including the United Kingdom has been in peace, and the government has continued to expand its power to intervene in the market for the benefit of the people. Therefore, in this era, tax cuts and spending increases have become the instinctive option of governments.
So why did you come to Truss to be prime minister and make a mess? Because she was born at an opportune time, she encountered a turning point in the great changes in the past century:
First, the energy shortage and soaring prices caused by the Russian-Ukrainian war have kept inflation high in the UK;
Second, the dollar has reached a period of contraction, the dollar that keeps raising interest rates is extremely strong, and the increase in the interest rate of US bonds is equivalent to raising the level of risk-free interest rates.
Truss obviously didn't learn anything real in Oxford, and if he did, he knew that it was impossible for the capital market to rashly cut taxes and issue bonds under such circumstances.
Graph/Network
You still think you are the British Empire? Feel free to set prices in the capital markets? The risk-free interest rate in the United States is so high, how high can you give? With the tax cuts, what are you going to pay back?
This is not something Truss can do with a hardliner. She can learn from the US interest rate hike, and the world's currencies will either follow suit or endure capital outflows.
The high price of energy means that various costs are increasing, including the cost of enterprises and the consumption cost of ordinary people. If there is not enough money, it can only reduce the desire to consume, and this is not a recession.
To give this kind of medicine in a recession, all I can say is Ms. Truss, you go.
04
Tesla's resignation also settled a public bet that the British made in the newspapers the other day: Truss and lettuce, who can hold out a little longer.
▲YouTube channel Daily star live broadcast "See who can last longer with the British Prime Minister and lettuce" (Photo/Network)
Now, the answer is that wet lettuce has survived a little longer than Truss in such climates.