The Real Reason for The FAILURE of Truss Economics 

A very polite and diplomatic analysis of the actions of incredibly thick people supposedly running the country.

If I can use a firefighting analogy, if inflation was like a fire, the budget of Mary Elizabeth Truss was like trying to put it out by pouring fuel on the fire, I mean in theory the fire could burn so quickly it uses up the fuel, but 9/10 times you would have melted your face off. The economy was in a weak place and the markets probably believed the budget would force the government to borrow even more in the future, so they dumped the pound. In addition the UK is awfully centralised around London and the financial services industry. Tax cuts probably weren't the best way to get business investment into the UK, especially for the manufacturing sector

The freemarket, doesn't magically provide a high quality of life for the average person. Without regulation, and public spending/investment, productivity dives, infrastructure crumbles and you get an oligarchy, of serfs and lords.

Recent Tory governments have had a few rebukes from the IMF. Such as the warnings some years back not to do more austerity, but they did anyway. The bond market is still in disarray and that is not helped by the fact that the Banks are now selling the bonds generated by quantative easing. Folk paying into pension schemes will take a second hit from that as pension schemes' mainstay is based on bonds and government bonds. I used to believe that the stuff coming out if the Tory Chancelry was just ideologically driven, misguided neo liberal economics. I am beginning to see it as economic illiteracy. Our economy is pretty much rubble now. As you keep explaining. Thanks for another seriously good video.

There were no growth policies in Truss' budget! At the time, Kwarteng and Truss claimed that their plan for growth would be ANNOUNCED in another 6-8 weeks - and that's just the announcement. It would then need to get through parliament before it could be implemented, meaning waiting several more months before their policies began to be implemented, followed by several years of waiting, to see if they actually worked. It was an extreme case of putting cart before horse, except this time they announced that they'd leave the horse at the farm, and only go back for it once they reached the market! Also, Truss & Kwarteng didn't underestimate the Bond market. They simply didn't understand how it works and proved their own financially incompetency.

As someone who used to work a low pay / minimum wage job. I can tell you that even if overtime was not taxed it still would not be worth it.

She also failed to cost the budget a basic mistake. Immediately markets assumed the worst and it lost confidence in the British government compounding the issues.

Personally I am absolutely convinced that had we chosen to invest during the aftermath of the financial crisis in infrastructure projects, improving healthcare and education during a time when money was pretty much the cheapest it has every been we would've been able 'invest' our way to a better future. Done correctly we would've created jobs, reduced welfare spend and improved the country's infrastructure and made it a better place to do business. Had we have grown the economy we would've been able to get the deficit and national debt under control. Austerity never really seems to work (I cannot think of an example where it has anywhere in the world??). I fear we have missed what was a golden opportunity and the Tory party have compounded Cameron and Osbourne's dire errors with Brexit and Truss's calamitous mini budget. The rot has well and truly set in now.

Like you say, "the market" is morally neutral. In the same way a black hole is neutral. It will tear apart anyone and anything in its vicinity - it does not discriminate.

Never trust a Truss

Another great summary .

Excellent, thank you.

Growth is needed, Truss tried this by attempting to let inflation wipe out debt in real terms while decreasing taxes. However she underestimated the bond market. The quandary, of how to achieve growth that includes average person, is one that alludes so many governments.

This Tory ideology of tax cuts for the rich worked to an extent in the 1980s, but that was 40 years ago. And even though it had a marginal difference at the time, the long terms effects of this ideology have been very damaging. The economies of the world has changed. Look at how the US economy has diversified since the 1980s, American banks aren’t the biggest companies anymore. However, The UK has had too many Tory governments wedded to these old fashioned principles in a changed world. Trickle down economics needs to binned.

excellent explanation, thank you

This is great content for a small channel. It's not particularly relevant to my life but I watch it anyway. Good stuff.

Sir, great content. Congratulations.

That episode is good for the MMT types to see.

Lower taxes don't just motivate people to work more. They also boost customer spending which drives the economy. This is in essence how the US functions. Interventionist policies like higher taxes *in my opinion* do more harm than good because no matter how much the government wants they just can't be sole spender in the economy and expect massive growth.

Truss is the reason my mortgages have increased she should be on a hill looking after goats far away from politics,

Low productivity is mainly caused by low investment, while working in financial services thete were days when I did no useful work as the computers were offline due to lack of investment in capacity and resilience meaning proposed workforce cuts were never achieved

The reason the UK has low productivity is precisely because of artificially low interest rates that cause resource misallocation, while also reducing the real rate of return for ALL businesses by creating a rapidly growing gap between the value of assets and their output. So that all business require more years reinvesting revenue to expand/ double. so the lower interest rates go, the more investment there is on paper, but the lower the rate of return becomes for all existing businesses. "hey look my business assets increased by 300%! Now my doubling time has increased by 300%!.

People can make excuses or blame others such as the Bank of England but two facts don't lie: 1. The markets can sniff out BS 💩 2. She shouldn't have pulled this stunt in the first place.

Many other countries had high inflation, rising interest rates and announcements of tax cuts at the same time as the UK, can someone explain why the UK in particular was the only country where faith in the markets was lost?

I miss the lettuce 🥬

She cut taxes and tried to increase spending. Which makes no sense. If i had lent the UK money i would worried too.

As someone who got very excited when she got into power. I have generally found the commentary around what she did frustrating. I can't say the same about your analysis. If there is one thing I'd have liked you to maybe have discussed it would be the supply-side reforms she'd planned to help growth. However, what's the point the tax cuts ensured they never got the light of day... If we are sticking to the demand side, there are better options. Probably no one's first, but the regressive tax between 100-125k is a better option if it is about pure principle. I'd love someone to get in who is set on simplifying our tax code... I know, I sound more deluded than the Truss government 😂

She was ignorance personified

In the us they had a covid like furlough policy, but instead of paying 80% they paid $16 dollars an hour equivalent wage . When the us started coming out of covid lockdown this lead to what was known as as the great resignation as many people refused to go back to their $9 dollars an hour job as they were still receiving the furlough. As a results the shipping docks back up amongst other jobs and companies had to start paying high wages. This cause a massive inflation in America as all this furlough was going out and not as many people were paying back in . This massive inflation was always going to hit the Uk economy and just seemed to hit around the time of liz truss. I say this on the basis that I saw the inflation wave coming and locked my mortgage into a long term deal at a low rate under 1.7% . I told all my family and friends and they did the same. This inflation wave from the us was not reported in the main stream media, if it had been it could have saved many people in the Uk a lot of money and their houses.

The anti growth coalition of the financial markets, banking industry and international capital conspired against Truss to destroy her legacy. If it were not the pesky free market she would have gotten away with it and this time next year we would all be millionaires.

@4:40 it is a very english way to say that the markets are morally and politically neutral, they are morally bankrupt and politically neutral between the far-right and centre-right ;)

According to Stephanie Kelton, this was a case of Liz Truss losing her nerve in the face of Financial Markets flexing. Conservative propoganda relies on the bogeyman of the markets being available to justify ideological austerity implented to complete the transfer of wealth from the 99% to the 1%. No saying that Truss' and Kamakaze Kwantang's was a good idea but I am leaning towards the perspective that the effect of the 'Bond Vigilantes' on sovereign states is massively over-rated.

The 'moron' premium is quite fitting. It would be quite amusing if it wasn't so catastrophic.

low growth is moot. Most G7 countries have had low growth since the Great Recession.

If it hadn’t been her and had been someone with more personal impact like Johnson or Cameron this may have worked

The whole economy got 'trussed up' there. 🤦🏻‍♂️

Because the people in charge wanted their man Sunak in.

How did Liz Truss ever get elected? It was a two horse race between Rishi Sunak and Penny Mordant; then suddenly Liz Truss comes out of nowhere. Seems like a move to manipulate markets.

Surely not, Liz swears it wasn't her fault, it's all due to " woke"😂

Not that I like Truss or Kwarteng but they didn't do anything particularly outrageous in their budget. It was a slight push towards old school fiscal conservatism but what it exposed was that (1) Governments are no longer in charge of financial policy (2) Our financial systems can no longer function on their own (basically exposing the markets are dead men walking) (3) Big financial institutions are now reliant on bail outs and demand them.

Tejvan, would you classify yourself as a Heterodox Economist or a Neo-Classical?

The failure is only due to macroeconomic inconsistencies.

How can we say Truss policy made interest rates soar, when the inflationary climate was set pre-Truss. Increased interest rates were a result of monetary and fiscal policy years before Truss, what became clear was that Truss appointment was used for further bond buying of the central bank, the wheels of this factor were also set in motion pre-Truss, as the bonds market was already billions into a freefall selloff.

International finance runs the world.

Economic investigator Frank G Melbourne Australia is still following this very informative content cheers Frank 😊

WOW! Liz Truss did all that!

2:13 truss or NO truss , interest rates were NEVER going to stay at those levels forever. . Shee got the blame for a lot of things that were going to happen anyway.

Something isn't right here. Giving more money to the rich should only fuel inflation on luxury goods because that's what they spend it on. They don't make a mad rush on the supermarkets and stock up on baked beans, so why do prices rise across the board?

She MP always against Hon Prime Minister Mr. Sunak she want from her mind being Prime Minister of England

One question off topic, what accent do you have?

Four months ago, the ONS revised GDP figures during her time...and they were £18 billion higher so her tax cutting policies were actually feasible. But remarkably, Rishi and Hunty will be cutting taxes again in two weeks, thereby endorsing her agenda.

Only here for Remoaner, comments👍

Awesome. Brilliant content. Not following it yet. Liz Truss she Liberal Democrats then she Tories. She liked by Tory activists Thomas they made her Prime minister. That good point to make Thomas. Support STV voting system for UK general election in England London House of commons. Full PR voting system Welsh local government elections has or will have it.

You see kids you dont have to do well or be brainy to get to a position of power and influence

Look at the growth of private debt! Almost all new money is now created as debt. No debt means no new money. Unless you can get the money back out of treasure island tax havens we’re stuck with using new money. It’s better the Government creates money out of nothing than private banks do it (ref. Bank of England Q1 2014 Bulletin) and taxes uneven distribution instead of using crude interest rates to control the money supply. Bonds are not needed to create the money supply. These are not medieval times. Distribution is the problem but no wealthy individual or group; eg Conservative Party and arguably Labour Party, will deal with that. Small government cannot do what’s needed, only big grown up democratic governments can do what the people need. Or they’re out.

Liz Truss was not "elected Prime Minister" - the UK does not elect PMs, as we vote in MPs, who form parties. The PM is the person commanding a majority in Parliament. Truss was chosen by Tory party members after MPs preferred Rishi Sunak - thus her position was both unconstitutional and unstable. I blame William Hague, who set that system up - he is an idiot.

Like many Tories Truss did not believe in listening to experts preferring economic fairy tails.

Compition in England I be Prime Minister similar Pakistan their with Choice Prime Minister ,

Great points, very well presented. Sunak and Hunt are a much safer pair of hands.

Anoter example of good management by brexit supporter, a litte more like this and UK will suply EU to come back.

Liz Truss one of Thatcher's children😂 Makes one wonder if Thatcher would have lasted 44 Days if she was around today !

Trussd is the worst UK PM ever.

2nd

You're way too kind to Truss and Kwarteng.You should try analysing their REAL motives. But like most, you dont want to go there. Actualy, I do believe that you know better than to peddle this BS. Fascism here we come.

1st

Brexit is the main reason why the UK is struggling so much right in all aspects. The so called benefis of Brexit hasn't been realised yet or may not be even realised in the future. People, think from an investors and businessmen point of view and explain why they should do business/invest in UK right now when they can easily do their business in the European union. Why should any businessmen and investors be limited to only UK when they can access a bigger market with simpler rules and regulations. If the UK wishes to stabilize their economy again, then rejoining the EU is a must without which there is very little hope of a good future for everyone. Period 😎😎😎

The problem was and still is spending, Government spending needs to be reduced by 20%, Welfare needs to have a time limit unless you are disabled. You also needs to contribute for at least 5 years before you can claim any benefits. The UK is drowning in Tax that's why 3,200 high net worth individuals left the Country last year taking their £7billion in taxes with them. There is plenty of money stashed away but nobody is going to put it to work in the UK if its impossible to get a return.

This is all because of the sins that you all had committed cruely.