Jamie

INCREDIBLE that any media commentators, let alone high profile ones, are still able to make this asinine, factually incorrect statement over and over again unchallenged. “Liz Truss crashed the economy” is a strong (and banal) take for people who quite clearly never checked when the Bank of England actually announced anything. The £40bn gilt sale wasn’t “sprung” on anyone “the night before” (as Liz herself has said and blamed on Blairite changes to the way comms happen between various bodies). The MPC publicly voted for QT back in February 2022 and said it again in August and September. The market had known for seven months - just to be really clear. It’s a choice to listen or not to listen to MPC remarks, dryer content than Gandhi’s flip flops - sure; but public and easy enough for anyone to check. What actually wasn’t disclosed was the size of £45bn in tax cuts with no OBR forecast attached (and look, this is far from being any endorsement of the OBR - which I’d never make because they suck, it’s really much more to say that removing a routine, low cost, previously universal scrutiny step on the biggest unfunded package in a generation was read correctly by the market as the government choosing not to be checked). Which points to a Kwarteng process failure, not a Truss economy failure, and Bailey himself agreed with that - under oath. Worth noting here too, Kwarteng spent years at a hedge fund (JWM Associates, John Meriwether’s fund after LTCM) built on what happens when leveraged bets meet a liquidity shock, so the market reaction to an uncosted package shouldn’t have been the surprise it apparently was. At least not to Kwazi. The real detonator, of course, was two decades of pension accounting rules forcing schemes into leveraged LDI hedges against gilts. When yields moved, funds had to sell gilts to cover margin, which pushed yields up further, which forced more selling. That loop was loaded years before the spark of September 2022 lit the tinderbox. Cable hitting 1.0350 gets used as killer proof too. But the dollar was having its strongest year in two decades that same month, DXY was at a 20 year high, the Fed was hiking harder than anyone. Euro went sub-parity the same week for the same reason. Sterling wasn’t the only currency getting run over by the dollar that autumn, it just got run over hardest because it has gilt credibility fears stacked on top of it. And yet barely anyone talks about this longer dollar move. It was a massive contributor. Gilts were already sliding before the mini budget too, on the back of the Fed and a UK inflation surprise landing on a market running on fumes for liquidity. Again - vanishingly few people comment on this. An economy that *actually* “crashed” also definitively does NOT retrace in a month on a raft of policy measures that were merely mooted and never realised. It’s just a total nonsense. It is instructive that yields and the pound mostly did retrace once the plan got reversed. What really broke was confidence in the economy for two weeks, not the economy itself. So NOT a crash, by definition. Truss is still fair game for one thing, as I have often said on here. She announced *that* scale of unfunded cuts with no independent check, which was an unforced error. But. That is not the same claim as the one everyone repeats parrot fashion like Kay has here. Kay is a great journalist, I’ve often enjoyed her work, but she’s totally wrong here. It’s a tired and incorrect and market-illiterate take that deserves much more due care and attention because of what it suggests - that cuts are bad; any cuts to taxes or spending = bad. Not least because the medicine the British economy needs MOST OF ALL is massive cuts to nominal spending. We need to take our medicine, regardless of how bitter it tastes. It’s an immutable mathematical fact. And repeating this falsehood stifles us from having public conversations that would lead to this much needed reality check.