RE: Truss29 Sep 2022 19:16
Kwarteng and Truss broke many taboos: they dared to criticise the Bank of England during the campaign, explaining that it had been too slow to hike rates, effectively making a softer version of my argument above. The markets agree that the Bank has been useless, especially compared with America’s Federal Reserve. But prejudiced by their incorrect reading of Brexit, they listened to those who deliberately distorted Truss’s powerful analysis into claiming that she doesn’t care about taming inflation, a despicable lie.
This was made worse by the Bank’s inexplicable failure to raise rates more last week, and its obtuse decision to start selling gilts. Traders also chose to interpret Truss’s supply-side tax cuts as suggesting that she doesn’t care about the national debt, another absurd misunderstanding.
My assessment of this Budget’s policies hasn’t changed: they are excellent. Every single idea announced is positive for growth. The same applies to all the other deregulatory and tax initiatives the PM is working on: they must be enacted. It is possible to boost the trend rate of growth. Corporation tax hikes would have been a disaster. Cutting high marginal tax rates is great. We need to build a lot more.
Truss is exceptional in realising that fake growth on the never-never is ending, and real, bottom-up capitalism is required instead. She wants to shrink the current account deficit by boosting the City, increasing energy production and sucking in businesses. It is therefore outrageously arrogant of the IMF, a faddish, hypocritical body that should have been scrapped years ago, to demand a U-turn. Its focus on a tiny proportion of Truss’s tax cuts – the £2?billion elimination of Gordon Brown’s top tax rate – proves that it is now explicitly aligned to the Joe Biden Left and should be boycotted by sensible governments.
The excuse for this egregious meddling by the IMF, run by Kristalina Georgieva, for six years a European Commissioner, was that Truss’s tax cuts would boost “inequality” and, presumably as per fashionable drivel, that this would depress growth. This is a shameful conflation of market outcomes with genuinely bad inequality (such as that which exists under feudalism or corrupt kleptocracies) and ideology masquerading as science. The primary driver of inequality in recent years has been the bubblenomics endorsed by the Davos consensus. It is nonsensical to claim, as the IMF also did, that one cannot tighten monetary policy while loosening fiscal policy.
The PM must hold her nerve. Her vision is exactly right for managing the transition to a post-Brexit economy built on a sustainable expansion, rather than debt-fuelled mirages. We must hope the Bank’s belated intervention will stabilise the markets and give her some cover. Andrew Bailey, the Governor, must start doing his job properly and Tory MPs must back the Prime Minister”
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