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A well-done breakdown of the current state of affairs, Konstantin. Detailed and just technical enough. It's amazing to me how short people's memory span can be when economics and politics collide.

As an American, I've been observing the Truss bashing by the British media for the past six weeks. Maybe I'm ignorant of deeper knowledge and context to the matter, but it seems like she has received an undeserved level of ire surrounding the current economic disarray. She enacted a budget plant that cuts taxes in an effort to reduce costs on the populace after a period of record government expenditure? You'd think that would've been met with some level of support, even if it isn't the right strategy for this moment.

Yes the markets reacted harshly, but isn't that's what markets always do in times of uncertainty? It's not like the budget caused these problems, or that its reversal will solve them. And the markets weren't solid at any point in the past two years - of course a proposal like this would have a strong initial reaction. A few weeks in large-scale economic terms isn't enough time to assess any real cause/effect accurately.

It feels like the UK expects some magic pill from a political hero to fix everything, and is unhappy with what it's gotten so far. No deeper reflection on decisions over the past decade leading to Russian energy reliance, government program expenditure, taxpayer burden, etc.

What am I missing here?

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Oct 27, 2022Liked by Konstantin Kisin

Excellent analysis. KK you must have this guy on more often.

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Excellent perspective. I would also note that the supposedly “reckless” fiscal plan pushed by Truss and Kwarteng would still have left UK government borrowing lower than the US’s for the next five years – and US government debt is already one-third higher than the US. Even considering the impact of the energy subsidies, the market reaction to me appeared excessive – and perhaps the vulnerability of pension funds to higher interest rates gave investors a twitchy finger on the “sell” trigger. I completely agree that today’s predicament comes from a decade and half of economic policy mismanagement – and not just in the UK. Now we need supply-side reforms to boost growth. I wish Truss and Kwarteng had pushed a more comprehensive set of supply-side measures, and done a better job at explaining why we need them.

PS – Konstantin: great idea to bring an informed economic perspective on this page; there is as much nonsense to uncover here as on the political and social front, and often just as amusing and alarming

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