There have been many jokes in recent days about sterling being an emerging market currency. But the crash of the UK currency is no joke. And it is a salutary tale that should remind us, yet again, that investors will punish countries that pursue reckless fiscal policies, in ways that will ultimately rebound on all their citizens but especially the poorest.
The UK’s new prime minister, Liz Truss, and chancellor Kwasi Kwarteng have moved swiftly to implement a new kind of supply side economics that they have long advocated, which depends on tax cuts and deregulation to lift economic growth. In his maiden mini-budget last week Kwarteng announced £45bn of tax cuts as part of a strategy to lift the economic growth rate to 2.5% over the medium term. The tax package came on top of an estimated £60bn energy emergency package, which Truss had announced earlier...
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