Wednesday, 10/19/2024
A financial crisis in the United Kingdom seems to have been averted the past few days, with the sudden sacking of Prime Minister Truss’s finance minister.
Their ill-conceived plan to stimulate the economy with tax cuts for Corporations and the Rich, combined with more spending financed with the creation of more debt, has been reversed over the weekend, with the appointment of a new finance minister.
Last week, the Bank of England needed to step into the mess, with both feet, and with “unlimited” bond buying support, to stem the potential financial meltdown, as many Pension Plans faced massive margin calls.
Is the problem solved, or is this just another temporary reprieve?
From my vantage point, the problems that surfaced in the United Kingdom’s financial markets, are only the tip of the iceberg, of the financial and currency problems facing the world’s economies in the coming months, awash in too much debt.
Inflation continues to be the number one problem, and the Federal Reserves’ raising of interest rates, may not be able to solve that problem which frankly has been caused by years of deficit spending.
In future articles we will explore the relationship of inflation to national debt, but in summary, it is this author’s opinion, that government spending greater than its income from taxes and fees, leads to borrowings and printing of excess dollars, which leads to a decline in the purchasing power of the dollar, which is inflation. Federal Reserve Chairman, Arthur Burns, under Nixon, said it plainly:
“Government Deficits causes Inflation”
Fed Chairman Arthur Burns