Tocks in the US fell again on Monday, dragging the Dow Jones Industrial Average into the bear-market territory—since hitting a peak early this year, it has now fallen more than twenty percent. The Federal judgment of the Reserve to stamp out inflation by raising interest rates is spooking investors. So the precipitous decline of the British pound in foreign-exchange markets. Raphael Bostic, a senior Federal Reserve official on Monday, took the rare step of criticizing a foreign ally, saying the government of British new packages of tax cuts sparked the pounds has increased uncertainty.
Spare a thought for patriotic Brits. Having buried Queen Elizabeth II, their last remaining link to a time when their schoolbook maps showed great swaths of the surface of the earth-colored imperial red, they now face a humiliating currency crisis. In Asian trading early Monday, the pound sterling hit an all-time low of $1.035 against the US. Dollar. When trading shifted to Europe, the battered currency rebounded amid speculation that the Bank of England would announce an emergency interest-rate hike to strengthen the pound. On Monday afternoon, the currency slump resumed after the Bank of England announced no rate increase but said it may enact one at its next policy meeting, which is not until November.
The new UK government under Prime Minister Liz Truss and Chancellor of the Exchequer (Finance Minister) Kwasi Kwarteng presented its mini-Budget last week British economy has plunged into a crisis and attracted some sharp criticism from around the world.
The International Monetary Fund (IMF) reported that the new UK Budget would likely increase inequality in Britain and could undermine the monetary policy.
US Treasury Secretary Lawrence Summers tweeted UK policy decisions as utterly irresponsible and warned that the ensuing financial crisis in Britain affects viability as a global financial center of risk of a vicious cycle where volatility hurts the fundamentals, which raises volatility.
The international reactions of the financial markets, which saw the pound fall to its lowest level ever against the dollar of devastation in its condemnation of the new government policies, and the astonishment and shock focused particularly chancellor of willingness to experiment with one of the most stable economies.
The US criticism led the former US treasury secretary Larry Summers. They took to Twitter to attack what he called the irresponsible UK policy expressing at the same time his surprise that the markets had reacted so quickly and harshly. He said itself indicated a loss of credibility.
His long thread concluded with a gloomy prediction. The financial crisis in Britain would not affect London’s viability as a global financial center but could have global consequences.
In New Yorker, John Cassidy wrote about all the disturbing for Britain after the death of Queen Elizabeth II, their last remaining link to a time when their schoolbook maps showed great swaths of the earthen surface-colored imperial red. Now, he said that they face a humiliating currency crisis.
He said to the prime minister of Liz Truss and her chancellor Kwasi Kwarteng had plunged Britain into a fine economic mess.
The tragedy Cassid said is that all this is unnecessary. Although Britain has been through many tribulations in recent years, it is the sixth-largest economy, it has a stable political system, and London is one of the biggest financial centers. If its government were reasonably competent, the risk of the finance blowup would be minimal. Unfortunately, that is a civic requirement not met.
In Ireland, commentators told the British blowout had backfired and urged the Irish government to unveil its budget on Tuesday to heed the lesson. Ministers Paschal Donohoe and Michael McGrath have delivered a real-time exhibition on exactly how not to do it, the Irish Independent said in an editorial. Despite the considerable weight of expectations, Budget 2023 must ground.
Additional spending and tax measures to cushion Irish households and businesses from rising prices to cost around €11bn (£10bn) – but unlike its neighbor, Dublin has a fiscal surplus.
The Irish Times said that learning from the London experience, the message sent out by the budget needed stability and involved a credible plan for public finances. They should place enough resources to respond to the immediate crisis and leave scope to adjust to circumstances next year if needed.
The London-based economic correspondent in Germany of the daily Frankfurter Allgemeine Zeitung, Philip Plickert, told readers that as a financial and economic historic Kwarteng should consult the history books once again to see how dangerous an escalating twin deficit can be. Prime Minister Truss cannot afford a balance of payments crisis.
The finance minister of Germany, Christian Lindner, told an event hosted on Monday evening he would wait to draw the lessons he referred to as the experiment Britain had embarked upon and said that putting its foot on the gas while the central bank steps on the brakes.
