Putin sacked Liz Truss… But his revenge won’t stop there

By: Alexander Nazarov

If Putin is responsible for all the problems of the UK, the West and the world at large, there is no point in trying to explain Truss resignation as foolishness or anything else…but I will.

I’m joking, of course, except for what I mentioned about Britain’s problems which are just beginning.

As for Truss, Liz Truss was lucky, and came out like a hair from the dough with minimal losses.

As for Britain’s economy, the next prime minister could witness its collapse.

I will try to briefly describe what happened and what will happen next.

Great Britain is a big copy of Lebanon, the country’s banking sector is bloated, the United Kingdom plays the role of one of the largest financial centers in the world, while the pound sterling is one of the world’s reserve currencies, at the same time that the national industry has deteriorated or/and was transferred to other countries other.

As a result, Britain as a country has had a negative current account balance for about 50 years, meaning it buys more goods and services from other countries than it sells them to.

Then the problem was exacerbated by the fact that since the early 1950s, the British government budget has as usual been in deficit, meaning that the government spends more than it earns.

In other words, Lebanon, with its bankruptcy, is a model of financial sustainability compared to Britain, where it used to live such a life for much less time.

To cover this persistent deficit, it was necessary for foreign capital to flow into the UK without interruption and in increasing quantities.

Without that, Britain would go bankrupt immediately.

But the problem is that this model has expired while Britain has become food for the United States.

Since the beginning of last summer, the United States has been absorbing capital from all over the world, and before anyone else, from its allies.

This became possible due to the fact that inflation in the United States is lower than in Europe, and interest rates in the American banking system are higher, which has resulted in capital flight from Europe, England, Japan, etc… to the United States, where investments are less losing, and capital evaporates doubly slowly.

That is, to restore capital inflows, the UK needs to raise its interest rate currently at 2.25% much higher than its US counterpart 3.25% and will be higher soon, and reduce its inflation 10.1% to a lower level than in the US 8.2%, and this needs to be done urgently.

To reduce inflation, it is necessary to stop printing paper money that is not covered.

Now, by issuing paper money that is not covered by merchandise, it finances: (1) the budget deficit, and (2) the country’s current account deficit, meaning that in order to reduce inflation, both deficits must be eliminated.

Liz Truss burned with the first point, proposing to cut taxes, which naturally led to an increase in the budget deficit, which had to be financed by printing paper money, which would raise inflation.

I don’t know if the reaction of the markets and the banks to this measure was proportional to the act, because that wasn’t the only measure that leads to the budget deficit.

For example, the government subsidizes gas prices, but these budget expenditures didn’t cause such strong feelings.

In any case, the state budget is in deficit, and the deficit cannot be eliminated or even reduced significantly, without a social explosion that would sweep through this government and all subsequent governments.

That is, under current conditions, there is no way to finance the budget deficit other than quantitative easing, which means that inflation will inevitably grow regardless of Truss and its tax initiatives.

Frankly, I’m not inclined to consider Liz Truss the cause of the crisis, but was simply “lucky” to be Prime Minister at the time the meltdown began.

Yet the charm of the situation lies in another matter, which is that there is no way out for Britain from it, and all efforts will be in vain.

In addition to the first point, there is a second point, which is the current account deficit, which is sufficient for the failure of attempts to reduce inflation.

There are two ways to eliminate the current account deficit: one is to dramatically reduce the cost of labor (ie the standard of living) in the UK, and I see no other way to increase the competitiveness of British goods.

One way or another, this is a long road, and it probably won’t be a voluntary path, and no government will take it.

The second way is to significantly reduce the value of the pound sterling, which will lead to two results: imports will decrease dramatically, as will the standard of living of the British, and riots will begin, plus inflation will rise due to high import prices!!!

In other words, reducing inflation in the UK in the current situation is impossible!!!

In addition, the devaluation of the pound itself will accelerate the outflow of capital.

Moreover, we must not forget that the flow of capital cannot be stopped without raising the interest rate above the US interest rate, and this means the bankruptcy of British debtors, and all the same pension funds, which the Bank of England had to rescue with the help of the resumption of quantitative easing after Publication of Liz Truss Tax Initiatives.

The situation in Britain is hopeless, and any attempt to solve problems will lead to more problems, the system has exhausted itself.

In short, Truss resignation will not solve the problem, the problems are just beginning, and as the USA sucks capital from all over the world, the problems in the UK will only get worse.

Liz Truss’s successor will run into the same problems very soon.

I am not sure that the next British Prime Minister will last longer than Liz Truss.

And yes, all debtors around the world are now suffering from the same problems, including the Arab countries, including, for example, Egypt.

The United States sucks capital from everywhere, all major debtors will now have problems refinancing their debts, and soon we will witness new bankruptcies among the countries of the world.

Keep this in mind when you read in the press, controlled by the West or controlled by your government, that the bankruptcy of this or that country was due to “Russia’s war in Ukraine”.