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Recently United Kingdom new Prime Minister's Office said that due to the disorderly policies of the previous Conservative Party, the United Kingdom's fiscal deficit soared to 20 billion pounds, which put the country into bankruptcy.
The Conservative Party, which had been in power for 14 years, had been shouting "repair the economy", but unfortunately they changed five prime ministers in the eight years of their later administration, and they had no time to repair the "hollow" United Kingdom, so they could only make do with leaving this problem to the Labour Party.
This is not the first time that United Kingdom has experienced an economic crisis, the most recent is the Conservative Prime Minister who triggered the "Truss crisis" - Elizabeth · Truss.
At that time, United States was still studying whether the crisis in United Kingdom would happen to them, and the United States research at that time was researching, and I was confident that this would definitely not happen in United States, after all, United States inflation has always been solved in various ways.
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Only two years have passed since the crisis caused by the United Kingdom "45-day prime minister", and United States has already fallen into its own national debt crisis, and the "Truss crisis" may indeed be repeated in United States.
In fact, the United Kingdom's economy entered economic difficulties as early as the Cameron era, when the conservatives led by Cameron were determined to revive the United Kingdom economy through harsh austerity.
At that time, United Kingdom, which had not yet recovered the effects of the 2008 financial crisis, decided to reduce social public service institutions through large-scale reductions.
Trying to get out of the economic recession through market adjustment, although the economy of United Kingdom, which has bottomed out, has recovered somewhat, it has widened the gap between the rich and the poor in society, leading to fierce populist sentiment in society.
According to data provided by research agencies at the time, the income of the bottom family in United Kingdom is one-tenth of the income of the elite, and many of this elite are immigrants.
It stands to reason that the tax revenue that elite immigrants bring to United Kingdom society will feed back into public service spending. But it is precisely because of the Cameron government's drastic cuts in public service institutions that the people at the bottom are very dissatisfied and increasingly hostile to immigrants.
Under this populist atmosphere, the topic of "Brexit" became the most concerned topic of public concern, and finally the Cameron government ended in power in the context of the "Brexit" referendum, which also led the United Kingdom economy into the era of "lost decade".
After nearly a decade of tugging, United Kingdom finally broke away from the European Union in 2019, but at this time they found themselves having to reinvent the image of a great power, Boris shouted the slogan "United Kingdom First", and began a term vowing to make United Kingdom the world's first power by 2050.
Most coincidentally, at this time, the United States was in power by Trump who shouted "United States First", and the two populist leaders not only shared the same heart, but Trump also promised to sign a "good trade deal" with United Kingdom.
At this time, the United Kingdom economy has long agreed with the "neoliberal" economic concept propagated by the United States, and the domestic industrial manufacturing industry continues to outflow, and the proportion of manufacturing added value in GDP has dropped to 8.59% in 2019, and it can only rely on the financial industry as the economic pillar of United Kingdom.
However, a no-deal Brexit has triggered a sharp depreciation of the pound, increasing trade disputes and a global economic slowdown have plunged United Kingdom into stagflation, many United Kingdom's automobile manufacturing industry has collapsed, and the United Kingdom's economy has even entered zero growth expectations.
Before Boris could exert his strength again, the epidemic that swept the world broke out, and the previously heavily cut budget of the United Kingdom NHS became the last straw that overwhelmed Borry's political career.
Boris, who had already implemented monetary easing, directly started the "money" mode during the epidemic, which was almost synchronous with Trump's approach at that time, perhaps this is why the United States was so concerned about the United Kingdom economic crisis in the later period.
At the end of 2021, United Kingdom inflation climbed to a 30-year high, people were desperate in the face of severe inflation, and Boris left the prime minister amid boos.
Truss, who took over as prime minister, implemented the most radical tax reform plan in United Kingdom in 50 years, directly triggering a major earthquake in United Kingdom's financial markets.
Originally, Truss thought that the first fire after taking office would boost morale, but she only noticed the energy crisis caused by the Russia-Ukraine conflict, but did not consider inflation.
After Boris's "big release" policy, United Kingdom inflation at that time was already a rare high in history, and the interest rate hike operation according to the central bank's idea could stabilize prices, control inflation, and slowly slow down the economy.
Just like the Federal Reserve, which was "tortured" by Trump at the same time, directly chose to raise interest rates and shrink its balance sheet, which is the routine operation of central banks.
But Truss was in too much of a hurry, ignoring the Bank of England's policies, directly giving people large energy subsidies while stimulating the economy with massive tax cuts.
The already heavily indebted government issued bonds again, and the accumulation of old and new debts made people look at it alarmingly, and because the tax cut policy directly reduced the country's tax revenue, which made British debt holders panic and worry about the United Kingdom defaulting.
Under this panic, British bond holders have started to sell, and many funds have publicly stated that they want to take the opportunity to short the pound, triggering the worst situation in United Kingdom's economic history - the three kills of stocks and bonds.
The Bank of United Kingdom had no choice but to bail out the market on a large scale, and finally the United Kingdom economy continued to be in a downturn, and it was these reasons that caused the public to really have no good opinion of the Conservative Party, and finally the Labour Party defeated the Conservative Party and returned to the ruling party.
If you compare the United States and Britain from this perspective, it is interesting to find that the two sides have a lot of synchronization strategies.
United States government debt has been soaring in recent years, and the Trump administration not only started the tax cut mode, but also used the "money" strategy during the epidemic.
Although the Federal Reserve has raised interest rates several times in a timely manner, it is limited by the continuous downturn of the global economy and has no way to alleviate domestic inflation.
Now United States has entered a worrying "three highs" state, and the scale of U.S. debt has exceeded $3.5 billion, Musk commented: "United States is heading for bankruptcy." ”
Now that the growth rate of United States debt has far exceeded the growth rate of United States' GDP, and the Fed's delay in cutting interest rates, the risk factor of United States' debt service is continuing to increase.
The gradual failure of the "dollar credit" as a firm backing of U.S. bonds is mainly due to the impact of the financial sanctions strategy of the United States major banks, which has caused many countries in the world to try their best to implement local currency settlement, resulting in the participation of the U.S. dollar in settlement has begun to decline.
Now that United States debt economy has turned into a "powder keg", when the United States election is decided, it will be time to settle the debt, and I hope that there will be a good solution at that time, so that the global economy will not fall into a state of great recession.
What do you think about the flood of dollars? Welcome to discuss in the comment area!
Information sources:
People's Daily Online: The scale of United States federal government debt exceeded the $35 trillion mark