Kwasi vs the markets

Warren Buffett famously said that ‘when the tide goes out, you see who is swimming naked’. Now that the tide of easy money has receded, and interest rates have risen, we can see that the UK is exposed. Higher rates are causing acute financial pain to an extent not anticipated for the government, homeowners and even pension funds. The cost to the taxpayer is going to be significant.

The Bank of England is in an almost impossible position: it needs high interest rates to tackle inflation, but high rates threaten financial stability. Which is the lesser evil? The Bank has had to intervene in the gilt markets three times since Kwasi Kwarteng’s ‘fiscal statement’, in an attempt to lower rates and calm things down. Once bailouts start, how to stop? Andrew Bailey, the governor, has warned that pension funds have ‘three days’ left. Was he bluffing? If his bluff is called, what happens to his credibility?

We are now realising the jaw-dropping cost of this market chaos.