The Critic, July 20, Catherine McBride
It is often quipped by pundits and comedians that Liz Truss killed the economy. Like many lies, this has now been reported so many times that it is becoming received wisdom, but it is really just an urban myth.
The evidence doesn’t support it. Now that 10-year gilt yields are above the giddy heights reached in October 2022 under Truss, and short-term rates have doubled, it is time to reexamine what really happened to the markets in October last year and whether Liz Truss’s proposals to fix the economy would have worked.
Deja vu all over again
Before getting into that, it is probably worth setting up some background. If you look at the Bank of England website, it has a page entitled Official Bank Rate history: the graph only runs from 2013, but the data table below it goes back to 1975.
For most of this time the Bank was changing the rate many times a year: in 1975 they changed it 13 times, starting from 11.25 per cent, going as low as 9.75 per cent in April, as high as 12 per cent in October and finishing the year back at 11.25 per cent. In 1982 the rate was changed 32 times, although it was an easier market to follow, as rates declined steadily from 14.38 per cent in January to 9.13 per cent in November. By the 1990s and the early 2000s inflation was under control, and rates were changed about four times a year, give or take, but interest rates were still high enough for investors to make money and still volatile enough for bond traders to make money.
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