What Happened To Liz And Kwasi?
The demise of the Liz/Kwasi (LK) was the result of:
• The Conservative Party establishment counter attacking the free market revolutionaries
• The Bank of England counter attacking the free market revolutionaries
• LK’s incompetence
LK were members of free market groups who feel that:
• The UK is stagnating under over repressive regulations and taxes
• The UK is stagnating under the over repression of the European Community
• Too much immigration is pushing down wages on the low end of the wage scale
• There is too little opportunity for the population to grow wealthy or perhaps even get better jobs
• The population can better allocate capital than the government
• The population can increase their happiness better than the government can increase their happiness.
So they came up with an agenda of:
• Cutting taxes
• Eliminating coming tax hikes
• Limited deregulation
None of this is really radical.
It was not radical to the voting members of the Conservative Party who looked to LK as a potential return to the glory years of Maggie Thatcher.
The Conservative Party has ruled the UK since Tony Blair left office but have had a string of bumbling Prime Ministers ending in Boris Johnson. So the voting members of the Party wanted LK to move the UK away from the statist policies of the past and into a freer world.
The Conservative Party has moved very left wing since Maggie left office. They would slight to the left of the US Democratic Party but with better style. They have retained power because the Labour Party is a socialist party and wants to take over everything.
So LK were really a challenge by the members of the Conservative Party to wrest control of the party away from the establishment of the party and go back to a more free market approach and away from the statist policies of the last five prime ministers.
But the establish struck back quickly.
Andrew Bailey, the head of the Bank of England, hiked interest rates aggressively precipitating a crisis in the pension fund industry (a story for another day) and the pension fund industry cried bloody murder to the government that they couldn’t live up to their obligations if LK remained in power. Wait, the pension funds were getting killed because of their own massive mistake that were then triggered by the BOE. LK had nothing to do with it. But they had to blame someone and LK got the blame.
Wise and grave economists complained that cutting taxes would increase the budget deficit, which is correct in the short run and wrong in the long run. We just had an example of this. Trump cut taxes at the end of 2017. Tax revenue dropped initially and then skyrocketed. The US tax revenue, after the tax cut, is at all time records! (Time to cut again!)
The wise and grave economists said that keeping the government budget deficit low was a good thing (it is!) and the way to do that was to raise taxes and reduce wealth in society.
Wait! The concept of cutting costs never even entered into the discussion. Period. No cuts. We want a low budget deficit but we certainly can’t cut waste out of the government!
So it became clear that the Conservative Party establishment didn’t want to run the risk of having power and money taken out of their hands so they had to get rid of LK.
So they didn’t ask the people who elected LK, members of the Conservative Party, who they wanted. The members of Parliament took matters in their own hands and picked Rishi Sunak. The members be damned. We have to take action quickly!
So they did.
They had to show they were the power in the Conservative Party, not the members.
Rishi is a smart guy, no question. After all, he is one of my fellow hedge fund managers. :) He is richer than the queen though most of that money comes from his wife.
But he is doctrinaire Conservative.
So how do we make money from this?
Here are some trades that I will stalk:
• Short the Pound
• Short the UK stock market
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