Only ‘idiots’ think tanking pound is a crisis says Cardiff Uni Prof who is Liz Truss’ go-to economist
A Cardiff University Professor who is Liz Truss’ go-to economic guru has said that the fall in the value of the pund is not a crisis and those who think it is are “idiots”.
Patrick Minford who is a Professor of Applied Economics at Cardiff Business School said that Chancellor Kwasi Kwarteng should ignore the “mob of critics” who have criticised his mini-budget delivered last Friday.
Fears over the Government’s economic policies has sent the pound tumbling and sparked a sell-off in the gilts market, with the Bank of England forced to launch an emergency UK government bond-buying programme to prevent borrowing costs from spiralling out of control.
But writing in the Telegraph, Patrick Minford said that “we should let markets work and pay no attention to idiots who cry ‘crisis'”.
He added that it was important to leave the pound free to find the level that will allow the UK Government’s “pro-growth policies” to work.
Liz Truss named Patrick Minford as the inspiration behind her pledge to cut taxes as a means of boosting the economy during the leadership race in August.
Patrick Minford has said that he remains convinced that low taxes, free trade and deregulation are what is needed to revitalise the economy, despite this thinking being less fashionable after the 2008 financial crash.
“It makes perfect sense for sterling to fall further over the long term to stimulate exports as imports rise in response to higher growth,” he wrote in the Telegraph. “We should let the market do its work on this front.
“Nor is it any sort of disaster for sterling to fall and boost our industrial competitiveness – far more worrying if it was being artificially held up by some misconceived ‘strong pound’ policy.
“We now have rightly a set of policies on tax and regulation to stimulate growth. It is important to leave sterling free to find the level that will allow these policies to work by pushing up the trade balance and direct investment inflows in the balance of payments.”
The Bank of England’s extraordinary intervention today, responding directly to the UK Government’s tax-cutting strategy, will however pile further pressure on Liz Truss and Kwasi Kwarteng to defend a vision for the economy that has spooked markets and shocked most mainstream economists.
The Bank’s chief economist, Welshman Huw Pill, said on Tuesday a “significant monetary response” may be required, but signalled this would not come until policymakers are due to meet as scheduled in November.
In the meantime, the Bank said it would buy bonds “on whatever scale is necessary” in order to steady gilts after Chancellor Mr Kwarteng’s mini-budget last Friday spooked the markets with his package of tax cuts and increased borrowing.
It said the bond-buying programme would be temporary, starting from today until October 14.
“The purpose of these purchases will be to restore orderly market conditions,” the Bank said.
It also postponed next week’s planned kick-off of its £80 billion sale of gilts under the so-called quantitative tightening programme until October 31.
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