When Liz Truss stated that she was prepared to be unpopular, she surely didn’t have market mayhem in mind. The combination of a falling pound and rising bond yields led some analysts to liken Britain to an emerging market (or submerging one, as Larry Summers put it to Bloomberg TV). One week after the somber, choreographed dignity of Queen Elizabeth’s state funeral, Britain is back to what lately has seemed a more familiar state of lurching from crisis to crisis.
On Monday, Chancellor Kwasi Kwarteng tried some damage control, promising to unveil a plan to tackle debt and reveal a more complete list of reforms over the next two months. He also promised an independent analysis from the Office for Budget Responsibility on Nov. 23. Meanwhile, the Bank of England ruled out an emergency meeting but pledged effectively to do whatever it takes to control inflation. And yet neither statement of “don’t worry, we got this” seems to have reassured for markets. Bloomberg Economics’ Dan Hanson explains just why the government has dug itself such a deep credibility hole.