The UK is experiencing the worst economic collapse in over 40 years. Energy Prices are soaring. The Bond market is collapsing, causing the rest of the economy to crash as well. Housing, pension funds, cash, cars, education, and banks are all in trouble now.

the Situation is so horrendous that the International Monetary Fund has openly attacked the UKs economic policies.. The Resignation of Prime Minister Liz Truss has left the UK with a huge financial mess. The Economic disaster in the UK is terrifying and its only going to get much worse from here.. This Government will have integrity, professionalism and accountability at every level.

the New Prime Minister Rishi Sunak has been left with an economic disaster. Because of excessive money printing. During the pandemic,, inflation in the UK has soared to a 32-year high of 8.6%. This is hurting the purchasing power of UK citizens and is, as a result, slowing down the economy. In The United States, the Federal Reserve is combatting inflation by raising interest rates and selling bonds.

this is lowering consumer prices by stagnating the economy. The UK Economy cant handle this level of pain, because the economy is already in a poor position. The UK is the only advanced economy that hasnt fully recovered from the pandemic.. This is a lose-lose situation for the UK because theres simply no way to avoid a total economic collapse.

selling Bonds is like slamming the brakes on a car going at 100 miles an hour. If The UK reduces the money supply, the car will lurch backward and everyone in the car will as well. The Other option for the UK is to print money to save the economy. This would be like slamming the gas pedal, forcing the car to accelerate to 200 miles per hour.

while The car might go faster in the short term, the entire car will eventually crash and blow apart. On September 23rd, Liz Truss and her chancellor announced a new policy called the mini-budget. Unbeknownst to Truss At the time,, this was one of the worst policies in modern history. The mini budget was on track to elevate the government's borrowing from 5% of the UK's GDP to roughly 8%.

this would have exacerbated inflation and increased government debt. The New Prime Minister Rishi Sunak will be implementing an economic agency that aims to control inflation. Sunak believes that in order to achieve faster economic growth, low inflation, and deregulation on the supply side as necessary. This will likely be done through tax increases on companies and payrolls. There will also likely be a tax hike on incomes by freezing income brackets.

raising Taxes during economic contraction is extremely dangerous. While Inflation will eventually come down,. the economy could easily crash even more. This is because the UK is currently in a tight situation internationally with foreign investors. The UK is currently trading like its an emerging economy, because it practically is one..

the Country is currently in a considerably large twin deficit. A twin deficit is when the current and financial accounts of a country are both in a deficit. You might be confused as to what those terms are,, so make sure to pay attention. The Implications of this are serious.

The Current Account tracks a countrys imports and exports. When A countrys current account is in a deficit,. this means that the country is importing more than it is exporting. In Simpler terms,: more money is leaving the country than entering the country. Lets say Im A citizen of the UK and I buy 50 pounds of goods from China and sell 30 pounds of goods back to China.

in Order to first buy Chinese goods,, I would first need to convert those 50 British pounds into Chinese Yuan. On The flip side,, the Chinese buyer of my 30 pounds of goods would need to convert Chinese Yuan into 30 British pounds. 50 British pounds were converted into Chinese Yuan and 30 pounds worth of Chinese yuan were converted back into pounds. This means that I essentially converted 20 net British pounds to Yuan.

in This instance,, I have now created a supply imbalance. Now There are immensely more British pounds than Chinese Yuan on the market. That is essentially what a current account deficit is on a smaller scale.. In The example that I demonstrated, I imported 50 pounds of goods, but only exported 30 pounds of goods.

by Doing this, I would be destroying the exchange rate of the pound, spending lots of money, selling uncompetitive exports, and exacerbating inflation. The UKs Current account balance as a percentage of GDP is currently at an all-time low of -8%. Thats A terrifying percentage that is putting substantial pressure on the British pound.. The pound-to-dollar exchange rate is currently at a 37-year low.

thats right,? a 37-year low. The UK not only has a current account deficit, but also a fiscal account deficit.. You Are going to be shocked by how ridiculous the situation is. The Fiscal account is equal to the governments total income subtracted by government expenditures.

in Simpler terms,: the fiscal account tracks the governments spending. If The fiscal account is in a deficit,. That means that the government is spending more than it is earning. If The fiscal account is in a surplus,. then the government is earning more than it is spending. The UK's budget deficit is expected to be at 8% in 2022 and 2023, which means that the UK is expected to spend 8% more than it is earning.

this could change with the new Prime Minister Rishi Sunak but the economy will be doomed regardless of what Sunak does. If Sunak Were to lower the budget deficit,, the economy would collapse even further. On The other hand,, if Sunak were to increase the deficit, inflation would soar and the pound would crash. The hole is too deep to get out of.

the Question that you might have is - "where does that deficit come from?" In Simpler terms,: how is the UK consistently spending more than it is earning? The Answer to that question and the phenomenon that is taking place is shocking. In Order to finance such a humongous deficit,, the UK has to borrow from foreign countries like the US. In September 2022, the UKs borrowed two times more than the previous month. That's right, two times more month over month.

The UK Government is essentially borrowing money from other countries to spend it on their own economy. As We discussed earlier, the UK is in a current account deficit, meaning that the country imports more than it exports.. This means that the UK government is borrowing money from other countries and spending it on products from other countries. That is totally absurd.

imagine If I borrowed $10 from an American citizen named John. Using that $10 that I just borrowed, I would then buy $10 of Johns products. So John essentially lent out $10 and received $10 back. The Only loser in this transaction is me.

now I have $10 in debt while John is making a profit. Thats Essentially what the UK is doing right now.: They are relying on the kindness of strangers to fuel their economy. This works when the strangers see the government as trustworthy,, but with the amount of spending that the UK is doing, they cant be trusted anymore.

foreign Investors know this and have been demanding higher interest rates on their loans. Britains 10-year bond yield has quadrupled to over 4%. The Government was just borrowing at an interest rate of 1% per year 12 months ago. Now They have to borrow at a rate of 4.4% annually.

thats A significant increase in the UKs cost of borrowing. Bond Yields increasing also have severe implications for citizens as well.. Pension Funds are typically invested in bonds because they are considered quote-unquote safe assets. Contrary To popular belief,, bonds, also known as gilts, are actually extremely risky in the UK.

this Chart shows the price of a 15-30 year British bond. ETF Over the past 5 years. Bond Prices have fallen by over 40% from their high in 2020. Thats A shocking decline that affects the purchasing power of consumers nationwide. Imagine Seeing the value of your pension fund drop by 30, 40,, or even 50% within the span of two years.

it would be logical to stop spending as much money if your retirement savings tank. If People stop spending money, that would hurt the economy substantially. In Addition to this, UK Businesses now have to borrow at higher interest rates. Higher Interest rates would lead businesses to lose profit, causing people to be laid off.

when People lose their jobs, they will stop spending money, forcing businesses to make even less profit and lay off even more people. The Economy works in a circular flow that will destroy the UK economy in the coming years. But While all of these indicators are flashing red,, there is an even bigger issue: energy.. Because of Western sanctions against Russia, the UK has lost a significant portion of its energy supply.

This has caused energy prices to soar by 96%. Imagine Seeing your energy bill double within the span of months. Natural Gas prices have seen an even larger increase of over 1,000% from pre-pandemic levels. Cooking Food, staying warm, and washing clothes have all become out of the reach of lower-class citizens.

these Shocking Price increases have also spilled over into all sectors. For Instance,, manufacturing food requires natural gas,. So as a result, food prices are increasing. Food prices are now up 13% year over year,, which is the highest level since 1989.. Due To increasing energy prices, Rishi Sunak now has an urgent issue that will be impossible to fully resolve.

sunak has stated that he will not keep the energy price cap that Liz Truss previously implemented. Truss intervenes with the energy market by capping energy prizes at 34 per kilowatt hour.. This means that if energy prices were to increase further,, energy prices would still be at 34 per kilowatt hour. Sunak Doesn't believe this is the right way to do it, but there is no easy way out.

if Sunak were to help households with energy prices, that would elevate inflation and increase government debt. On The flip side,: if Sunak were to leave energy prices alone, then households would not even afford to keep their homes lit. With Energy prices expected to increase as the winter season comes close,, Sunak will be faced with a lose-lose situation. The International Monetary Fund Believes that the UK is going to have the most persistent inflation out of the top 7 advanced economies.

the Only other country in the Eurozone that is expected to have higher inflation than the United Kingdom is Slovakia. The Bank of England Initially intended to raise interest rates and sell bonds to stop inflation. Because Liz Truss was spending money and causing inflation, the bank temporarily pivoted.. Bond Prices and bond yields are inversely correlated, meaning that bond prices have fallen substantially. 10-year bond yields have quadrupled in one year.

as I Discussed earlier, increasing interest rates will crash the economy. If The Bank of England were to stick with its plan of selling bonds, the bond market would crash further and therefore increase rates. this would in turn slow down the economy further. The Bank of England was planning to sell 8.7 billion of government bonds in the final quarter of 2022..

in Order to save the economy from entering turmoil,, the bank has now purchased 8 billion of bond. So Instead of selling 8.7 billion of bonds,, they bought 8 billion of bonds. Thats The complete opposite of what they were going to do. Such activity will only cause even more inflation. The Bank of England Governor insists that the bond-buying will end and the bank will start selling bonds again. This was essentially a game of tug of war.

On One side, we have prime minister Liz Truss and on the other side, we have the Bank of England. Liz Truss wants to spend money and exacerbate inflation. On The flip side,, the Bank of England wants to cut back on spending and lower inflation. By Annihilating the bond market, Truss has tugged the rope all the way to her side, forcing the bank to follow her in her direction.

the Bank has declared that it will pull the rope back to its side at all costs. With Sunak Now on the same side as a bank,, only one side of the rope will be tugged. this is better than when Truss was in office, but it's not going to be sunshine and rainbows from here. A Recent survey has suggested that the UK economy is already in a recession.

on A monthly basis, UK Economic activity declined at the fastest pace since two years ago. Raising Interest rates and taxes in a recession will prolong the economic turmoil by slowing the economy even more. The Market has rebounded slightly after Sunak came in the office. However, it's still safe to say that the UK economy is headed for a complete disaster.

the London School of Economics believes that Sunak will likely be out of his job by 2024.. This is because a recent YouGov poll revealed that only 19% of citizens would vote conservative in a general election. Sunak is conservative, meaning that he has a low chance of staying in his job unless he does something unexpected. The Implications of this are going to be global because the global economy is interconnected.

other Countries in Europe are going to suffer, which will in turn affect the United States as well. All of this is going to unravel over the next few months and you will need to stay updated once it does.. Thank you all for watching.