Former U.S. Treasury Secretary Larry Summers warned that the global economy faces the most complex series of challenges in four decades.
Former Finance Secretary Larry Summers (Larry Summers) was one of the first prominent economists to warn federal policymakers to underestimate the threat of ongoing inflation, and now he is worried that the central bank's efforts to cope with rising prices could lead to a global economic crisis.
Sumers told audiences at the International Finance Association annual meeting on Friday: "I think that in the 40 years I've been following these things, I remember these challenges as the most complex, completely different and cross-sectoral challenges." "Honestly, I think the fire department is still at the station."
Sumers said interest rates rose, the dollar strengthened DXY, energy and food shortages, geopolitical tensions and the challenges of climate change "meaning someone should make some substantive suggestions here and continue to push forward."
He added that he believes interest rates must be higher than the forecasts of the Federal Reserve and financial markets to curb inflation, which could lead to global economic chaos.
"If you try to avoid this, you find yourself in stagflation and have to do something harder later," Summers said. "But this will have all kinds of collateral consequences for the rest of the world." One of the consequences of
is that the government may find it difficult to raise funds for itself through the debt market, as evidenced by the recent market turmoil in the UK government debt TMBMKGB-10Y.
British Prime Minister Liz Truss fired Finance Minister Kwasi Kwarteng and abandoned a large part of her disgraceful economic strategy to save her one month's Prime Minister.
At a press conference on Downing Street, Trass said she was canceling plans to reverse the rise in business taxes after investors and her Conservative Party members were concerned about the impact, a move that would save 18 billion pounds ($20 billion). Government lending soared during decades of high inflation.
This is the second drop in a key policy this month: On October 3, the government abandoned plans to cut the highest income tax rate, just over a week after the plan was announced.
"Faced with the problems we have, I took decisive action to ensure our economic stability is right," Tras said Friday.
In a letter posted on Twitter, Kwarteng said he had agreed to stand aside at the request of Tras, adding that he believed her vision of “optimism, growth and change” was correct and committed to support.
Tras appoints former Foreign Minister Jeremy Hunter as Kwarteng's successor. He will become the fourth British Treasury Secretary in just over three months.
Just three weeks ago, Kwarteng proposed a "mini budget" that promised a tax cut of £45 billion ($50 billion) and increased borrowing in an effort to boost UK economic growth. But pound and government bonds are worried that the plans will further stimulate inflation as prices have risen at the fastest pace in about 40 years, with pound and government bonds plummeting. Mortgage rates soar.
This prompted Bank of England to warn UK financial stability at serious risks and announced three separate interventions to calm the collapse of the bond market, leaving some UK pension funds on the brink of default.
"It's obvious that some of our small budgets are going further and faster than the market expects, so the way we are now fulfilling our mission must change," Trass told reporters. "We need to take action now to make the market believe in our fiscal discipline."
Opposition Labor Leader Kier Starmer (Kier Starmer) said that it is time to change the government.
"Liz Truss' reckless approach collapsed the economy, causing mortgages to soar and undermined Britain's position on the world stage," he said.
Investors, IMF , credit rating agency and Trass' own party members have harshly criticized the tax cuts without funds, some of whom are now reportedly talking about getting her to remove her from office after just five weeks as prime minister.
Kwarteng flew back from the IMF meeting in Washington, DC overnight to discuss with Truss. His dismissal on Friday means he served as Chancellor of the UK for just 38 days, the second shortest term on record.
"What happened in the UK, some of it was the harm caused by itself, but some of it was the tremor of what was happening in the global system," Summers said. "When you have tremors , you don't always have earthquakes, but you should probably consider shockproof."
