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Former Treasury Secretary Summers warns sterling may fall below $1

Former Treasury Secretary Summers warns sterling may fall below $1
Former Treasury Secretary Summers warns sterling may fall below $1

Former Treasury Secretary Lawrence Summers has criticized the economic policies adopted by newly appointed British Prime Minister Liz Truss as creating conditions for the sterling to surpass parity with the US dollar.

“It saddens me to say this, but England is transforming itself into a country that is about to go bankrupt by pretending to be a developing country,” Summers said in an interview with Bloomberg TV. “Along with its policies, the UK’s economic policies will long be remembered as the worst macroeconomic policies of any major country.”

The Truss government has prepared the most radical package of tax cuts for the UK since 1972, reducing taxes on both workers and companies in an effort to boost the economy’s long-term potential.

Economists are worried that the package will not be affordable and trigger a Currency crisis due to concerns about rising debt.

“If the current path is maintained, I wouldn’t be surprised if sterling eventually drops below a dollar,” said Summers.

On the other hand, the former minister drew attention to the dangers of the rise of the dollar, which contributed to inflationary pressures in many parts of the world and increased the pressure on institutions borrowed in US currency.

“This is going to be a problem that will live with us for a while. Countries will have to adapt to a very strong US dollar, and this will make macroeconomic management of economies difficult in May,” Summers said about the strengthening of the dollar.

The former Treasury Secretary suggested that tightening US fiscal policy could help by reducing the burden placed on the Fed to combat domestic inflation.

“If Washington puts more emphasis on fiscal policy and less on monetary policy, it will create a policy environment with slightly lower interest rates and probably not mean upward pressure on the dollar,” Summers said, reiterating his approval of Wednesday’s increases on the Fed and Chairman Jerome Powell He stressed that it has become increasingly clear in acknowledging that the medicine needed to curb inflation involves a recession.Esj

The article is in Turkish

Tags: Treasury Secretary Summers warns sterling fall

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