Former U.K. central bank official says it’s time to ‘short the pound’

Former Bank of England policy director Danny Blanchflower criticized British Prime Minister Liz Truss’s economic plan, concluding that investors should “short the pound”.

The Dartmouth College economics professor who worked at the UK central bank between 2006 and 2009 has long criticized the government’s plans, which he says do not go far enough to help people on low incomes.

Following interviews Truss gave in New York about a mini-budget the government plans to deliver this week, Blanchflower posted on Twitter that she believes the Prime Minister’s policy is in disarray.

It also widened the concerns it has expressed about the outlook for the UK economy, which the BOE expects to slip into recession later this year. In another tweet, he suggested shorting the UK currency, a trading technique where investors can profit from a fall in value.

The pound has already been hit by growth worries and fell to around $1.13 on Wednesday, a level not seen since 1985. The currency has sunk 16% year-to-date ‘year against a broadly stronger US dollar, and some strategists have flagged the risk of a slide towards parity as the UK faces a more painful recession than other developed countries.

Investors are concerned that Truss’ plans mean the government will take on more debt to finance its economic restart effort, which could add pressure to the country’s public finances. The UK’s current account deficit has already widened to its highest level in Bloomberg data dating back to 1997.

That raises questions about whether Britain can continue to rely on the “kindness of strangers,” a concern raised by former BOE governor Mark Carney about the country’s reliance on foreign investment to fund its deficit.

Truss has signaled that he plans to cut taxes and do unpopular things to stimulate the economy, brushing aside concerns that most of the benefits of his program will go to those already well off. Chancellor of the Exchequer Kwasi Kwarteng is due to outline the government’s new tax plans on Friday.

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