UK Recession Has Begun… [Worst Prediction For An ECONOMY COLLAPSE]

UK Recession Has Begun… [Worst Prediction For An ECONOMY COLLAPSE]

To curb the UK’s highest inflation in 40 years, the government is seeking a new solution to resolve the crisis that will come.
Yet it all fell apart on Friday morning. The US bank released a worrying report to investors on Friday. The pound is losing its confidence against the U.S dollar.

On the same day, U.K chancellor Kwasi Kwarteng announced the new mini budget plan, the largest tax cut in the past 50 years.

Soaring energy prices are threatening the European Union countries and the UK’s economic stability.
Markets believe that this winter will be the hardest one that the continent has faced in decades because of low supplies and higher living costs. Or in other words, a recession will occur.

In this video, we will review the reasons why the pound is weakening, how this adds fuel to the inflation fire and accelerates the recession.

On Friday, the U.K chancellor revealed his country’s new plan and direction, which he expects will take the country out of the shrinking danger zone.
Investors and economists describe it as a radical and aggressive plan. It includes focusing on the future and growth while cutting taxes at the same time.

The tax-cutting plan and mini budget that the UK government is aiming to implement are the latest tax cuts in the past 50 years.
In the early weeks of September, the government also reassigned a previous plan that is expected to tame inflation a bit, which is reducing energy bills.

The pound dropped 3.5% hours after the announcement, and since then it has fallen sharply to its lowest level since 1985.
Three weeks ago, the sterling pound was worth $1.17 and is now worth $1.07 in the currency exchange market. Rising energy and goods prices will only make matters worse for the British if the pound continues to fall.
In the past 30 days, the pound has fallen by more than 8% against the dollar, indicating that the British pound was already declining before the announcement.

By stepping back a bit, marketers found the UK currency was acutely dropping for the past year since the pandemic.
And now, what does a weak pound mean for the UK economy and its outlook?
In the UK, as elsewhere, inflation is already high; a weak pound will raise rather than lower prices.

Oil, gas, tech devices, and other importers will all be paid by the dollar. A less valuable pound against the dollar means more expensive goods.
The country is already on the verge of a recession. The average British consumer cannot keep up with the soaring energy bills.
A previous survey shows that when winter comes, a large population will choose between reducing their daily expenses to keep up with heating bills.
46% of the UK’s foods are considered importers, and a large percentage of them are based on the dollar. So that adds another pressure to higher heating costs.

On top of that, recently one of the U.S. specialists said that the probability of a U.S. recession is higher than 50% and it could hit 80%. That’s in the U.S., the largest economic power, meaning that the U.K’s recession probability is much higher, at least 70%.

So what is the solution here? There is one solution the government will take and one most don’t like. If the pound keeps declining, the British banks will likely go for 100% interest hikes at the next meeting. Higher interest rates mean lower borrowing and higher household costs.

As we know, increasing interest rates is a double-edged sword, and unfortunately, the sharpest edge is pointing at the UK economy.
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