IT'S hard to write that I now think that we are at the start of the biggest economic crisis of my 64-year lifetime, but I have no choice. I warned in this column that things would be bad with Truss in charge. But I must be honest and say that I never thought she and Kwasi Kwarteng would be as bad as it turns out they are intent on being.

To summarise, what Truss and Chancellor Kwarteng did in the so-called “mini-budget” last Friday was announce that they intended to run a deficit of more than £200 billion in the UK as a whole in the next year. Of that sum, maybe £75 billion was for routine spending. £100 billion or more was for support for households and businesses to help them get through the energy crisis whilst another £45 billion was for the cost of tax cuts, almost all of which will go to the rich.

The energy support package in this made sense, but not having a windfall tax on energy companies to pay for it did not. The tax cuts made no sense to almost anyone, including the wealthy who might enjoy them, and the deficit spending was fine, except it was insufficient. That is because we all know how much pressure those services are under. In other words, markets would have understood a record breaking £200 billion annual deficit if it was to be well spent and Kwarteng had explained how it was to be funded, but neither of these conditions were met.

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As a result, over the weekend the markets began to look at what they were being asked to fund and realised three things. The first was that UK interest rates were going to have to increase a lot, and very rapidly.

The second was that those people from overseas who owned UK government bonds realised that they were going to lose a lot of money as a result, because as interest rates go up the value of UK government bonds goes down.

Third, as a result, these bond owners decided to try to cut their losses and quit the UK market, forcing both the value of sterling and the price of government bonds down. This meant that the Bank of England had to respond on Tuesday to make it clear that it would considerably increase the interest rate on those bonds just to stop people from selling them.

However, what that announcement made clear was that interest rates might increase from 2.25%, as announced last week, to maybe 6% or more by early 2023. What then become apparent were two things.

The first was that the price of government bonds was going to fall again and very heavily. Large numbers of these bonds are held by pension funds. As a result they suddenly faced the risk of not being able to pay the pensions that they had promised to millions of people because the value of the assets underpinning that promise had disappeared in days. As a result, they began to panic sell their bonds, actually making things worse than they were beforehand.

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The second thing that became apparent was that UK mortgages were going to increase in cost. Millions of people when they got their next mortgage deal could be asked for many hundreds of pounds extra a month. That is an increase that is going to make energy price increases look small by comparison. And given that rents follow mortgages, this issue is rapidly going to become one for people in rental property as well.

It became clear that a housing crisis is looming as within months millions might not be able to afford to stay in their homes and will have nowhere to go.

That meant that yesterday the Bank of England had to offer yet another panic reaction. They promised to buy at least £65b billion of the bonds that pension funds most favour. The first aim of doing so was to reduce the interest rate on them, and so increase the price. The purpose of that was to save pension funds from going bust. The additional hope was that mortgage rates would not increase too fast.

Will that work? We do not know as yet, most especially as markets have not yet changed their interest rate expectations for next year by very much.

What is the consequence? It is little short of a political and economic disaster. A Prime Minister backed by right-wing think tanks and driven by pro-markets dogma has revealed her most massive misunderstanding of how markets actually work, as has her Chancellor. Instead of liberating them to deliver growth, as they claimed, they have crashed them with austerity and recession is by far the most likely response. That is especially likely if they do not now agree a plan for keeping interest rates at manageable levels with the Bank of England through the judicious use of quantitative easing, or government money creation to fund itself by any other name.

Is any such agreement possible? I genuinely do not know. But even if it is, will markets have any faith left in a Prime Minister and Chancellor who have got so much so spectacularly wrong in such a short space of time? I seriously doubt it.

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And in that case, is it possible that another government can be created now - maybe on a short-term basis of national unity - to stabilise the economy before an election can be held to give the people of this country their say on what has happened? I hope so. But hope is all we have left because beyond dispute we are in the most almighty mess. If ever there was a time for Scotland to quit the Union this has to be it.