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The global signals from the UK’s mini-budget matter. Modern monetary theory has been taken into a corner by the bond markets and beaten up. Advanced economy bond yields are not supposed to soar the way UK gilt yields rose.

This also reminds investors that modern politics produces parties that are more extreme than either the voter or the investor consensus. Investors seem inclined to regard the UK Conservative Party as a doomsday cult.

Tax cuts are unlikely to give the UK a meaningful medium-term boost (the supply constraints in the UK economy are more about health and education). A short-term “sugar high” is likely but may be limited. A high-income earner’s rational response would be to increase savings in anticipation of future tax increases.

Woke UBS economists
https://www.ubs.com/global/en/wealth-management/insights/chief-investment-office/market-insights/paul-donovan/2022/mmt-takes-a-pounding.html/global/en/wealth-management/insights/chief-investment-office/market-insights/paul-donovan/2022/mmt-takes-a-pounding.html