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The week that was for Prime Minister Liz Truss and the UK economy

The UK's economy is in dire straits just three weeks after Prime Minister Liz Truss took up the top job. 

And that period includes the 10-day national mourning period following the death of Queen Elizabeth II.

To be fair, the nation's finances weren't looking crash hot with inflation at a 40-year high and the economy tipped to slip into a recession. 

But it was a so-called "mini-budget" announced last week which has led to a mega drama. Let's unpack the situation.

'Where have you been?'  

For four days after the announcement of the mini-budget Prime Minister Liz Truss was missing in action as markets crashed. 

But yesterday before she appeared on a series of local radio interviews. 

Some might say she fared about as well as the British pound in attempting to argue her case. 

Her interviews have be clipped together here:

Or you can check out this one: 

Hang on, what kicked all this off?

The UK government announced a mini-budget which included £45 billion ($76 billion) in unfunded tax cuts.

This means that the government did not explain how they would fund the budget shortfall those cuts would be likely to create.

Tax cuts mean the government would be taking in less tax revenue. 

But the government still needs to fund the services it provides like healthcare, education and infrastructure. 

To keep paying for this means that the nation's debt levels will increase as it borrows more money to pay for it all.

Why would the Truss government do this?

Ms Truss argued that the measures would promote economic growth, and eventually bring more revenue into government coffers over the long term. 

"We had to take urgent action to get our economy growing, get Britain moving, and also deal with inflation, and of course, that means taking controversial and difficult decisions," Ms Truss said. 

UK Prime Minister Liz Truss stands firm on pilloried fiscal plan

But the markets were unconvinced and went into a freefall shortly after the announcement. 

The British pound fell to a record low to $1.0327 against the US dollar. 

The mini-budget even prompted the International Monetary Fund to point out that it's probably not a good idea. 

"The nature of the UK measures will likely increase inequality," the United Nations agency said.

The organisation said it was closely watching the developments in the UK. 

"Given elevated inflation pressures in many countries, including the UK, we do not recommend large and untargeted fiscal packages at this juncture, as it is important that fiscal policy does not work at cross purposes to monetary policy," the statement said.

Aren't central banks across the globe trying to slow their economies down? 

Generally speaking, yes. 

That's what the IMF is referring to when it talks about fiscal policy the statement above. 

The British bond market had already gone into a firestorm before the IMF weighed in. 

And it was the United Kingdom's central bank, the Bank of England, which responded.

It started buying billions of dollars of government debt in an attempt to pull the economy back from the brink.

Basically, this means the bank was forced to dump more money into the market at a time when they are trying to slow the economy down to ease rising inflation. 

Has this ever happened before? 

Professor Danny Blanchflower, a former member of the Bank of England's Monetary Policy Committee, says he hasn't seen anything like what has happened in the UK for the past 50 years. 

"The trickle down economics she's [Liz Truss] tried to go with won't work," he told RN Breakfast. 

"Particularly on inequality, so essentially the only chance I think she has, somehow or other, is to scrap most of that and start again."

Support for Ms Truss' Conservative Party has cratered following the announcement of the mini-budget.

The opposition Labour party has surged to a 33-point lead, according to a recent YouGov poll.

"With a 33 point gap in the polls and the market still tumbling it doesn't look to me that there's much she can do," Professor Blanchflower said.  

"Other than to say 'I fold and I'll start again', 'I'll talk to the adults in the room rather than talking to the children' which she's been doing for the last however many months she's been planning this nonsense."

So, what's going to happen next? 

There are a few dates to keep an eye on.

Ms Truss and Mr Kwarteng will meet the head of the country's independent fiscal watchdog on Friday local time after the days of financial chaos.

They will meet Richard Hughes, chair of the Office for Budget Responsibility (OBR), to discuss the budget forecast process and economic and fiscal developments.

"[This is] alleviating fears within the markets of the so-far uncosted fiscal package, helping support GBP," says National Australia Bank's head of market economics Tapas Strickland.

Mr Kwarteng has asked the OBR to produce a first draft of its next economic forecasts on October 7.

He plans to announce a full budget statement on November 23 that will include new forecasts and detail the cost of the borrowing and measures to cut debt.

A committee of politicians in Britain's parliament has urged Mr Kwarteng to bring his November statement forward.

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