Now-former Chancellor of the Exchequer Kwasi Kwarteng. Photo: Carlos Jasso/Bloomberg via Getty Images
British Chancellor of the Exchequer Kwasi Kwarteng was fired on Friday as the government backed off of the tax-cutting plans he championed. The plan sent bond and currency markets reeling in recent weeks.
Why it matters: Britain's economic problems are unique in many ways. But recent events indicate that the world economy is entering a new phase, where deficits matter more and high inflation acts as a constraint on governments.
The backdrop: Every fall in Washington, the International Monetary Fund and World Bank hold annual gatherings of the world's financial elite. Some years feature one country that is in an economic predicament so serious, and so messy, that it dominates hallway conversations.
Kwarteng was in Washington but skipped out on Thursday's Group of 20 finance ministers meeting. By Friday, he was back in London, his five-week run as chancellor having ended prematurely.
Between the lines: The United States is in a stronger position than Britain. The U.K. is more reliant on imported energy, doesn't provide the world's reserve currency, and is working through the disruption of Brexit.
Yes, but: The events in Britain are a sign that the era of the free lunch is over. In the last 15 years, rich countries could enact fiscal stimulus, cut taxes, and massively replace lost income without worrying too much about inflation, or spiking interest rates.
The bottom line: The omnishambles in Britain is quite a story to watch if you're an American student of economic policy. But just because it's happening an ocean away doesn't mean there are no implications on the homefront.
