Liz Truss on the 'Doom Loop' Engulfing the UK Economy

Liz Truss (0:02)

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Joe Weisenthal (0:18)

Hello, and welcome to another episode of the Odd Lots Podcast. I'm Joe Weisenthal.

Tracy Alloway (0:22)

And I'm Tracy Alloway.

Joe Weisenthal (0:24)

Tracy, we're recording this August 26th, 2025 There is a lot going on right now, particularly in, I guess, many big questions about macro and governance and all kinds of things in some of the richest countries in the world.

Tracy Alloway (0:38)

That is certainly one way to put it. So just overnight, we had headlines saying that Trump was going to fire Lisa Cook from the Fed. And this obviously fits into the whole debate around central bank independence and how much influence governments should actually have on central banks. And it turns out this is a debate that we've had before in other countries.

Joe Weisenthal (0:58)

Totally. And part of the reason I think Trump is focused on the Fed is the high level of interest payments, and you'd like to see them come down. Speaking of interest payments, this morning I saw the headline that the UK 30 year guilt is like at the highest since 1989 It continues to elevate. So for all the stress that we have here, all the fiscal pressure, inflationary pressure, it actually seems potentially worse elsewhere.

Tracy Alloway (1:22)

Although I will say the pound is up against the dollar, right? So from a currency perspective, we're kind of doing worse.

Joe Weisenthal (1:30)

From a currency perspective. But there's a lot. These things are global is I think the point. And all of these anxieties and stresses, it's not just a US story.

Tracy Alloway (1:39)

No, and obviously it's feeding into bond markets and I cannot tell you how many notes we get on a daily basis about how governments can reduce the debt, how they deal with deficits and things like that.

Joe Weisenthal (1:48)

Right. Now, everyone's talking about this these days here in 2025 It got a lot of interest, of course, in 2022 after there was a famous spike in yields in UK gilts and maybe the sort of premonition of what a lot of rich countries would be dealing with. So I'm very excited to say we really do have the perfect guest to speak about all of this today, to understand some of the pressures facing rich developed economies. We're speaking with the Right Honorable Liz Truss, former Prime Minister of the UK, author of the recent book Ten Years to Save the West. Liz Truss, thank you so much for coming on Odd Lots. Thrilled to have you here.

Liz Truss (2:25)

Good to be on.

Joe Weisenthal (2:26)

I have a question. When you see like 30 year guilt yields higher substantially than when you were the Prime Minister and when everyone attacked you over the mini budget, do you feel some sense of like sort of vindication or happiness or is it all like despair for the state of your country?

Liz Truss (2:42)

Well, I do feel despair for the state of my country. And it's in fact why I tried to do what I tried to do in 2022 Because I could see the way things were going. I could see our economy was stagnant, that the tax revenue being generated wasn't enough to cover the amount of money the state was spending. And we needed to do something different in order to get out of a negative spiral. And what I see now is we're further down that negative spiral and we are heading for a very, very serious crisis. I said last year, I thought we were headed for an IMF bailout as Britain experienced in the 1970s. I think that's even truer now than it was a year ago. And we're in an economic doom loop of higher taxes, lower growth, higher debt. And it's very difficult now to see the political way out of that.

Tracy Alloway (3:43)

So how should governments actually announce or unveil large scale policy shifts? Because there does seem to be, A, some institutional constraint and then, B, the market reaction. We saw that this year in the US after Trump's Liberation Day announcement, you know, a lot of people were saying this was Trump's trust moment. How should governments actually go about, I guess, balancing the views of the market with, you know, big scale change in terms of policy?

Liz Truss (4:15)

I think the issue that I faced, and it is also the issue that Donald Trump faces in the United States, is a lot of the mainstream economic establishment do not agree with the policies that I was pursuing, and they don't agree with the policies that Donald Trump is pursuing. So you're operating in a hostile environment. In the UK's case, we have institutions that have become very divorced from government policy.