Hello and welcome. You are listening to Patrick Boyle on Finance, a podcast exploring ideas from quantitative finance, examining events occurring in markets right now and financial history to see what lessons can be taken away, including interviews with some of the most interesting people in the world of finance. To learn more about the podcast, visit onfinance.org.

Okay, we need to talk about the pound, which despite what you might have heard, has not

been pegged to the staple coin tether.

The UK has been facing a cost-of-living crisis, which was a problem before the war in Ukraine

and has only gotten worse since, in particular due to the huge spike in energy prices.

The new British Prime Minister, Liz Tras, who assumed office a few weeks ago, has promised

to be bold and to do things differently.

Upon her appointment, she put in place an energy price guarantee to limit the amount that

suppliers can charge customers for gas and electricity.

The plan is that the average British family

will save £1,000 a year based on current energy prices. A thousand pounds converts into a bit

over $1,000. The price guarantee is to be funded through borrowing and according to the

Institute for Fiscal

Studies, the two-year energy package is likely to cost £100 billion or 4% of GDP in

the first year alone.

Its total cost might be £150 billion or dollars or tethers.

The Bank of England's chief economist said at the time that the extra government borrowing

and spending would likely lead to higher interest rates in the future.

Investors sold UK assets earlier this month after this announcement, sending the pound

down against a dollar, which reached its weakest level since 1985.

Something did have to be done about high UK energy prices, in particular because energy

prices make up a very high percentage of the costs of the most

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