By Victor Reklaitis
That was White House economic adviser Jared Bernstein’s comment on Wednesday, when he was asked if the Biden administration had any concerns about potential spillover effects from the recent volatility in U.K. financial markets.
“In part, we’re a far more closed economy than the U.K. or the EU, but it’s also the case that we have, as I mentioned, a very tight labor market, good job creation, pretty strong consumer spending, [and] at least in the aggregate, balance sheets that are quite solid,” added Bernstein, who is a member of President Joe Biden’s Council of Economic Advisers.
“In terms of financial contagion — which again is where I would look for spillover — we’re clearly, in our view, not looking at a 2007-2008 situation, where there was really very consequential financial contagion from the implosion of a housing bubble.”
The U.K. had the attention of investors on Wednesday, as the Bank of England said it would buy U.K. bonds at “ whatever scale is necessary ” to restore orderly market conditions.
Investors had been dumping gilts in response to what they deemed a dangerously profligate budget by new Chancellor Kwasi Kwarteng.
Bernstein’s remarks came at an event hosted by the Peterson Institute for International Economics , where he gave a speech and responded to questions from a PIIE senior fellow, David Wilcox.
“I’d like to start with the U.K., where — to borrow a phrase from the soccer world — it seems like the incoming prime minister and her team seem to have scored a massive version of an own goal,” Wilcox said, as he kicked off his questioning.
“We’re watching this very closely. The president’s being kept up on all the developments,” Bernstein also said, referring to the U.K.
The pound /zigman2/quotes/210561263/realtime/sampled GBPUSD -1.0005% was recently down against the dollar, changing hands just below the $1.09 mark. The U.K. currency has fallen about 20% against the dollar this year and traded below $1.04 earlier this week.
This is an updated version of a report that was first published on Sept. 28, 2022.