What is a stress test in finance and economics?

My answer to What is a stress test in finance and economics?

Answer by Desmond Last:

A stress test is: The application of a set of assumptions that evolve into a decision when the inputs to the assessment of the economic situation are furthest away from rational.

This is happening right now in the United Kingdom.

The people of the U.K made a decision. They decided to leave the E.U.

The Government of the U.K have to enact the decision.

But the rational is at a point where it no longer represents the reality.

Carney, the Governor of the Bank of England, has applied the stress test to the U.K Economy. His assumptions are that the U.K will lose investment and exports. He did not want the U.K to Brexit. So his rational is now furthest away from its normal reasoning.

He has lowered interest rates. Even though long-term they will have rise.

At a time when the U.K needs to encourage banking investment he has discouraged it.

Why has he failed his own rationale? Because the U.K Government has none.

The U.K needs a Plan A. Otherwise the biggest stress-test in its history will become a reality.

Who in the U.K have we got, who has the experience to amalgamate our common economic interest with those of other countries?

Nobody. Theresa May got rid of them all. Grab your lifejackets U.K you are going to need them.


What is a stress test in finance and economics?

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