Friday, 13 May 2016

Carney's Roasting

Mark Carney has put the cat amongs the pigeons and the Brexiteers are furious, resorting to ad hominem attacks.

I saw nothing 'hysterical' about his pronouncements - in fact I'd say the Brexiteers are becoming shrill and hysterical - some are even foaming at the mouth. Carney merely pointed out the glaringly obvious:
  1. There is no plan for the eventuality of an Out vote.
  2. No plan means uncertainty.
  3. Uncertainty means risk.
  4. Investors and markets don't like unpredictable risk.
  5. Risk means investment will dry up until there's a plan.
  6. Investment drying up (even for a short period) means no or even negative growth.
  7. That results in job losses.
And that's even before some businesses pull out of the UK to relocate to the continent to be within the single market. We all know 50% of our exports are insurance and financial services - and just how patriotic these industries are - not.

It's part of Carney's job to assess risks to the economy - that's what the Governor of the Bank of England does. It's his bloody job, as the politicians huffing and puffing with righteous indignation know very well. His job, and that of the MPC is forecasting, and whether his forecasts are accurate or not, the effect of Brexit is a no brainer to anyone with a basic understanding of the effects of uncertainty and risk on markets.

It's all very well saying that everything will be roses in the event of an exit and many countries exist quite well outside of the EU, but the elephant in the room is that they were never part of the EU and then came out. It's a unique event that is likely to cause an economic jolt or at the very least a readjustment - countries that have always been outside of the EU have never suffered such a readjustment.

The comparison with Norway just isn't valid either - the surplus on Norway’s current account with the rest of the world is estimated at NOK 55 billion in the 4th quarter of 2015 - Norway doesn't actually need the EU as it exists on well managed oil reserves which bring in enough to negate anything the EU might do and additionally provides the best social care in the world.  

The only good that could come out of Brexit is that the pound will fall, possibly offsetting any tariffs imposed by the EU (especially if currency speculators get in on the act) and negating job losses, but conversely, anything we buy from the EU (which is more than what we sell to them) will be more expensive.That may facilitate a Buy British drive and an improvement on the balance of payments. However, no-one on the Brexit side is saying this, as it's tantamount to admitting there's no plan and that chaos will reign, and that's heresy in their eyes.

Meanwhile we keep seeing the entirely false claims of £350m to the EU every week, the entire population of Turkey migrating to the UK, most of our laws are set by the EU, our fathers and grandfathers didn't fight and die for this (patriotism being the last refuge of the scoundrel and the politician).


  1. You could change No. 1 to .....In vote.
    The rest would still follow.

    1. How do you see that. It's continue as before with efforts to reform the EU continuing. No massive negotiation of trade deals - they're already there.

  2. Sterling is already bouncing from between 1.25 to 1.28 to the Euro, some 14 years ago it was 1.43 a large difference.
    Brexit will bring about a disaster for the UK but at least the rest of the EC will not have to listen to Cameron's unfound whinges...