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Post by Deleted on Jun 25, 2023 15:30:24 GMT
Right after the referendum, the value of the pound fell dramatically from which we have never recovered. This raised import prices and consequently consumer prices. So, would a reversal of Brexit produce a reverse effect on the pound, i.e., would it raise the value of the pound and conversely, reduce consumer prices? uk.yahoo.com/finance/news/brexit-cranks-inflation-don-t-060028621.htmlIt’s Brexit that cranks up inflation. Don’t just blame the Bank
William Keegan The poor old Bank of England is now being blamed for the UK’s stubbornly high rate of inflation compared with our European (former!) partners and the rest of the Group of Seven leading industrial countries. It is all the Bank’s fault, we are told. Its job is supposed to be controlling inflation and it keeps getting it wrong. The truth that dare not speak its name in certain circles is that the reason why inflation is so much higher here than in other countries is Brexit; the referendum was followed by a dramatic fall in the pound, which raised all import prices, not least food from the EU. Not only did this have nothing to do with the Bank, but the governor at the time, Mark Carney, warned forcefully against Brexit. With its discouraging impact on the supply of EU workers on which so many British businesses depended, Brexit has aggravated inflationary pressures further, on top of the direct effect of higher import prices. It is not obvious to me that raising interest rates is the appropriate policy to deal with this: what is needed is nothing less than the reversal of Brexit.
Let’s face it. Brexit is the biggest act of self-harm this country has imposed upon itself since the English civil war of 1642–51. The Tories have severely damaged themselves and the nation they were supposed to govern. So what is the Labour party doing? Running scared. I should be very surprised if Labour did not win the next election with a working majority. However, ..... If Starmer refuses to shoot at an open goal, and fails to come out strongly with a policy of re-entering the single market on day one, he will inherit an economic disaster that is almost certain to inhibit the achievement of his many other laudable ambitions. |
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Post by Pacifico on Jun 25, 2023 17:02:01 GMT
So Bill Keegan wants a return to an overvalued currency to damage UK industry.. No thanks..  |
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Post by Deleted on Jun 25, 2023 19:26:53 GMT
The aim is to bring down inflation. Not to destroy UK industries. At any rate, re this out-of-context argument that a strong pound will destroy UK industries and conversely, a weak pound will protect UK industries -- can someone explain: In 2015 and the years immediately before it, the pound was averaging £1.40 to the euro; the interest rate was 0.5%; inflation 0.37%; negative trade balance; no reports of the relatively strong, "overvalued pound" destroying UK industries. In 2016, in the wake of referendum results, the pound came crashing down. Now in 2023, the pound is still averaging £1.17 to the euro; the interest rate is 5%; inflation 9%-ish; still negative trade balance; no reports of the relatively weak pound resurrecting UK industries that should have and would have been destroyed by a relatively strong pound -- the logical conclusion that that same argument provides. At the end it, no economist worth his salt would entertain the idea of maintaining a weak pound so we can all suffer 5% interest rate, 9% inflation, high prices, trade deficit, etc. just to avert this phantom destruction of UK industries. |
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Post by Pacifico on Jun 25, 2023 21:22:52 GMT
I hate to point it out but inflation is not being driven by a weak pound... ..hence having a strong pound and damaging UK industry is not going to help.. |
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Post by Deleted on Jun 25, 2023 22:10:48 GMT
Basic principles of economics tell us that a weak currency pushes up the cost of buying from overseas which in turn pushes up consumer prices; hence, inflation.
In the case of the UK, the relatively weak pound is pushing the cost of imports which is contributing to the cost of living crisis in a major way. But what makes the UK situation worse is that it is a net importing country. The high cost of importing food, oil, crude oil, parts for cars and machineries, pharmaceuticals, etc. has to be passed on, ultimately, to the consumer.
The ££ needs to go up.
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Post by oracle75 on Jun 26, 2023 6:55:17 GMT
I hate to point it out but inflation is not being driven by a weak pound... ..hence having a strong pound and damaging UK industry is not going to help.. What the UK has lost is foreign direct investment. No one is going to invest in somewhere with a weak currency, since it costs more of that currency to import materials and more to export now the UK has to pay tariffs and transport. On the other hand fdi is what will strengthen the pound, indicating confidence. Between à rock and à hard place. |
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Post by Pacifico on Jun 26, 2023 6:56:57 GMT
Basic principles tell you that if the cost of buying goes up then demand goes down - which is precisely how you solve inflation.
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Post by Pacifico on Jun 26, 2023 6:58:42 GMT
I hate to point it out but inflation is not being driven by a weak pound... ..hence having a strong pound and damaging UK industry is not going to help.. What the UK has lost is foreign direct investment. No one is going to invest in somewhere with a weak currency, since it costs more of that currency to import materials and more to export now the UK has to pay tariffs and transport. On the other hand fdi is what will strengthen the pound, indicating confidence. Between à rock and à hard place. No - you are totally wrong. Foreign investment is pouring in as UK businesses are cheaper to buy now. In fact there is concern that the UK has become too attractive and businesses are too cheap for foreign investors. |
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Post by Deleted on Jun 26, 2023 9:36:32 GMT
Basic principles tell you that if the cost of buying goes up then demand goes down - which is precisely how you solve inflation.
An exercise in gum flapping. ^ Just points out the obvious and says nothing else. |
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Post by Deleted on Jun 26, 2023 9:57:16 GMT
I hate to point it out but inflation is not being driven by a weak pound... ..hence having a strong pound and damaging UK industry is not going to help.. What the UK has lost is foreign direct investment. No one is going to invest in somewhere with a weak currency, since it costs more of that currency to import materials and more to export now the UK has to pay tariffs and transport. On the other hand fdi is what will strengthen the pound, indicating confidence. Between à rock and à hard place.Between a rock and a hard place, indeed! The immediate problem is to reduce inflation and so increase the purchasing power of the pound. But, unfortunately; on the monetary side, the BoE can not increase interest rate to the point where mortgage and business debt holders are unable to sustain servicing their loans. On the fiscal side, the government can not cut public spending and raise taxes any more than it has or to the extent of breaking consumers. Jeremy Hunt, though, apparently is OK with recession by way of the BoE introducing very high interest rates in order to reduce inflation and stabilise prices. Maybe, Brexit defenders hell bent on massive wage growth can make a positive contribution by shelving their wage-growth ideas for the time being? |
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Post by Pacifico on Jun 26, 2023 12:10:01 GMT
Basic principles tell you that if the cost of buying goes up then demand goes down - which is precisely how you solve inflation.
An exercise in gum flapping. ^ Just points out the obvious and says nothing else. Well pointing out the obvious to someone who doesnt know what the obvious is is a public service.. glad to help. |
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Post by Deleted on Jun 26, 2023 12:20:26 GMT
An exercise in gum flapping. ^ Just points out the obvious and says nothing else. Well pointing out the obvious to someone who doesnt know what the obvious is is a public service.. glad to help. Meh! Just another demonstration of how good he is at flapping his gums. Got nothing to say but insists on opening his mouth. |
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Post by johnofgwent on Jun 27, 2023 10:27:51 GMT
i think the thing one should most bear in mind is that my mother and indeed every other housewife in south wales at the time predicted massive rises in the costs of what were at the time considered basic foods as a result of our entry into the common market and its policy of hiking prices to subsidise incompetent, layabout farmers in France and sure enough even Wilson admitted that had been the case in his "it's too much of a faff to leave" referendum
And the first thing that took place when we left was .. prices rose again
So the one thing we can be sure of is politicians will fuck us over in the pocket whatever we do and are not to be trusted
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Post by steppenwolf on Jun 28, 2023 7:46:02 GMT
Right after the referendum, the value of the pound fell dramatically from which we have never recovered. This raised import prices and consequently consumer prices. The pound fell dramatically after the referendum because the Forex traders had conducted an exit poll on the referendum and that said that the result was "Remain". There was a lot of buying of Sterling on that result. When the actual result came in (Leave) they were left with a large amount of Sterling to get shot of and this caused a drop in Sterling, obviously. However, if you look at the longer term valuations it's fairly obvious that the main hit to Sterling came in 2008 when Brown crashed the economy and the banks had to be bailed out. Brexit had no discernible long term effect. Then the Coalition govt in 2010 had to borrow large amounts of money (nearly £800 billion) from the BoE (QE) and drop interest rates to about zero which dwarfed any small effects on confidence from the Brexit vote. The surprising thing is that this didn't really cause inflation. But it often happens that money printing doesn't immediately cause inflation. What seems to have precipitated inflation now is Sunak's unwise spending during Covid (about £400 billion). And the reason why we have a bit more inflation than the EU is that we have printed much more money (proportionately) than the ECB did. But you have to bear in mind that countries like Greece and Italy in the Eurozone suffered very badly because the ECB didn't print much money. The UK came through relatively unscathed - but the day of reckoning has now arrived. |
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Post by Deleted on Jun 28, 2023 10:58:23 GMT
Right after the referendum, the value of the pound fell dramatically from which we have never recovered. This raised import prices and consequently consumer prices. The pound fell dramatically after the referendum because the Forex traders had conducted an exit poll on the referendum and that said that the result was "Remain". There was a lot of buying of Sterling on that result. When the actual result came in (Leave) they were left with a large amount of Sterling to get shot of and this caused a drop in Sterling, obviously. However, if you look at the longer term valuations it's fairly obvious that the main hit to Sterling came in 2008 when Brown crashed the economy and the banks had to be bailed out. Brexit had no discernible long term effect.Then the Coalition govt in 2010 had to borrow large amounts of money (nearly £800 billion) from the BoE (QE) and drop interest rates to about zero which dwarfed any small effects on confidence from the Brexit vote. The surprising thing is that this didn't really cause inflation. But it often happens that money printing doesn't immediately cause inflation. What seems to have precipitated inflation now is Sunak's unwise spending during Covid (about £400 billion). And the reason why we have a bit more inflation than the EU is that we have printed much more money (proportionately) than the ECB did. But you have to bear in mind that countries like Greece and Italy in the Eurozone suffered very badly because the ECB didn't print much money. The UK came through relatively unscathed - but the day of reckoning has now arrived. As you point out yourself, the cause of the drop in Sterling was the Leave result. All to do with markets reacting badly to it. If it had been a Remain result, the Sterling would not have dropped and instead, would have arguably gone up . So, it is safe to say that it was the vote to leave that crashed the Sterling. Still, it should have been temporary. But, instead, the Pound has not recovered 7 years after the vote. And this is a lot to do, if not all to do, with Boris Johnson's version of Brexit itself and the way he handled his own version of Brexit. The Brexit years should not be conflated with the years 2008 - 2012. They are simply two different, separate beasts. The pound recovered in the intervening years to close in 2015 at 0.74 euros. But in 2016, referendum year, the pound dropped to 0.85 euros; in 2019 before Covid and Ukraine, it was still 0.85 euros; then in 2022, it closed at 0.89 to the euro. So, if what you are saying that Brexit had no discernible long term effects were true; then why and how is it that in 2019, before Covid and Ukraine, the pound was till at 0.85 to the euro when, logically, it should have at least gone back up to the pre-referendum 2015 rate of 0.74? |
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