Post by Ian JacksonPost by James Harris...
Post by Ian JacksonPost by James HarrisAnd Cabinet member Jeremy Hunt apparently told Iain Dale that he would
now vote Brexit because Osborne's predictions failed to come true and
because of the attitude towards the UK he's seen from the Brussels
elite. Treasury minister Liz Truss said similar today.
Realisation is dawning. :-)
There has to be more to it than that. No one could have their opinions
so radically altered simply because one man's predictions haven't
completely come true (yet).
Ian, do you realise that the predictions of doom were only for the
short term? We are in that period now!
By "only for the short term" do you mean that the "doom" wouldn't last
for long? If so, why was anyone particularly worried?
Not being funny but I'm not sure I can say why certain people were
worried because I was not one of them! Would you mind saying what was
that worried or concerned you? Maybe I can respond to that rather than
me guessing about what the worries were.
Post by Ian JacksonPost by James HarrisThings are suppressed a bit due to effects such as inflation and
uncertainty. But there's no doom.
Maybe no doom yet - but there's certainly a lot of 'gloom'.
You mean things like the banks being about to relocate staff?
Post by Ian JacksonPost by James HarrisThe promised firecracker turned out to be a damp squib.
Was the immediate drop in the pound a vote of confidence in the UK
economy? OK, since the initial shock there's been a reasonable recovery,
but I suspect this is largely because nothing disastrous has happened
yet - and quite a lot of us are still living in hope that something that
isn't too bad will eventually emerge - although hopes are certainly
beginning to fade.
OK. It's interesting to hear such views.
I am no expert but from what I've pieced together from those who know
more about this stuff than I do the pound had been artificially high for
some time (more than a year) due to the UK's financial operations being
lifted by fiscal and monetary policy. That's not my assessment; you may
remember that the IMF had been telling us that the pound was overvalued
- by between 5% and 20%, IIRC.
The markets assumed that on 23 June 2016 we would vote to remain in the
EU and had priced in business-as-usual. The vote shocked them and let
them know that we were about to go through a period of uncertainty.
Therefore the pound dropped.
In general terms, the pound's value against other currencies can be seen
to change on the loss of or resumption of certainty. For example, when
Andrea Leadsom pulled out of the Conservative leadership race the pound
popped up noticeably. I presume that was down to the UK getting the
certainty of a new PM in place sooner than the traders had expected.
I think you are right that if the EU talks look as though they are not
going to produce a trade deal then the pound will drop again. But then
over time as the UK migrates to a WTO deal with the EU and as it begins
to build up global trade the pound will rise back up. The process may
take a few years.
(At the moment, I suspect the pound is still overvalued due to the UK's
focus on financial markets.)
Post by Ian JacksonPost by James HarrisWhat's more, inflation is expected to drop back and the uncertainty
will go as our new relationship with the EU becomes clearer. As the
uncertainty goes businesses will increase investment again.
While you could be right, I can't share your absolute confidence.
I don't have /absolute/ confidence. But what does reassure me a lot is
not the rhetoric from Remain or Leave advocates but seeing the
investments that businesses are making in the UK.
For sure, UK-based SMEs will be holding back on growing their businesses
until they see more of how Brexit is going to work out and can see how
it is going to affect them. But notice that the big corporates who have
to look many years ahead are making significant investments in Britain.
They wouldn't be doing that unless they thought that the UK will be a
good place to do business.
--
James Harris