Do hopes and fears of Brexit move markets?

According to the Remain campaign, if the pound falls against the dollar that shows investors have fears about Brexit. In recent days the pound has been rallying against the dollar. They have gone quiet. Is this a reappraisal by investors, who now see the substantial gain to our balance of payments from leaving?   The pound fell from $1.47 to $1.38 between January and the end of February, but has since improved to $1.44.

If we take up the Remain view that investors are mainly moved by Brexit considerations and have been so far this year, then we can see that investors have some good thoughts on the advantages of Brexit. So far this year the number of jobs is up, vacancies are up, and a record number of people are in work. The Remain fears that Brexit worries would damage the jobs market have so far proved inaccurate.

The cost of government borrowing has gone down since the end of last year. The cost of borrowing ten year money has fallen from 1.99% to 1.4%. Why don’t the Remain people hail this as a substantial improvement, and see that implies investors are positive about Brexit? The US in contrast has to pay 1.8%a year  to borrow for ten years.

Then there is the prediction that inward investment will dry up. At a time when German investors are keen to take a majority share in a merged company with the London Stock Exchange ahead of the vote, it is difficult to sustain this argument. Various industrial businesses with five year investment programmes have confirmed they are not going to cancel if we vote to leave.

I think the Remain campaign exaggerate the impact of Brexit on the economy and on markets. Sterling has been falling against the dollar since last summer, as have other currencies, mainly on forecasts of rising US interest rates. The pound fell from over $2 in 2008 to $1.4 in 2009 when we were firmly committed to the EU, so we know other influences can generate large sterling movements. Whilst I would like to claim hopes of Brexit as the main cause of lower interest rates it is as difficult to do so as to claim Brexit caused the fall in sterling. Advanced country bonds have generally been rising in price with the European and  Japanese authorities both heavy buyers of their own paper.


  1. Mike Stallard
    April 2, 2016

    We have three choices:
    1. Stay in. Maybe the markets are not spooked by Brexit because they do not believe it is going to happen. And also, maybe because they realise that Frankfurt will be in control of the Eurozone which (Five Presidents Report) will be the dominant force in the EU in a couple of years.
    2. Leave suddenly with an act of parliament. In your dreams!
    3. Nail down EEA, join EFTA and negotiate from there, playing the Article 50/138 card as we begin. That way things will go on more or less as they are at the moment.

    1. Denis Cooper
      April 2, 2016

      Once again, the UK is a dualist state, and so the way to leave suddenly would be by a diplomatic action on the international plane, that is by our government just telling the other governments that we are leaving with immediate effect, with or without an Act of Parliament as a legislative action on the domestic plane.

      On the one hand if Parliament were to repeal the ECA72 but without the government taking any diplomatic action we would still be in the EU but potentially unable to meet our obligations under the EU treaties, and it would be left to the other governments or the EU institutions to initiate the diplomatic moves.

      On the other hand if the government just took the diplomatic action of abrogating the EU treaties then that would mean the UK was no longer in the EU, and even if the ECA72 was left on the UK statute book it would become a dead letter insofar as there would no longer be any EU treaty obligations to be implemented.

      For me it’s in the category of the bleedin’ obvious that when we decide to leave the EU our government must politely inform the other national governments and the EU institutions that we’ve decided to leave the EU; appealing though such prospects may be to some, including myself at times, we won’t leave them to find out through the news that our Parliament has started to repeal ECA72, or to begin to think that something may be up when the monthly cheque fails to arrive.

      And when the Foreign Secretary sends out that formal letter, he might just as well add “this letter may be taken as the notification mentioned in the first paragraph of Article 50 of the Treaty on European Union.”.

      1. Denis Cooper
        April 2, 2016

        That should have been the second paragraph, not the first:

        “1. Any Member State may decide to withdraw from the Union in accordance with its own constitutional requirements.

        2. A Member State which decides to withdraw shall notify the European Council of its intention … ”

        So it will be a “Dear Donald” letter, copied to all the other member state governments and the presidents of the other EU institutions.

    2. Duyfken
      April 2, 2016

      Or leave calmly, using an amendment to or repeal of the EC Act 1972 as a big stick held in reserve whilst we negotiate withdrawal terms. Is there any legitimate reason why we should comply with Lisbon Treaty terms if we find the EU executive adopting an intransigent or obstructive attitude? I can see little reason for our being obliged to take the EEA/EFTA routes.

      1. Denis Cooper
        April 3, 2016

        That seems to be the sensible approach to me: start off with the procedure for an orderly withdrawal provided in Article 50 TEU, but still reserve the right to abrogate the EU treaties including that article if they mess us about; and at the same time introduce the Bill to amend or repeal ECA72 so that it can wend its way through Parliament. Different provisions of that Bill could be subject to different commencement orders, so that even when the Bill had become an Act they would not necessarily all come into force immediately.

  2. Ian Wragg
    April 2, 2016

    The Remain side are like the global warmists.
    Anything is a result of perceived opposition to their views.
    They have no tangible arguments so project fear is the result.
    Interesting that TATA and Krupp discussed a merger contingent on UK steel plants being closed.
    etc ed

  3. oldtimer
    April 2, 2016

    The Remain campaign is based, it seems, on grasping at any passing straw. Currency markets are driven by multiple forces. My guess is that there will be a blip when the result is announced but that over the longer term fx rates tend to reflect more fundamental forces.

    1. Lifelogic
      April 2, 2016

      Indeed and the fundamentals post a Brexit are clearly greatly improved.

      1. hefner
        April 2, 2016

        More exactly, the forecasts of “the fundamentals post Brexit” are improved.
        Do not forget, they are only forecasts, so anything more is hope, your adverbs “clearly greatly” are nothing more than your feeling. You don’t and nobody knows for sure.

        If you and others on this blog criticise the climate warmists, you as a person with scientific background could apply the same level of stringent scientific doubt on any other topics, Brexit included.

        1. Lifelogic
          April 2, 2016

          Clearly there is considerable doubt both ways as to what sort of government will follow either way. We might get the lunacies of Corbyn economics but at lease we can remove him.

          Predictions of the future are of course only predictions. On balance however surely a government that is elected by and responsive to UK voters (and removable by them) is likely to be rather preferable for UK voters.

    2. Mark B
      April 2, 2016

      Good morning.

      Your first sentence took the words out of my mouth.

      It could be argued that, all these scare stories by the remain side, are what is driving down the pound and possibly the economy. Maybe they should concerntrate on all those percieved positives of membership of the Stupid Club ?

    3. Ken Moore
      April 2, 2016

      The latest scare campaign by the Stronger In side is to suggest to football supporters that inter club player transfers will end if we leave the Eu.
      Desperate stuff.

  4. Antisthenes
    April 2, 2016

    “Remain campaign exaggerate the impact of Brexit on the economy and on markets”

    A bit of an understatement and not only on those items but a host of others. The extent of exaggeration and the accompanying lies are staggering. Every utterance of the stayers I have heard so for has been ridiculous and a simple put down response springs to mind immediately. All of which points to their ignorance of all things EU and indicates desperation. Ignorance I can understand both side exhibit that but desperation I cannot fathom as they appear to be on course for a comfortable win.

    The markets will be influenced by Brexit I am certain as there will be different views of the impact of it as there is amongst the rest of us. So far as far as I can see the markets have been reacting to events other than Brexit so far. Maybe closer to June 23 when the outcome is clearer markets may voice their opinion by rising or falling there is certainly no evidence that they are spooked yet. The problem is that remaining in and the markets believe that is how the vote will go then they will undoubtedly remain calm. For them it will be business as usual. If the vote looks to be to leave that may cause volatility because it must cause some uncertainty. That may then cause voters to rethink and change back to the stayers camp. It depends on how it is spun. Scary negativity from the stayers that is certain. The leavers need to have a credible calming counter ready for that eventuality.

    We leavers have an uphill battle as the stayers do not need proof to win their argument but we do and there is precious little of that. There are plenty of powerful rational self evident reasons for leaving. One major one being our sovereignty and right to self determination enough on it’s own I would think to persuade people to want to leave. Strangely no people are not swayed by it or the many other good reasons that proof is not needed because they are just a simple case of what is right and wrong. Either we want it or we are happy to give it away. It appears most are content with the latter forgetting that once given away getting it back is next to impossible. Something I am sure we are all going to live to regret.

    1. Antisthenes
      April 2, 2016

      Pondering why people are being taken in by the stayers when logic and common sense dictates we leave it struck me it is because as our faith in the church has diminished at the same time it has increased in the state. Indeed we are all critical of the state before which the church but that does not stop us still believing in them. We have just changed dogmas from theocratic ones to socialist ones. Once the church gave succour and comfort now it is the state offering the same thing. Neither of course gives as much as we believe they do and both rob us blind in the process.

      So the stayers backed by the state appeals to peoples comfort zone and make them fearful of the state not being there to cater for their very needs. They believe the bigger and more powerful the state like the church before it the more that they will gain from it. So extending the state by being part of the EU makes them feel more secure. It is of course all an illusion just as the church made us believe that what we cannot have in this life we will receive in the next. Clever for the state to claim that we can all have it now and not have to wait for death.

      1. Lifelogic
        April 2, 2016

        Well the real problem is that they use peoples taxes to spend on indoctrinating them with project fear the BBC’s bias/influence alone is huge.

        Even getting Australia getting in on the act doubtless pushed by Cameron’s Remain side and the foreign office. Let them join the EU and take our place it they a daft enough to.

        I see that the EU too spends more on propaganda than fighting terror.

        How many voters think they should be taxed so the their money can be spent telling them what and how to think?

        1. Lifelogic
          April 2, 2016

          Such state propaganda is yet another attack on democracy.

    2. oldtimer
      April 2, 2016

      According to this former ad man, negative campaigning works. It appears on the website here:

      If his reasoning is correct then the Leave campaign should engage in some punchy negative campaigning too. It has some very specific and factual themes to work on such as the cost of the EU, the impact of and future threats to public services (schools, hospitals, housing etc) of uncontrolled immigration, the prospect of future Turkish membership (supported by Mr Cameron), the threat to UK jobs which many will recognise and understand. I read that Mr Grayling has pointed this out in an interview with the Daily Telegraph.

      There are other issues, such as national security and the future impact of the Five Presidents` report which matter too, but are unlikely to resonate so widely as the all-pervasive threat posed by continued uncontrolled immigration – which is what the Remain campaign offers.

  5. Anonymous
    April 2, 2016

    Claiming that the uncertainty about Brexit changes markets is not going to be as impactful as stating that the Premier League won’t be able to sign EU footballers or that people won’t be able to easyJet out to Spain.

    Lots of voters really are that thick and childish that they’ll make their decision based on these two things.

    1. Denis Cooper
      April 2, 2016

      On Thursday I heard about a 17 year old whose only concern was that we would be excluded from European football competitions. I’m not au fait with sporting matters, is there in fact any competition which is restricted to EU member states?

      1. Anonymous
        April 2, 2016

        Denis – I’m concerned that voters who don’t plant to turn out WILL turn out on these two things.

  6. Lifelogic
    April 2, 2016

    Indeed, but it is not just the Remain side pushing this propaganda, also some arms of the state sector, such as the Bank of England. This despite the fact that they should be being independent on the issue.

    Not that anyone expected a fair referendum from someone like Cameron or fair coverage from the absurdly biased BBC.

    Still good odds available on Brexit of 15/8.

    Surely Brexit it will be, the UK population are not stupid to give up their last chance of escape are they? Do they really want to finally kill UK democracy and have open door immigration for millions, expensive energy, and have to pay huge fees for zero or actually negative benefits?

    1. Bazman
      April 2, 2016

      BBC influence may well be low. How bias do you think C4, C5, SKY, ITV will be? You assume that many even get their information from the TV in particular the young who use the internet mostly and not the BBC sites. There is any number of other news sources such as newspapers and the often intelligent independent internet sites not to mention the crackpot ones.
      The internet has given millions the ability to find out facts about the EU and politics in general as well as debating them with others in here and abroad on social media.
      How much of a threat do you think this will be in influencing the population to voting the wrong way in your case a staying in vote and what censorship other than self censorship you you wish to impose to stop this?
      The licence fee is not enough to justify your argument of mass brainwashing causing a vote to stay in. The widely available other media sources must be held to account too in that case. To argue any different is just a lying foil hat fantasy.

      1. eeyore
        April 2, 2016

        I am glad to see Bazman’s contributions, even though I don’t always understand what he means. He adds a heterodox element to what is sometimes a rather orthodox commentary.

        There must be arguments about Brexit which speak particularly to people of Bazman’s political persuasion, about the effect of EU membership on housing costs, jobs, wages and social cohesion, for instance. The Bazmans all have votes in the referendum; maybe Mr Redwood could help them and us by addressing their special concerns, with his unique clarity, expertise and fairness, before polling day gets much closer.

    2. Lifelogic
      April 2, 2016

      Listening to Any Questions just now it is hugely depressing to hear all three politicians (Leader of the Liberal Democrats Tim Farron MP, Conservative MP Andrea Jenkyns and Labour MP Jess Phillips) support the idea of minimum wages – mainly just wanting them to be even higher.

      The minimum “living” wage is of course a complete con trick, a huge job destroying back door tax increase. This as 2/3 of the increase is taken back by the government and the money the companies pay out will leave them far less to invest in future productivity and far less incentives to invest in the UK at all. Thus destroying future growth too.

      Are these politicians;- A. Too dim to understand this or B. Just liars who just think there are votes in this job destroying con trick?

      A letter in the Telegraph today blames the recently knighted (for what one wonders) (& hugely deluded green) Ed Davey for much of the destruction of steel and heavy industry in the UK.

      Actually you could also fairly blame Ed Miliband, C Huhne, Ed Davey, Amber Rudd and the foolish PMs G Brown and D Cameron who appointed and retained such inappropriate lefty PPE graduates and historians to such a position. Encouraged, of course, by the general EU greencrap agenda.

  7. agricola
    April 2, 2016

    No, it is the chance of a profit on the movement of a market up or down that encourages stories about Brexit or Remain. There is nothing like a fictitious story about a rampaging beetle in the coffee crops to hike the price of coffee and make a profit in the market.

    There is no logical reason why the Pound is at Eu 1.248 when you look at the forecasts for the EU economy. Mark it down , sell it forward at a low price and make a fat profit when it goes up in three months time. Such markets are another form of gambling , but the exchanges are the bookmakers.

    April 2, 2016

    Former President George W Bush’s every positive economic soundbite moved the American Stock market up by 1.5-2%.

    It is little wonder the Pound Sterling sinks sometimes with a maudlin and constipated Bank of England and Stay Campaign.

    If the movement of currencies were so simple, the Stay campaigners would make a killing on the market whenever they yawned their maungy un-British pessimistic suspect prognostications. They lack get-up-and-go. Low energy. They look and sound they need a good holiday. Brussels comes to their minds but nowadays only with Yorkshire pud.

  9. Lifelogic
    April 2, 2016

    Cameron I see is pictured wearing Union Jack headphones, what a complete and utter phoney this serial ratter is!

    Vote Brexit and be rid of him and Osborne as a huge additional bonus.

    I do not want people who claim to be “low tax at heart”, “no if no but”, “cast iron” conservatives or people who falsely claim to be keeping their IHT promises. I just want real conservative who believe in an independent UK, UK democracy, control of our borders, sensible & simple tax levels, cheap energy, policies for growth and a far smaller but more efficient government.

    Anyway why do people pay up to £300 for headphones when better ones are available for £20?

    1. Lifelogic
      April 2, 2016

      Perhaps in government you get use to paying 15+ time more than is needed for inferior value?

      1. Bazman
        April 2, 2016

        Like housing costs then? How can a flat in Mayfair be better than a house in Cumbria and how can a £300 camera be better than a £20 one? Its just common sense.

        1. Lifelogic
          April 2, 2016

          Supply and demand of course.

          1. Bazman
            April 3, 2016

            You are telling us the housing market is just based on supply and demand and not rigged in any way and the £20 camera is better because there is more demand? Really?

    2. hefner
      April 2, 2016

      They may be some very good noise-cancelling headphones.

      1. Lifelogic
        April 2, 2016

        You can get very good, noise cancelling, headphone for about £30 but perhaps without the union jack.

  10. Bert Young
    April 2, 2016

    Markets react to all sorts of stimuli including the “uncertainty” of Brexit . It doesn’t help when Carney gets on his feet and says one thing or another about the economy or when Yellen hints at a hike in the cost of borrowing . When the markets also have to absorb changes in China and what the ECB are up to , is it any wonder there is lack of direction ?

    I ,like all investors , want predictable and reliable conditions in order to protect my portfolio and to keep it heading in positive territory ; I want the values to increase and the withdrawals I make to go on being positive ; anything that is likely to diminish this view is something that makes me “edgy”. “Brexit” is currently being heralded by Cameron and his colleagues as threatening and dangerous ; of course the markets don’t like it so , of course the value of shares are regarded with extreme caution . If the “Brexit” campaign could get itself sorted out and properly co-ordinated , I believe an atmosphere of confidence would exist and some sense return to the markets .

  11. mick
    April 2, 2016

    I cannot believe there are still people who would vote to remain in the dreaded eu, what these people don`t seem to understand is that this vote unlike the Scottish referendum isn`t going to come round for another 40 odd years, and if god forbid if labour/lib`s/greens get there grubby hands on power they will surely give the rest of this great country away, and i for one don`t want that to happen.

    1. Lifelogic
      April 2, 2016

      Indeed it is the last chance to escape the death of UK and the end of democracy. I cannot understand why would anyone vote remain unless they just hate democracy, the UK and want to harm the economy?

  12. rick hamilton
    April 2, 2016

    Of course sentiment moves the markets day by day but I don’t see how fear of Brexit affects the pound that much at present. After all, if Leave wins we are still in the EU the day after and probably will be for at least two more years.

    Ironically the result of the referendum itself changes nothing legally. The actual situation after Brexit can only be determined by the success or otherwise of the hard negotiation that the UK government will have to embark on. My only fear of Brexit is that Cameron might be doing the negotiation !

  13. Vanessa
    April 2, 2016

    I think it is obvious that Britain would be better out of the EU.
    A very good piece on EUReferendum today says that all those who argue that Britain is too small to make its own trade agreements need to look at world trade. It is collapsing – there is too much steel, too many lobsters, too many container ships wondering what to do with their loads. Global trade is slowing down, countries are up to their eyes in debt, barriers are being put up in everything. We need to be able to make our own Agreements with countries which would benefit both of us. The Commonwealth would be a good place to start !

  14. Denis Cooper
    April 2, 2016

    I mentioned yesterday that the UK’s current account has actually been trending towards greater deficits since 2011 Q2, it is not something new in recent quarters:

    As now also highlighted in this article:–the-good-outweighs-the-gloom/

    As Osborne has been Chancellor for the whole of that period, and the year before, one might have thought that he’d hold back from trying to make any link to the prospect of Brexit when it is clearly connected with his own stewardship of the economy.

  15. Wingsovertheworld
    April 2, 2016

    I think there will be a concerted effort by student’s unions to get the young (mostly proEU) votes, as per the Scottish referendum. From your experience of previous student votes/protests, do you think that they respond more to logic or emotion? I fear the arguments don’t have to be rational to mobilise this particular group and they could swing it in favour of stay.

    They care about jobs – what good has the EU done to protect jobs for the young (45% youth unemployment in Spain). How has it reacted to the steel crisis? What assistance is it giving for our £30-odd million a day net membership fee?

    They care about the environment – why is Germany investing in coal? Is making the move to green energy worth the closure of our heavy industry and the unemployment that will bring? Is the propagation of wind farms not a blight on the land; a shift to Chinese owned, French-run nuclear a perverse outcome?

    They care about immigration – wasn’t inviting migrants into the EU, unvetted, a huge mistake? Didn’t it attract many more to come, as our government predicted? Isn’t inward UK immigration (often by highly – state – educated EU nationals taking jobs less worthy of their education) just providing more of a challenge to UK graduates to find jobs at home? Is it as simple for them to find jobs in the EU?

    My burning question is, why do they think we couldn’t possibly do all of these things better, faster and more tailored to our own needs independent of the EU?

  16. acorn
    April 2, 2016

    Reading the comments of the UK’s financial journalists this week, it quickly becomes obvious that they know even less about the UK’s “external economy”, than they do of its internal (domestic) economy. Or how they interact to make GNP (GNI) different to GDP.

    Elsewhere today I have recommended a read of the draft bits of Bill Mitchell’s book; but you don’t have to be a budding sixth form economist to understand it. Part 4 and 5 particularly, but all ten parts if you can.

    To the “macro-media as S W-L calls them, the Balance of Payments IS the “trade” bit of the “Current Account”. The balance occurs between the whole of the Current Account and the Capital Account added to the Financial Account.

  17. ChrisS
    April 2, 2016

    The one advantage that the Brexit campaign has over CMD and his Project Fear Team is that our message is invariably a positive and uplifting one.

    Positive about a future in which a great country like ours can make real progress in the world and a reminder to voters that Britain still retains just about enough independence to be a significant player on the world stage. This, of course, would be significantly enhanced were we to leave the EU and retake our own seat on bodies such as the World Trade Organisation.

    Our citizens below the age of 40 have for more than a generation been fed a constant stream of negative, anti-British sentiment and deprecation by those in education and politics. I was brought up in the 1950s in a Britain that suffered from real austerity. Food rationing, a left over from the war, was still in force when I was born. While the quality of life in the USA streaked ahead, it took years for they UK to get out from under the financial and commercial constraints of a wartime economy.

    Yet Britain continued to innovate : We built highly advanced new planes, both civil and military, we successfully built and operated the first nuclear power stations in the world and we developed our global reach in financial services and much else through overseas investment.

    Most of our politicians have since lost the vision shown by their predecessors. This has particularly been the case when Labour has been in power, They have retreated into the “protective” ( I would say constricting ) arms of the EU as if that were the only way to save our country from terminal decline.

    We have lost a great deal though this but fundamentally the people of Britain are unchanged. The younger generations just needs to regain the self confidence that the immediate post war generation have (or had). They need to understand that we don’t need Brussels to represent us on the world stage and to appreciate that the fifth largest economy in the world and, despite CMD’s best efforts, our still-effective military can be a substantial influence for good in the world.

    What have CMD and his cronies really got to offer as an alternative ? His laughable renegotiation will do nothing to prevent more integration, often conducted via the European Court and thne introduction of more “single market” rules, and the further loss of control over our destiny that yet more rules and regulations inevitably bring.

    Evne worse, stealthily operating under the radar, the European army is already well on its way to becoming a permanent reality :

    I quote :

    “The European Union is a global actor, ready to undertake its share of responsibility for
    global security. With the introduction of the Battlegroup concept, the Union formed a (further) military instrument for early and rapid responses when necessary. The EU
    Battlegroup concept reached full operational capability on 1 January 2007.”

    As recently as last month Junckers, the president of the European commission, stated in a speech that “The European Union needs its own army to help address the problem that it is not “taken entirely seriously” as an international force”.

    If this goes ahead, as I surely will, it can only be a matter of time before the EU demands to take over the seats of France and the UK on the UN security council. It will then request that member states dismantle their diplomatic services to be replaced by the EU’s “External Action Service ” which bears significant blame for the current problems in the Ukraine.

    Like so much before it, these measures will all be sold to a gullible populations and their politicians as “cost saving measures” and the natural way forward. In fact they will be a simply continuation of Brussels’ policy of taking away more and more independence and freedom of action from member states.

    It is very much to our detriment that the Blair and Brown Governments fell for this kind of line and over their 13 years in power we lost a great deal of our independence and Sovereignty. Please note that “Pooled Sovereignty” is not Sovereignty at all.

    If we remain within the EU, the rate of progress towards full integration will only accelerate.

    Is this really what the population of Britain wants ?

  18. bigneil
    April 2, 2016

    Two things guaranteed by “staying” – our contributions will rocket and our “Schengen” wall will be destroyed. We will be turned into (a much poorer place ed), full of new people who only “want”.
    We already have an “investigation” as to how numbers of arrivals don’t match with NI numbers handed out. Is the number of arrivals massively greater than thought – – or are the arrivals making multiple person claims?

  19. alan jutson
    April 2, 2016

    Currency moves up and down all the time for a whole host of reasons, on occasion even when it has absolutely nothing to do with the UK, but the other currencies to which it is compared against.

    Those journalists who think they can predict such movements, should be billionaires, the reason they are not, is because they have no confidence in their own predictions.

    Speculation is fine, but that is all most of it really is.

    Simply a guess, sometimes educated, sometimes not.

  20. Tad Davison
    April 2, 2016

    That’s true John, they have gone quiet now that the pound continues to rally, but I want to see more people from our side exposing that myth for what it is. As far as I can see, it just isn’t happening with any great impact. We need to be like the horse in Animal Farm. We must work harder, especially those who are in positions of public prominence (yourself excepted).


    1. Bazman
      April 2, 2016

      All state subsidies for industry and transport to be stopped, all goods and services to be bought at real market rates on the open world markets and housing benefit to be for those on more than 10k a year stopped. A rise in the market or a fall? You’ve got it right!

  21. Mitchel
    April 2, 2016

    Andrew Sentence (Telegraph article) may think it’s wonderful that we are the fifth largest economy in the world but on a purchasing power parity and per capita basis we rank no higher than 27th(source:Global Finance).So,not so wealthy really.Does Osborne ever refer to that measure when telling us what a wonderful job he is doing?

    1. Mitchel
      April 2, 2016

      That should of course read Sentance rather than Sentence.

    2. Lifelogic
      April 2, 2016

      Of course not they carefully pick and chose the statistics and periods that suit them at the time in the smoke and mirrors they want to create.

      PR is all, the truth is nothing to professional politicians and PR spin merchants.

      1. Bazman
        April 2, 2016

        We need some clarification on your views on housing benefit, low wages and cost to the taxpayer lienonsense? Its a basic part of all your posts. Sorry missed that..!

    3. hefner
      April 2, 2016

      It is a good point. PPP or BigMac or iPad index put the UK much lower the scale. Unfortunately, it is not only Osborne who is culprit of this sleigh of hand, most politicians do it, more particularly those who for years have been so keen on selling the country’s silverware. Some in the past, (Letwin & Redwood, 1988) were already at it with the NHS. Fortunately, Mrs T did not listen to them.

      Reply I have never advocated “selling the NHS”. I have always supported a free at the point of need public service.

  22. Ken Moore
    April 2, 2016

    Whether Brexit moves the market or not, something bigger could be just over the horizon.

    I thought this extract from Tim Morgan’s excellent ‘Surplus energy economics’ deserved a wider airing.

    ‘Whitehall, you see, all too easily believes that a job lost in manufacturing doesn’t matter if, instead, we employ an additional estate agent, “manager” or pizza-delivery driver. This misapprehension – perhaps fostered by the way in which all jobs are aggregated together in statistical publications – reveals gross ignorance, not just of supply-chain considerations but also of the process by which value is added in the economy.

    In short, government does not understand the difference between creating value and simply recycling it.

    What has been happening has been a hollowing out of the British economy, with asset ownership being traded for short-term consumption, whilst high value-added jobs have been replaced by more peripheral, casual and lower-paid employment.

    Of course, I might be accused of venting pointless frustration, because, in practical terms, it may already be too late – not just for Port Talbot, but also for a British economy managed on the assumption that a country can live ‘on tick’ indefinitely.

    The point is drawing ever nearer when some very nasty events occur. I will leave you to ponder what these nasty consequences might be, suggesting that you consider the possibility of a sharp fall in Sterling, a sharp rise in Britain’s cost of borrowing, and a simple inability to go on selling assets or borrowing from abroad.

    Conceivably, there may be someone reading this who believes that this will never happen, and that the UK can continue indefinitely to live far beyond its means. If so, that person has all the qualities of vision and understanding to qualify for a top job in government.

    For everyone else in Britain, the outlook is grim. Living beyond one’s means is not a sustainable policy.

    It would be interesting to hear John Redwood’s views on this as one of the few in government with a grasp of economics.

    1. Dennis
      April 2, 2016

      ” Living beyond one’s means is not a sustainable policy.”

      Quite right as is the same as beyond the means of the planet’s environment. This will just impoverish all, not quite now but for the future generation which many crocodile tears are now being expressed at the moment – can’t let our grandchildren pay for our debts – yeah, right.

    2. oldtimer
      April 2, 2016

      Agreed. The UK is a fools’ paradise. Both government and the consumers are deeply in debt. Only the business sector is in a better position overall, not least because if it gets in too far over its head the outcome is terminal – as the grim outlook for the steel industry may well turn out to be.

      Mr Osborne comes up with meaningless “targets” for exports but seems clueless about how government can help create the conditions for businesses to compete internationally. Schemes like the Carbon Plan, which promote expensive and unreliable energy, or telling businesses how much they must pay their employees simply add to costs with no offsetting productivity gains. All that he and the PM appear to understand is how to offer guaranteed returns and subsidies to their pet, inefficient renewable energy projects and foreign investors in nuclear energy. The sooner we have ministers who understand what is needed to run a successful exporting business the better off we shall all be.

  23. Sue Doughty
    April 2, 2016

    The US$ moves anyway. Bexit will make no difference to that. But I see the stock markets waiting for Brexit and our freedom to trade improves. Then and only then will it start making progress again. If we stay in the EU I predict it will drop.

  24. Ken Moore
    April 2, 2016

    What should spook the markets is the fact that George Osborne has clearly gone stark raving mad – ‘anyone who believes that ‘Britain deserves a pay rise’ when more than 5% of Britain’s now comes courtesy of foreign creditors. The state of the Uk current account is deteriorating as we run out of assets to sell and money leaves the country in interest payments and profits.

    John Redwood – would you do us all a favour please and send in the men with white coats for Mr Osborne..perhaps you could look after his office for a while.

    1. Ken Moore
      April 2, 2016

      when more than 5% of Britain’s consumption (sorry)

  25. Mitchel
    April 2, 2016

    I’m not sure comparing the £ and $ rates over the past few weeks is particularly illuminating as the trade weighted value of the dollar which had been surging(used by the IN campaign to claim the £ was week due to Brexit fears) has slumped over the past couple of weeks(silence) – it’s the $ rather than the £ that is gyrating.

  26. Dunedin
    April 2, 2016

    Slightly off-topic question for Mr Redwood – why are British people resident in Europe permitted to vote in the EU referendum (if they have been on the UK electoral roll in the past 15 years), while Scots resident in the rest of the UK were not allowed to vote in the Scottish referendum? If there were to be a second Scottish referendum, would this set a precedent to allow Scots resident in the rest of the UK to vote?
    While I think the fears of Scotland leaving the UK in the event of Brexit are overblown, the inclusion or exclusion of the rUK Scots could be significant.

    Reply Each Referendum Act defines the electorate.

    1. graham1946
      April 2, 2016

      Reply to reply

      The sentence which you did not add ‘According to who is drafting the Bill and his interests in the referendum’.

      1. Denis Cooper
        April 3, 2016

        In the case of the Scottish referendum you should also add “and what he is permitted to do by the UK government and Parliament”.

  27. Bazman
    April 2, 2016

    So we are to ignore business leaders who are for voting Tory, but against staying in the EU and to put our faith in the markets which in all their wisdom crashed the world economy in 2008? Dingbat nonsense has the right not learned anything? It seems not. Gambling via glorified bookies cutting up chickens on the future is not the way forward.
    Its like in 1999 I had people telling me that renting was a much better bet than buying as rent was less than a mortgage. I now have no mortgage and rents are sky high, so much for that theory and where are all these sages now? Paying rent or got on board just in time thats where no doubt conveniently forgot what they said or just telling themselves it was all fate and bad luck.
    A small few are twiddling their pencils in their drawing rooms wondering how it went so wrong and planning how to gamble everyones house except their own again in Brexit.

  28. MikeP
    April 2, 2016

    While I agree with your article JR, the pound has weakened a fair bit against the Euro (7.5% in the last 3 months, 10% against the Yen and still 3% against the dollar) – which is bizarre given that the Euro is at least as likely to take a knock if a country like UK decides it wants no part in the EU.

  29. Dennis
    April 2, 2016

    “… and a record number of people are in work.”

    I see this all the time. If a record number of people are eating food in a finite growing area to feed adequately fewer people would this be something to crow about? What about getting extra output by tweaking the human biology so that people can work for 20 hours per day to increase productivity. “That;s the way to do it”

    Resources are finite so the same thing applies. Too many people chasing to few resources

  30. The Prangwizard
    April 2, 2016

    I read that buy-to-let mortgage applicants have to prove they can service a loan rate of 5%. It follows that if not they may well be refused.

    The UK’s current 1.4% seems to being praised but could the UK service a debt at 5%. If we were a business or an individual would we not be bankrupt?

    I don’t think I’d give my cheque book to Mr Osborne.

    1. Bazman
      April 5, 2016

      First time buyers have to prove they can manage 7% and come up with a bigger deposit. Sorry lielogic I missed how this l helps then. Is it because it allows them more flexable and cheaper housing?

  31. Lindsay McDougall
    April 2, 2016

    The facts in your blog could just as easily be presented as demonstrating the folly of easy money and QE, and the folly of failing to get the deficit down fast enough. The objective must be to get total UK state debt on a downward path, not as a % of GDP but in absolute terms, before higher interest rates kick in.

    Low interest rates ensure that it is very easy for those who have money to make more money. Meanwhile, restrictions placed on total lending ensure that some would be entrepreneurs are denied capital. We are manifestly not all in it together.

  32. fedupsoutherner
    April 2, 2016

    I see some of the headlines recently are saying that while some people have been made ery rich from the renewables fiasco, others have really paid the price. Over 40,000 British pensioners died from the cold this year and it is the poor that are paying the price for high energy costs down to wind and solar etc. Add to this all the people who are going to be out of a job soon and the whole thing is an utter disgrace. We went home a few days ago to see friends of my husbands who are all turning 70 soon and went to school together and the general concensous was that the ‘Great’ has gone from Britain and that there is no future for the younger generation who are staying here. The only people who will see a brighter future are those who are coming here from poorer countries. What a sad time and what a let down the Conservative party has become. Not an element of common sense or fairness to be seen.

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