Monday, 27 June 2016
The fall in the pound does not prove Brexit was a poor choice.
Brexit means the UK re-arranges the way it trades with other countries. In particular, tariffs and non-tariff barriers are re-arranged.
Assuming extra tariffs imposed by the EU against UK exports is exactly matched by a REDUCTION in tariffs facing UK exports from other countries (and same goes for tariffs imposed by the UK against imports) then roughly speaking, there shouldn’t be an effect on Sterling when the dust has settled.
On the other hand, if raised tariffs by the EU exceed the effect of REDUCED tariffs by other countries, then the pound will fall in value.
But where would those increased tariffs erected by the EU actually get the EU? The answer is: “nowhere”. That is, as explained in the introductory economics text books, if country A erects tariffs against goods coming from country B, then BOTH COUNTRIES are likely to be hurt to the same extent. I.e. countries which impose tariffs against other countries shoot themselves in the foot.
People voted for Brexit for several reasons. One was the lack of democracy in EU institutions. Another was the fact that totally free and unrestricted movement of people for some strange reason is regarded as “sacrosanct” in the EU. That’s a problem because the EU has now lost control of its borders: Africans, Muslims etc are marching into the EU like an invading army. Plus it looks like there’s a good chance of Turkey joining the EU in the next five or ten years. In short, Brexit offers the chance of reducing the speed at which Britain becomes an Afro-Islamic state. (The fact that Islam is ten miles to the right of European “far right” parties, combined with the fact that the political left is positively in love with Islam is a self-contradiction that political left refuses to explain, far as I can see.)
So if the view of Brits is that they’d rather quit the EU because of the latter two and similar reasons, that’s not unreasonable. If the EU reacts by imposing relatively high tariffs against the UK, that is illogical behavior by the EU. It will result in a fall in Sterling. But that does not prove Brexit was a poor choice: you could equally well argue it proves the EU has gone into a sulk and decided to shoot itself (and the UK) in the foot. Plus those who attach a lot of weight to the above "democracy" and "Islam" point, may regard any cut in living standards that results from a Sterling devaluation as being a price worth paying for the benefits of more democracy and less Islam.