The Consequences of Brexit (part 2)

[L00b]

Consequences are now starting to snowball.

 

I attended an economic briefing by Dame Frances Cairncross the other morning.

 

Regrettably her slides are not publicly accessible, but the 1980s-to-current productivity graph painted a rather alarming picture: a steady dead cat bounce since 2008. That's in the face of the UK's job creation/fairly low unemployment rate by G7 standards to date.

 

This backs up her position that most of the jobs newly created since 2008 do not contribute much of anything to the UK GDP (because they are hand-to-mouth low-value jobs like pushing trolleys in supermarket car parks and washing cars on ex-petrol station forecourts, taken up by retirees and immigrants).

 

What the UK has enjoyed since 2008-2009, is a low wage recovery. There is another 3 or 4 years of it to expect, before the next bust comes along in the cycle.

 

Now, position the above in the developing context of:

• rapid inflationary pressure (estimated to reach 5% at next year's end...and that's conservative IMHO: witness the latest UK government announcement that they'll be changing their official preferred inflation measure to the CPIH from March next year);
  
• rapid curtailment of free money: end of asset price driving through QE (this is Trump's declared policy in the US, it will filter through to the UK quick), and
  
• the government out of serious/large tax-manoeuvring options, due to tax receipts currently falling off a cliff and the UK already close to the 'test limits' of its Laffer Curve.

Dame Cairncross ' main warning to attending business heads was 'prep for heavy inflation'.

 

All of this guarantees a slower growth come what may over the next few years.

[Petminder]

One thing is for sure - the Euro is an insane fiscal and political experiment. The sooner it is tuned up to only be used by countries where it is viable the better.

 

If it went altogether and the EU returned to being a cultural union and trading bloc then it's something we could be more comfortable with.

 

I think Mervyn King agrees with you, as do I.

 

The eurozone is doomed to fail and will lurch from crisis to crisis unless it is broken up, according to the former governor of the Bank of England.

http://www.telegraph.co.uk/business/2016/02/28/mervyn-king-the-eurozone-is-doomed/

[unbeliever]

Oh come on. Boris put his foot in his mouth again, he's clearly in the wrong job. But this has been blown out of all proportion.

[the_bloke]

One thing is for sure - the Euro is an insane fiscal and political experiment. The sooner it is tuned up to only be used by countries where it is viable the better.

 

If it went altogether and the EU returned to being a cultural union and trading bloc then it's something we could be more comfortable with.

 

You and I rarely see eye to eye, but I totally agree.

[Zamo]

Consequences are now starting to snowball.

 

I attended an economic briefing by Dame Frances Cairncross the other morning.

 

Regrettably her slides are not publicly accessible, but the 1980s-to-current productivity graph painted a rather alarming picture: a steady dead cat bounce since 2008. That's in the face of the UK's job creation/fairly low unemployment rate by G7 standards to date.

 

This backs up her position that most of the jobs newly created since 2008 do not contribute much of anything to the UK GDP (because they are hand-to-mouth low-value jobs like pushing trolleys in supermarket car parks and washing cars on ex-petrol station forecourts, taken up by retirees and immigrants).

 

What the UK has enjoyed since 2008-2009, is a low wage recovery. There is another 3 or 4 years of it to expect, before the next bust comes along in the cycle.

 

Now, position the above in the developing context of:

• rapid inflationary pressure (estimated to reach 5% at next year's end...and that's conservative IMHO: witness the latest UK government announcement that they'll be changing their official preferred inflation measure to the CPIH from March next year);
  
• rapid curtailment of free money: end of asset price driving through QE (this is Trump's declared policy in the US, it will filter through to the UK quick), and
  
• the government out of serious/large tax-manoeuvring options, due to tax receipts currently falling off a cliff and the UK already close to the 'test limits' of its Laffer Curve.

Dame Cairncross ' main warning to attending business heads was 'prep for heavy inflation'.

 

All of this guarantees a slower growth come what may over the next few years.

 

The Remainers want a second bite at the Brexit economic prediction cherry? And people should trust them to get it right this time (or tell the truth) because... ?!?

 

And if UK productivity has been in decline since 2008 isn't that a consequence of EU membership and not Brexit? Surely it is better to get out of the EU and open up markets beyond the EU to improve the productivity that Dame Frances reports has been stunted whilst in the EU?

 

Interesting too that the warning is now for slower growth as opposed to the pre-referendum doomsday forecasts of contraction. And slower than what? Slower that it has been? Slower than remaining EU members? What are we comparing it with?

[L00b]

After a self-imposed hiatus on here, I'm now wholly uninterested in engaging you or others, Zamo.

 

Posts like the above shall be the extent of my contributions from now on.

 

Feel free to ignore them, or to comment about them -as you just did- to your heart's content.

 

Just don't be expecting an answer on the merits.

[Zamo]

After a self-imposed hiatus on here, I'm now wholly uninterested in engaging you or others, Zamo.

 

Posts like the above shall be the extent of my contributions from now on.

 

Feel free to ignore them, or to comment about them -as you just did- to your heart's content.

 

Just don't be expecting an answer on the merits.

 

If you're going to guarantee a forecast of slower growth then it would have been nice for you tell us the benchmark against which we are supposed to be measuring. I suppose a little Nostradamus style mystique provides some wiggle room in the future.

[tzijlstra]

One thing is for sure - the Euro is an insane fiscal and political experiment. The sooner it is tuned up to only be used by countries where it is viable the better.

 

If it went altogether and the EU returned to being a cultural union and trading bloc then it's something we could be more comfortable with.

 

Is it? Weird that support for the Euro is pretty solid throughout the Eurozone and trending upwards since the Financial Crisis then?

[gomgeg]

One thing is for sure - the Euro is an insane fiscal and political experiment. The sooner it is tuned up to only be used by countries where it is viable the better.

 

If it went altogether and the EU returned to being a cultural union and trading bloc then it's something we could be more comfortable with.

Good grief, we both think the same thing. It could be called , The Common Market.

If we'd thought of that a few years ago there wouldn't have been a referendum and even if there had the result would probably have been to remain.

[L00b]

As some posters are clearly tempted to consider my context-setting post about slow UK productivity and growth prospects for anything other than that, i.e. a post raising attention to the full economic context within which Brexit is taking place (rather than a post predicting what Brexit will or won't do or cause), can I invite them to read this resource, explaining the issues much more eloquently, albeit perhaps not so accessibly.

 

Brexit or not, Trump or not, polarising politics or not, an economical storm is slowly and steadily brewing. Clearly, it's been brewing since long before Cameron campaigned to give a referendum in 2015. In that context, Brexit, Trump <etc.> are just catalysts.

 

As for "slower growth", since this expression seems to confuse some, of course it's in relation to historical growth (actual growth in past periods, what else could actual growth be slower than?)

 

Incidentally, historical growth from which government tax revenue and expenditure planning is likewise extrapolated, and Hammond reckons he's going to be £100bn short over the next 5 years (-for now). I can't hardly wait to see Hammond's Autumn budget, just to see how far or close it comes to Osbourne's mooted emergency budget.

Edited November 18, 2016 by L00b