Thursday 31st August 2017

You’ll have been hearing about the euro/sterling parity story – that the slump in sterling means that very soon – in fact now if you’ve been careless enough to buy your holiday money from the shameless moneychangers at the airport – sterling will be ‘worth’ the same as, or less than the euro. Yesterday a friend reported a pound bought 0.88 euro at Gatwick.

Technically, the euro’s been doing better because of the recent strength of the Eurozone economy and a less popular dollar because of all the obvious political reasons. In fact, on a  trade-weighted basis , with which economists try to get some real idea of comparative values of currencies, the pound is ahead of the level it reached in early October 2016. But let’s not be too commonsensical.

It’s all a little scary. Especially when our politicians appear as if they’re making it up as they go along.

The sterling slump is  good for exports, but not good for import prices. Which means, because so much of what we buy is from abroad, the value of our wages gets squeezed. A lot of the Brexit fears are adding to the pressure on our currency and it’s very easy to devise  a scenario where a devaluation becomes a run and a rout and an eventual recession.

So is there an intrinsic case for the down on the pound and favour for the euro? Moving aside from the relative values I described earlier – what of the relative successes of the economies? Forgive me for restating the litany, but for example the Common Agricultural Policy has manufactured mountains of waste and encouraged its recipients to continue to suck on the teat of the state- while  burgeoning rivals in Asia have been attempting the difficult task of discovering the fundamentals of economic growth, on their own. And it’s working.

The EU is linked by a single currency and a single interest rate which lacks the freedom to adjust to individual country needs. Unelected bureaucrats police their army in the European Council. The construct bears no relation to real life. And the whole edifice is based upon the funny money rules of quantitative easing which merely extend the life support of huge debt.

It may look good now, but those debts will be called in. The state dependent agribusiness will bloat itself out of reality.

So will the view that somehow that not ‘having member access’ to the single market is a killer for the UK. The US and China are the biggest exporters to the EU, and of course neither is a member.

One day the EU will fail. It’s got too many spinning plates, too much bureaucratic self importance. I don’t want it to collapse.  I don’t want a problem like that over the Channel. Meanwhile don’t despair of the shrinking pound in your pocket too much..its day will return.


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