Are Both Sides Of The Brexit Divide Being Played For Fools?
Are Both Sides Of The Brexit Divide Being Played For Fools? by Steven Guinness – Alt-Market
Over two years of conflict between people who voted to leave the European Union and those who opted to remain has predominately been contested through the political rather than economic paradigm. 2018 has seen this conflict exacerbate amidst warnings of the UK potentially vacating the EU with no withdrawal agreement, coupled with increased talk of a second referendum.
On one side you have campaigners for a ‘People’s Vote‘ clamouring for another say, one that would offer the option to remain in the EU in order to ‘call off‘ Brexit. On the opposing side you have the ‘Brexiteers‘, who insist that the 2016 referendum result must be honoured with or without a deal in place.
The latest anti-Brexit gathering to demand a referendum on the terms of exit served only to accentuate the division between both camps. Many of those against the UK leaving the EU continued to denounce it as a ‘Tory Brexit‘ and a manifestation of the hard right, whilst those in favour described the ‘March for the Future‘ protest in London as ‘remoaners‘ trying to thwart the ‘will of the people‘.
What neither group have contemplated is how their own ideological bias is potentially being used against them. Whilst they bicker over the day to day theatrics of the Brexit process, the economic side – namely the actions and communications from the central banking fraternity – is largely ignored.
In articles posted throughout 2018, I have written extensively about how a no deal scenario between the UK and EU is advantageous to the Bank of England as they continue to ‘normalise‘ monetary policy by raising interest rates. The economic ramifications from a no deal are not difficult to speculate on. An inevitable sharp depreciation of sterling would, as witnessed after the 2016 referendum, serve to push up the rate of inflation and give cause for the bank to persist in hiking rates. Add to that constricted trade supplies and increased tariffs, and the troublesome realisation of higher borrowing costs and higher consumer prices coalesce as one.
Only the other week did the Bank of England’s deputy governor Jon Cunliffe warn that a ‘bad‘ Brexit outcome could see a ‘big fall‘ in the pound. This came after multiple warnings from the IMFand also Federal Reserve chairmen Jerome Powell and the U.S. Treasury over how Brexit is a key risk to the stability of the global economy.
In the event of no deal, if you believe the Bank of England would come to the rescue of the British economy by cutting interest rates and pumping further hundreds of billions of pounds into the financial system, official communications from the bank might make you think otherwise. BOE governor Mark Carney has made it clear that the only way rates could be cut was if a ‘disorderly‘ Brexit proved DIS-INFLATIONARY. There are no circumstances in which a no deal exit fit this criteria.
During an appearance in September at the Treasury Select Committee, Carney discussed the probable ramifications of no deal: