Ritchie does quite get macroeconomics, does he?

That immediate market reaction could just be speculative, but I doubt that. The fundamental uncertainty will flow through into a significant decline in investment, which will lead to recession, inevitably.

The decline in the value of sterling should logically lead to an interest rate rise but that would tip many UK households, and in turn many UK banks into financial crisis. Preventing this will require massive injection of funding from the Bank of England but not for investment, but just to keep banks afloat.

At the same time tax yields will fall, inevitably. Balanced budgets are now animpossibility.

Pound falls. This makes British assets cheaper. It also delivers a large dose of stimulus to the domestic economy. As in, you know, 1993?

This thus causes less foreign investment and a recession?


16 thoughts on “Ritchie does quite get macroeconomics, does he?”

  1. And plus this immediate market and FOREX reaction is speculators minting it on shorting UK assets and GBP. I’m watching GBP/CHF at the moment, and it’s already floating back up.

  2. @Ian B – I reckon at the end of the day (or the middle of next week at the latest) we’ll be back where we were a week ago on CHF/GBP, before the marked started betting on Remain.

  3. Carney et al must allow the £ to find its own level. Its crash could be a big positive shock, as long as the Bank maintains its inflation credibility.

  4. “It’s traders scrambling to correct their wrongly-predicted positions.”

    Yep. An awful lot of people who despise the Stock Exchange and usually ignore it are suddenly squealing about a 4% fall on the day.


  5. Bloke no Longer in Austria

    I am absolutely fuming. Someone’s going to catch it hot.
    I have money in Euros and wanted to move it back to the UK and what happens ?
    The bloody pound has gone back up, nearly to what it was at the beginning of the week !
    Last time I vote Leave.

  6. You can understand Murphy and about 95% of the Commentariat if you understand one simple thing: none of them has a clue what they are talking about, but agree with what the others say because they want them to express agreement with what they say.

    These are the experts who want to run things.

  7. Pound/RMB has been mental today, being paid in pounds i’m watching closely. Started at a recent high of 9.8ish then plummeted to 8.78 around my lunch time now back up to 9.18. Crazy.

  8. Today is only interesting for those who tried to make a quick buck speculating on the outcome of the referendum, and the guaranteed wobbles it would cause either way.

    Next week it will be business as usual, given that the Brexit itself will be *at least* two years from now, if not longer.
    Given Camerons’ speech, earliest october 2018, unless his hand is forced and he has to engage article 50 in the next two weeks.
    The next wobble will be when the actual negotiations and re-extablishing of trade agreements start, but until then *nothing* will change significantly.
    Actual economics will always win against speculation and scare stories.

  9. don’t be so fucking stupid. exchange rate move makes investing in UK more attractive ceteris paribus but ceteris isn’t fucking paribus, never reason from a price change and all that, sterling fall can be *caused* by UK becoming less attractive destination for investment. Who fucking knows what the net effect on investment will be, Richie as ever too certain of own opinion imho probably right on direction, if you think economics somehow tells us FDI will be boosted by this you are as dumb as him.

  10. Stock market now down to the eerie depths of….3 weeks ago.

    Sterling vs euro back to the catastrophic levels of…….2014.

    Sterling vs dollar down to a couple of cents lower than it was in Feb 2016.

    And this all means the end of the world apparently.

  11. I was thinking of taking out a bigger mortgage here but I’m gonna hold off for a bit until I see what happens, as we sell into the UK and I have absolutely no idea how open our biggest market is going to be in 2 years. (I mean, I think it will probably be fine, but that extra bit of risk has made me want to push the decision)

    I’m sure there will be a lot of people in the UK and around Europe who will change their behaviour based on the result. Whether the accumulative result of that change in behaviour leads to negative economic consequences is to be seen – but as a betting man I’d say it’s odds on.

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