by Alasdair Macleod, Gold Money:
Brexit is not the most important problem facing markets, it is mounting problems in the European banks.
But before looking at that systemic issue, I will summarise the Brexit position, from the trenches, in the last few days before the referendum.
In the run-up to Britain’s referendum on 23rd June, the Treasury was tasked with modelling the economy, post Brexit. The result was George Osborn claimed that a Brexit vote could cost every household £4,300. This is the underlying reason that markets, allegedly, are frightened of Brexit.
One suspects that if the Treasury models had suggested there is little cost to leaving, the result would have not been published and George Osborne would have contrived a different argument. Anyway, we all know that econometric models suffer from garbage in, garbage out, but the Treasury is meant to be authoritative and trusted. However, a new paper by Professor David Blake of the Cass Business school points out “the extraordinary abuse of economic models in the EU Referendum debate”, and he is moved to term the two Treasury reports that gave the Chancellor his facts as “dodgy dossiers”.i
Any good Austrian economist can tell you why economic models do not work. Without going into it here, models should simply be disregarded. Professor Blake’s paper exposes the techniques, as well as the statistical assumptions, employed by the British government when using econometric modelling to frighten voters into voting to remain. Separately, a new book co-authored by Dr Radomir Tylecote and Sir Bill Cash charts the history of the EU project, from America’s post-war strategy, implemented through the American Committee on United Europe in 1948, with strategic assumptions that persist to the present day.ii
The paper and the book taken together expose the truths withheld or obscured by the British government at the time of the first referendum, and the use of a similar approach today. This time, the vested interests and scare tactics used by the government appear to have begun to smell to the electorate like a long-dead rat. Instead, ordinary voters are more worried about the high levels of immigration and the strains placed on health and education services, the housing shortage, and the suppression of wages.
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