by Steen Jakobsen, GoldAndLiberty:
I am writing this Chronicle from South Africa which is almost as far away from Europe and the constant and never ending Brexit talk you can come. It’s hard even here to avoid the turbulence and never ending ‘need’ for investors and media to understand what comes next.
The best analogy I can use is one from my extensive travels: When you arrive at airport to check in you have to pass security control two options is at hand: The fast track or the slow version(economy class) Using the fast track gets you faster to the gate and allows you pre boarding, but what really should matter is that the actual flight time and route is the same for everyone in business and in economy. We arrive EXACTLY at the same time.
The point? What is now transpiring in an economic sense is that we have entered the fast track courtesy of Brexit, the sell of in GBP, the lowering of growth projection and in some places talk about reform and change would have happened with or without the Leave vote.
UK’s problem remains their double deficit. The chronic budget and the current account Deficits. The last time UK ran a surplus on the current account was the year Italy won the World Cup in Spain and the top scorer was Paolo Rossi, you guessed it: 1982!
UK also have the lowest productivity of the G7 countries together with Japan. Yes, UK needs the lower GBP and desperately so and if the ERM crisis(1992) is any guideline what comes next for UK is more employment and stronger GDP as seen in this chart from the excellent research done by Societe General.
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