Actual economic effects cont...

[ManonLescaut]

Telegraph: Britain could be up to 70 billion worse off if it leaves the single market IFS warns

The respected economic think tank said that Britain could enjoy an extra 4 per cent in national income if it remains in the single market, equivalent to two years worth of growth.

The report claims that while leaving the EU will free the UK from an estimated £8 billion a year of budget contributions, the loss of trade from Brexit could hit tax receipts by a larger amount.

It found new trade deals would be unlikely to make up for lost EU trade, which accounts for 44 per cent of British exports and 39 per cent of service exports.

Telegraph: Treasury looks at quitting the single market

Officials say the talks have revealed a willingness among some top figures to scrap passporting despite early calls to stay in the single market from some quarters...

Mr Boleat cast doubt over the UK’s ability to secure a Norway-style deal to remain in the single market. He said accepting free movement of people and paying large sums to Brussels while accepting its rules would not be politically acceptable.

The BBA wants the UK to leave the single market but retain unimpeded access to EU markets.

Totally random thought, but I'm watching a documentary about the history of Chinese porcelain on iPlayer and a historian was explaining how the 19th century was pretty disastrous for China - in the 1820s, it accounted for one-third of the world's GDP; by the end of that century, its share was 4.6%.

Something for us to bear in mind when we boast confidently of being "the fifth largest economy", how everybody "needs us more than we need them" and how the British are the "best people". Never mind the "great timezone" thing which is just cringeworthy.

I don't think EU is going to sell us opium at gun point so I don't think we will be 19th century China.

But yes, complacency is always bad and to think that being in the EU will ensure our economic prosperity is complacency.

The EU (EU28) is also the block that has its world GDP share reduced from 30% to 18% today and then go on to institute working time directive telling its citizens to not work for more than 37 hours a week.

Sorry... the actual directive limits working time to 48 hours in any 7 days but some member state such as France has stricter interpretation (France = 35 hours week).

Measuring percentages is a bit useless if you don't state that the entire world's output has increased dramatically in that time. Mainly cussed by rapid development in previously ledc countries.

In real terms the EU gdp has increased significantly since then.

Effectively the EU has far larger gdp than it did but as world gdp has increased exponentially since 1980 it's percentage has decreased.

It's like saying 30 percent of a glass of wine is bigger than 18 percent of two bottles.

smallfox you beat me to it (and articulated it better than I could have, you horrible expert you).

topsy I take it you are against the notion that people should not be compelled to work more than a certain number of hours?

topsy the collapse of the Chinese economy by the 19th century was only marginally the result of western imperialism, and the opium imported by the west only met a small proportion of the demand for opium, the top end of the market. 90% was grown in China (see Frank Dikotter, Lars Laaman Narcotic culture, a history of drugs in China - good book, upends a lot of existing academic assumptions, Julia Lovells book on the Opium wars is good too)

Pre 1800, prosperity was in fact effectively based on a free trade block. China did not absorb states like Tibet, instead they became tributary states whose rulers kowtowed to the Emperor but more importantly they became part of a vast free trade area. However the economy became increasingly dependent on silver which, originating in the Spanish mines of South America, the Europeans were using to pay for commodities like tea. It became the basis for the coinage and taxes were paid in it. As the price of silver was twice in China what it was elsewhere in the world more silver was mined and flowed to the UK economy which flooded the Chinese economy causing deflation and an economic crisis which bought down the Ming dynasty.

Throughout the 18th and nineteenth centuries the population of China quadrupled meaning that all marginal land was brought into prediction, the introduction of non food crops like Tobacco and Opium making food sufficiency more precarious. The country was therefore more vulnerable to a series of natural disasters, drought, earthquakes and a series of popular rebellions, white lotus, taiping mobilised, and killed millions. The bureaucratic infrastructure that enabled the emperors to rule broke down under the pressure of population growth and these disasters, meaning that self interested corrupt local bureaucrats increased their power.

By the time the Brits arrived with their gunboats the Chinese economy, and government were already weak, it was the shambolic response of an Emperor trying to mobilise local officials that meant that the British could probably have achieved their objectives even without their guns.

So a far more complex picture than you present, and perhaps there are some lessons there........

More importantly the population q

% - I think that applies to TheElement China's scenario. Europe and NA were growing like crazy and that reduced China's share. I was just comparing like for like.

Hours - perhaps this is one of those you cannot have your cake and eat it scenario.

Topsy So now it is China and the other Asian economies turn to be growing like crazy, where for eg the Chinese textile and pottery industries were decimated by the cheap mass production in Stoke and the North of England, now the same has happened in reverse, and with other manufacturing industries . When you drive out of Shanghai you drive through an area of factories that goes on for hundreds of miles, the same in Guangdong and the same increasingly in Cambodia driving out of Phnom Penh as Chinese manufacturers seek cheaper labour costs. It may on the face of it be economically precarious but it has been for over a decade, and even when it slows down the growth rates are still the envy of western economies. There is a lot of room for further development too.........

Very interesting ron, what I vaguely recall from school history lessons (not UK) was also that China at the time did not consider there was anything they required from the western "barbarians" and turned their backs on overtures from Europeans seeking trade - in effect the damage was done before the Opium Wars - would you agree?

topsy so we should agree therefore to be consistent between scenarios, is a decrease in % GDP is inconsequential or not (China in 19th century and EU in 21st century) - and we can't brag about being the 5th (6th) largest economy?

Disclaimer: not an economist, but always keen to learn.

Agreed TheElement. We should stop being obsesess about the 5th largest economy or EU being the largest trading block by GDP.

GDP and HDI per capita are more important for current citizens' welfare while absolute GDP determine international pecking order.

'Required nothing'

An interesting parallel where we seek trade with the EU and Tusk Juncker said you either accept all or rules or else (we don't need you?)

Not quite what he said is it?

Basically he said that if we want access to the free market we have to obey all the same rules as everyone else.

If not we can trade on wto rules.

wwr
Interesting Chinese history. Thanks.

small
'Everyone' other than those with FTAs?

TheElements Actually the Chinese were prepared to trade with "the barbarians" (their perception - then and now frankly- of the nations beyond the 2000 year old civilisation of the Han Chinese) but on their terms under the Tributary system. That required their rulers, or their representatives to kowtow (prostrate themselves) to the Emperor and as you can imagine from the Georgians on, the arrogance arising from the power of a growing Empire made that a little problematic. When McCartney visited in 1798 he conceded that he would bend on one knee and bend his head and so he did in time with a thousand others as they touched their heads to the ground three times! Trade relations were a bit more complex than that but it was a symbol of an Emperor who effectively ruled a third of the population of the world complacently resting on past glories and failing to recognise the reality of its' decadence clashing with the arrogance of a country that was a rising power. I can see some modern parallels in that too.....

But yes, the decline in the Chinese economy was long before the gunboats appeared. The reason the Brits flooded the Chinese economy with silver was because they had nothing else to trade that could compete with what China produced for itself, and they wanted the tea and the manufactured products that the fashion for chinoiserie created demand for etc. That was until they realised the potential of a particularly fine Opium being grown in a region of India, basically the Champagne of Opium.

www.bbc.co.uk/news/business-37652467

Mark Carney has said that inflation will rise on products such as food because of the fall in the value of the pound.
The governor of the Bank of England made clear that sterling's fall "helps the economy adjust".
However, he said it was "going to get difficult [for those on the lowest incomes] as we move from no inflation to some inflation".

(contd)

The sugar could come from UK-grown sugar beet,

The UK al;ready imports grain (some from the nasty EU). What would you stop growing and import to be able to grow sugar ?

An interesting parallel where we seek trade with the EU

Hmmm, I would say a better parallel would be the idea that the rest of the world are clamouring to transact with us and we need do nothing but sit back and await adulation (the belief that more lucrative deals are assured)?

Try this:
Membership fees = tribute
Barbarian on our terms = Accept all our Acquis or else.

No one in UK is telling the world that this is the rule book. Read it from first to the last page and don't forget to attach a membership fees cheque in your application if you want to trade.

www.bbc.co.uk/news/uk-england-tyne-37656480
"The boss of Japanese car giant Nissan says he is "confident" the government will keep the UK a competitive place to do business after it leaves the EU."

LurkingH post above on inflation.

"He said the Bank had to "weigh increased inflation against supporting the economy" with low interest rates. The pound recovered most of the days losses against the dollar following his comments."

BoE policy has influence on the £ and should therefore take part of the blame if you want stronger £. It is BoE policy to deliberately tolerate inflation.

"BoE policy has influence on the £ and should therefore take part of the blame if you want stronger £. It is BoE policy to deliberately tolerate inflation."

Gosh your economics is bad.

The value of the £ is out of control of the BOE at the minute, because it is a free floating currency, the markets control its value.

The BOEs tools for dealing with inflation are essentially interest rates to stimulate the economy. In a high inlfation situation they would raise rates to incentivise saving, increase borrowing costs and reduce consumption and investment. It also increases the flow of hot money into the country, which creates demand for the currency increasing its value.

However this only works in terms of demand pull inflation, if as in the case it is as a result of cost push inflation, increasing the interest rate only chokes domestic demand and so we end with a stagflation situation .

The BOE hasn't tolerated inflation, for the last two years it has been below the 2% target. In fact much of the modern thinking is that the era of inflation targeting for central banks is over because it is effected by global issues to a much greater extent than it has been in the past. The new idea is that their main responsibility is to do with the economic well being of their home country.

The BOE hasn't tolerated inflation, for the last two years it has been below the 2% target. In fact much of the modern thinking is that the era of inflation targeting for central banks is over because it is effected by global issues to a much greater extent than it has been in the past. The new idea is that their main responsibility is to do with the economic well being of their home country.

I agree with this, but at the moment the bank is just tasked with aiming at an inflation target. There is no employment target for instance.

Smallfox

Really? If BoE raise rate to 2%, GBP will not move up at least in the short term?

Have you ever trade currencies?

And do you know why USD is very strong at the moment (which partially contributed to the GBP/USD 1.21 rate). Try looking up the Federal reserve meeting minutes.

And do you know why the Swiss does a negative rate on the Franc ?

Your understanding of economic theory is probably good, except that they are detached from reality.

I agree with this, but at the moment the bank is just tasked with aiming at an inflation target. There is no employment target for instance.

And why should there be? Unless we want a return to the days of socialism where the government (mis) managed every aspect of the economy.

The BoEs only focus is the supply side of money - it's all they can do. Print it, store it, and exchange it.

Tops.. you think the interest rate increases would improve the trading value of gbp now?

It really won't. The US economy is fairly robust as is the Swiss. We can't say that our future is.

What it will do is choke investment further, and consumption.