Thursday, June 23, 2016

Brexit

Although markets are down, I don't think Brexit will be bad for the British economy. Indeed, I think that it will be a boon.

A major structural issue in the EU monetary union was that individual countries no longer had their own currency, but there was no entity, such as a US's Federal Reserve, which could run deficits to support any nation whose desire for savings outstripped available savings. This triggered paradox of thrift conditions, where austerity drove deficits higher, demanding more austerity. The price was paid in human misery and unemployment, and it was totally wasteful, totally destructive, and totally unnecessary.

Greece may not be a well governed country, but the human cost in forced unemployment and underemployment was high and not only brought no benefit, but could not bring any benefit. As Zizek would say, austerity was the German superego run amok.

The UK can now run deficits denominated in the pound sterling, keep its population employed, and try to run its country, for its citizens as best it can, to the extent it is allowed to. Good luck to all.

4 Comments:

Blogger shm said...

The UK was never part of the EU monetary union.

1:14 AM  
Blogger Ramanan said...

Posted a comment here:

https://mikenormaneconomics.blogspot.in/2016/06/winterspeak-on-brexit.html?showComment=1466788842654#c5612697723045623736

The UK was not in the Euro Area. (as shm also says).

10:22 AM  
Blogger winterspeak said...

Oooops. Totally got that wrong (blushes). I do believe that the EZ has a terrible design and any country in it should get out ASAP. Maybe the UK's example will give them courage.

5:39 AM  
Blogger Felipe Bachman said...

good to know

10:42 PM  

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