England in Double Dutch

Mark Rutte, the Netherland’s prime minister, for reasons known only to, oh let me see now, just about every bit of media that I read, says the UK has collapsed “politically, monetarily, constitutionally and economically.”

Let’s have a look at this terrible collapse that we’re all reading about.

Allow me to be old-fashioned, in this post-factual democracy, by observing some of the monetary and economic facts as they stand at the end of June:

  • Equities are up.  FTSE-100, the index covering 85% of our public markets, is up at almost 6400. Markets took barely a day or two to adjust, and are now at almost a 9 month high. FTSE-100 stands 15% above the low that occurred in February, many moons before the referendum. It is within 10% off its all-time high. Compare and contrast with the Euro-350 equity index, which is down almost 20% in a year.
  • UK unemployment is down.  It stands at 5.4%, lower than the US (5.5%) and well below Holland’s 7.0% level and only half the rate of France. Even Germany, that supposed economic powerhouse, stands at 5% – but allowing for the UK’s higher rate of labor force participation the UK’s picture is better than theirs.
  • The pound has been fixed.  Sterling has moved to correct the UK’s major imbalances.  While the UK was securely in the EU, the major monetary concern was the giant sucking sound that represented our gigantic current account deficit at £32bn per quarter / 7% of GDP.  £2,500m, net, was leaving the country every week – never to be spent on the NHS. This clearly indicated the pound was at the wrong level, with our imports being too cheap and our exports being too pricey.  This problem has at last been corrected with the pound falling around 10%.
  • UK exports are set to boom.  With the slight edge having come off the pound, provoked by unwarranted media hysteria that is certainly boosting major site’s page views, investors are flocking to our exporters.  Our world-beating champions like ARM, BATS, DGE and RR are all up 10%+ in the last week alone. And tourism is on the up.
  • Interest rates are set to stay low.  Since the referendum yields have fallen – so whatever the rating agencies may say – the UK is paying less for its borrowing than it was in the run up to the referendum.  Investing in this country has never been cheaper.  Even the Bank of England is getting in on the act, with £250bn being earmarked for almost anything except the NHS.
  • House price pressure is reduced.  If the share prices of housing-related stocks (PSN, TW, CWD, ZPLA etc) is any guide, the housing market is heading for a slump.  Given the acute difficulties London’s stratospheric house prices are causing, presumably this is a good omen. Anything that hurts Foxtons must be good.  Though whether we can look forward to as beneficial a collapse as the Dutch experienced after 2008 won’t be clear for some time, but doubtless Mark Rutte will keep us updated.

Surveying the monetary and economic landscape the UK picture, I am sure readers will agree if they can tear themselves away from all other media, looks unprecedentedly sunny.

Politically and constitutionally, the picture is a little more mixed.  To the extent that we are not completely keeping calm and carrying on, I agree that improvements can be made, but again there is much to be cheerful about.

  • The mother of all democracies has been leading from the front, again.  Uniquely among European countries, the UK actively seeks the democratic support for its key EU decisions. The only reason France hasn’t Frexited is because France is too nervous to ask its people’s views.  And France’s president has the support of one in seven of his countrymen.  The EU-27 might not like the UK’s democracy but it is, as ever, the least bad alternative.
  • The UK is actively involving its disgruntled victims of globalisation with the levers of power.  The gulf between the embittered working classes and the establishment is widening in every developed economy.  But the UK is actively bridging it.  Signing the country up to an economic death warrant like a single currency managed 1000s of miles away could never happen here; yet it has happened all over Europe.
  • The machinery of government remains firmly in place.  In some countries, notably America, the executive would have left the building.  In the UK the actual heavy lifting is done by the professional civil service is, as it always has been, politically impartial and objective. This puts it in excellent stead to find the best way to upgrade our trading, legal, administrative and financial systems to exploit the newfound freedoms secured by Leave last week.
  • The final solution for Scotland is getting closer.  With oil prices destined to remain low, the Scottish economy is going to suck cash out of England for the foreseeable.  It also messes up our general elections by ensuring a two party duopoly (with the Tories) and inhibiting old fashioned centrist political competition. While it isn’t clear what form the future holds here, it looks increasingly likely that us English can look forward to being rid of their troublesome Scottish priests.
  • But, sadly, the two main political parties are in a small spot of bother.  But in this regard they are simply joining their rivals UKIP and the Lib Dems whose spots of bother are only one or two years ago.  For the country as a whole this is an irrelevance, albeit an exciting one.
  • Two of the most prominent Leavers’ jobs have collapsed.  Nigel Farage and Dan Hannan, as MEPs, will soon be out of their Brussells gravy-train-fuelled jobs.  An ironic reward for all their hard work. But one collapse we can all be cheerful about, surely? STOP PRESS and the other prominent Leaver, BoJo, has just confirmed he won’t be getting the job he wanted either.  More reasons to be cheerful.


19 thoughts on “England in Double Dutch”

  1. As our political viewpoints don’t agree, I think it would be hard for me to continue to read your blog.


    1. @John B – Do you discern the political viewpoints of all your news sources, advice columns and discussion sites before dismissing them if they don’t tally with yours?

      An appreciation for other viewpoints is surely a good thing?


      1. I was replying to John B rather than your good self!

        And now I don’t appear to have the ability to reply to your reply? :-/


  2. FvL — Another reason for optimism… public-spirited people such as yourself are already bridging the deep rift between the Remainers and the Leavers.

    Even with this one post, you have joined the warring factions together: Remainers who have a grasp of reality and see what you did there, and Leavers who see a jolly good bit of straight-talking and would give you a vote if they could do.

    Liked by 1 person

  3. if possible can you explain in laymans terms the current account deficit and how it is benefited by a weaker pound?


    1. Current account + capital account = balance of payments. Current account is basically the net flow of daily spending / income / etc. If you export more than you import this creates a surplus; if your overseas investment income brings in more money than your debt repayments overseas this does too. The deficit is the net of imports/exports and investment income/interest. Having a weaker pound boosts exports, curbs imports, reduces our (pound-denominated) interest payments and increases our (pound-denominated) foreign investment income. A persistent current account deficit is widely described as ‘living beyond your means’.


  4. Good post. I agree with most parts, but not with the one about the current account deficit. You present the situation as positive, when the reality is the opposite: UK citizens are now poorer. The current account deficit (and therefore the capital account surplus) will shrink, the decrease in imports means lower consumption etc. The UK was (and still is, but less so) on the right side of the global imbalances, i.e. being able to “live above its means”. You don’t want to make it poorer. If you want to close the deficit, you should do it via improved productivity and increased added value for your exports (including, mainly, services), not through competing with the Chinese for cheaper labor (to give an extreme example). The FT article you mention btw says pretty much the same, effectively disagreeing with you.

    Liked by 1 person

    1. You’ve blown my cover! I agree with you. In reality we have just voted to drop below France, which I think has now overtaken us to become the fifth biggest economy in the world.

      Of course the best single way to reduce immigration is to make your economy worse.

      My attempt at irony hasn’t worked very well. Lesson learnt.


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