Wake up: the Franco-German EU strategy is anti-British
As most observers expected, yesterday’s Sarkozy-Merkel piss and wind session in Berlin blew everyone tantalisingly towards Paradise…up to but not including the means of getting across the River Jordan. But mainly, it didn’t do was blow anyone away.
And the day afterwards, as most economists didn’t expect, the Bank of England monetary policy committee (MPC) upped its votes against raising interest rates – and dropped large hints about another burst of QE.
I stick by what I’ve said for nearly two years now: we should never have dropped rates here in the UK in the first place. With markets abroad likely to choke anyway, we’d have been far better off letting our currency value rise in order to lower the cost of imports…and at the same time show a healthier fiscal face to the debt markets. Pretty much regardless of price, our export performance has been awful for donkeys’ years: our quality and design in most sectors just isn’t good enough. So although our trade gap would’ve increased – and unemployment would’ve risen further – we would still have had more money to spend (at a far lower cost) on investing in (a)redeployment of the unemployed and (b) new sectors of business beyond
paper lunacy financial services. Last but not least, we have needlessly pauperised the comfortably retired with Zirp – a very large sector of consumers whose cash purchases could’ve had a significant effect on the domestic retail economy.
Our inflation is indeed today being fuelled by the higher prices our weak Pound must pay for imports – thanks to negligible planning for self-sufficiency by British governments since the 1950s. Additional QE will mix that inflation with the historically more familiarversion based on wage demands and printing presses. Further QE in the UK now would have two effects. First, burn money pointlessly to buy junk ; and second, print money in order to afford those purchases. Both are inflationary. Both will drag down the value of Sterling. And the QE will have no effect: the amount of stimulus required is now far too big to be solved by Mervyn King chucking three coins in the fountain.
Much of the above is down to idiocy by the last two governments, a few thousand swinging-dick bankers, and a spineless BoE Governor who should’ve used his ‘independence’ to tell Brown and Darling where to shove it. But I can tell you that they made his life a misery in late 2007, and there are very few of us who could’ve withstood that kind of pressure. So in his case, it is perhaps unfair to judge.
However, a lot of it is to do with the power-mad plotters in Brussels, Berlin, Paris, and Frankfurt. For their long-term aim – an efficient euroblock with the purse strings in Berlin and the bureaucrats in Paris – is by definition antithetical to the health of the UK in terms of both geopolitics and economic futures. This – and the blindingly obvious crypto-fascism of most EU institutions – are the reasons why we should be out of the Union, but still trading with Europe (why not?)….and more importantly, selling out brand vigorously to emergent Asia. However, the Establishment has made a good fist of positioning folks like me as Little Englander nutters. C’est la vie, c’est la guerre: I’m still waiting for someone to explain to me why sticking with a trading partner going down the toilet and costing us a net £121billion a year is safer than striking out on our own. But we live in a risk-averse culture unable to grasp that risk is often a form of responsibility.
Consider: what Sarko and Merkel are doing is creating a situation where it seems there is no alternative to a tighter, more fiscally disciplined EU union – by highlighting the hopelessness of all other members but Germany and France. In doing so, however, their (to be fair, it’s mainly the Germans) constant brinkmanship by definition exacerbates instability, and raises the price of borrowing.
Further, Merkel’s tramline obsession with fiscal probity at the expense of investment is destroying peripheral markets one by one. Thus it is hardly surprising that last night’s German growth figures showed a pretty pathetic 0.1%. And hardly surprising that the British economy is flatlining.
The effect on the UK will be to continue dragging our sales down, and our borrowing costs up. The first is already happening, and the second will soon follow as the Franco-German alliance dithers, promises, fails to deliver – and eventually disappears up its own backside. There is the old adage, ‘You have to be in it to win it’. Camerlot’s strategy in that context is incomprehensible: a sort of ‘We’re in it, because we really want to be absolutely knee-deep in it’.
I’ve looked at this every which way, and I’m damned if I can see the logic in British foreign policy at the moment. Perhaps George Osborne is so busy sneezing as a result of foreign nasal bodies, he can no longer see straight when it comes to foreign parts. And perhaps William Vague is so busy contemplating his own parts, he no longer sees beyond them. For us on the outside, meanwhile, the only thing I can see is unnecessary short-term hardship, and a ship without a rudder in the long term.