Deadly Sin 1: Currency Manipulation:

“For a small, open economy like Cyprus, euro adoption provides protection from international financial turmoil.” A quote from Jean-Claude Trichet, then President of the European Central Bank, in January 2008. After the provision of a number of emergency loans to Cyprus throughout 2012/13, on the 25th March 2013 a €10bn ECB bailout of the entire Cypriot banking system was undertaken. To fund part of the bail out savers deposits (above €100,000) were seized and used to bail out the bankrupt banks. To this day, capital controls, restricting the amount of money that can be taken out of Cyprus, are still in place. Contrary to Mr Trichet’s comments, adoption of the euro has simply been an economic disaster for Cyprus. And the worst part of this story; it was all entirely predictable. Why? All rational economic justification for the EU went out of the window the minute that the single currency became a fact of life. Currencies act as the pressure valve for an economy. They weaken when economies are weak, thus encouraging increased capital inflows and inwards investment, therefore cushioning the economic fall, and eventually promoting recovery. The opposite is also true for booming economies, where currencies appreciate and ultimately dampen the euphoria, before the boom ‘overheats’ and becomes too destructive. The minute you block that pressure valve, by artificially fixing the value of currencies, as the advent of the euro has done in Europe, internal pressures begin to build. History is littered with examples of financial crises where official currency manipulation is a major symptom. Arguably, there has never been a totally successful currency union anywhere in the world, as the internal pressures always result in unbearable economic and/or social distortions. The euro is clearly no different; today social discontent and expanding economic disparities are plain to see and they are getting worse. When will the pressure become too great? And when will that valve blow?

David Fuller's view

Today, the world’s financial markets are telling us that Brexit will not occur.  Global stock markets are soaring; government bond yields are mostly rising; and British Sterling has rallied sharply.  Most of this, I believe, is short covering because for most of last week the opposite was occurring as polls showed that support for Brexit had gained momentum.  The pendulum has now swung in favour of Remain.

I will be voting for Brexit on Thursday, because to quote from Abraham Lincoln’s Gettysburg Address on November 19^th 1863, I favour “government of the people, by the people and for the people”.  Instead, we British citizens will increasingly be ruled by an unelected, unaccountable bureaucracy from the EU.  That is neither good for democracy, responsibility, or economic growth and prosperity, in my opinion. 

However, I think this will continue to be less bad for Britain than for our European neighbours, mainly because the UK has not suffered from the Euro straightjacket.  Moreover, it is increasingly recognised within the EU that it is a grandiose, oligarchical scheme heading for the rocks.  Bureaucrats in Brussels and Strasbourg may be the last to accept this but the political unrest and uprisings tell another story.  Economic underperformance for the entire EU region, plus the tragedy of scandalous unemployment levels in Southern European countries, will force root and branch changes over the next ten years, in my opinion.