Crashing out of the EU will be a blessing in disguise
Have you read or heard the negative language used by the Remainers and the mainstream media in describing Brexit? Phrases such as crashing out of the EU, economic disaster, catastrophe, the cliff edge, and the supermarket shelves will be empty are often used to describe not only a no-deal Brexit but also any Brexit deal.
The Remainers say that economists believe a no-deal Brexit will bring an economic crash upon this country. However, not all economists agree on this. Some say that the UK will benefit significantly from a no-deal Brexit.
European Exchange Rate Mechanism (ERM)
In the early 1990s, economists persuaded the UK government to join the European Exchange Rate Mechanism (ERM) as a preparation for joining the euro.
When it became clear that our membership of the European ERM was a failure, economists warned that crashing out of the ERM would lead to economic disaster, catastrophe, and the supermarket shelves would be empty.
They were wrong.
Leaving the European ERM was a blessing in disguise!
Black Wednesday refers to Wednesday, 16 September 1992. The pound sterling collapsed which forced Britain to leave the European Exchange Rate Mechanism (ERM). The UK was unable to prevent the value of the pound from falling below the lower limit specified by the ERM. The European ERM intended to stabilize European currencies in preparation for Monetary Union. Countries looking to join the euro were obliged to keep their currencies within a specific range for several years.
The UK joined the European ERM two years before crashing out. With the pound depreciating, the British government took measures to support its value. Chancellor of the Exchequer Norman Lamont warned the Prime Minister John Major that propping up the pound was futile, but Major disagreed and demanded interest rates should rise further to a whopping 15%. The government spent billions on buying sterling on the currency markets.
However, the strategy failed to stop the pound falling below its minimum level in the ERM. At this point, George Soros sensed an opportunity. He and other currency speculators began to ‘short sell’ the pound (betting that the pound’s value would fall). This speculation caused the price of sterling to plummet.
On Black Wednesday the UK decided to leave the ERM. On that day, George Soros ‘broke the Bank of England’. Allegedly, he made a $1 billion profit in one day.
Many economists at the time believed that Black Wednesday was a disaster. However, crashing out of the European ERM was a blessing in disguise. It prevented us from joining the euro, and it eventually led to higher economic growth and lower unemployment.
Similarly, crashing out of the EU (European Union) will be a blessing in disguise.